USDA announces $16 billion trade aid program for farmers
Agriculture Sonny Perdue and other USDA officials today announced a $16 billion package of trade aid to farmers whom the Trump administration says have suffered damage “from unjustified retaliation and trade disruption” from China, the European Union and Turkey.
“China hasn’t played by the rules for a long time and President [Donald] Trump is standing up to them, sending the clear message that the United States will no longer tolerate their unfair trade practices, which include non-tariff trade barriers and the theft of intellectual property,” Perdue said in a news release. “President Trump has great affection for America’s farmers and ranchers, and he knows they are bearing the brunt of these trade disputes.”
The total package of $16 billion compares with $12 billion in aid in an earlier package that was focused solely on loss of exports to China in 2017.
The trade practices of China and the European Union over several years are included in the calculations because they currently have tariffs on U.S. farm products, USDA Chief Economist Rob Johansson said in a telephone briefing. China, the European Union and Turkey imposed the tariffs after Trump imposed tariffs on their products.
Although Mexico and Canada also imposed retaliatory tariffs and U.S. producers have complained about losses of sales to those countries, they will not be included in the calculations, Johansson said. Mexico and Canada recently removed those tariffs after Trump lifted the tariffs on Mexican and Canadian steel and aluminum.
Johansson did not reveal the exact years under consideration in the calculations.
The structure of the program will be the same as the earlier program, but the basis for the calculations of aid will be different.
The earlier program made payments by commodity, with soybean growers getting the highest payment because they had lost the most revenue in sales. Producers of other commodities, particularly corn and wheat, complained that the rates were not fair.
But USDA officials were also worried that this round of payments would skew farmers’ crop decisions since this year’s planting is still going on.
Commodity producers will get Market Facilitation Payments, but the payments will be set at rates per acre per county.
MFP payments will total $14.5 billion, and they will come in three tranches — one in July or August, a second in late fall, perhaps November, and a third payment in early 2020.
Perdue said that the first round of payments is likely to be bigger than the second or third. If the United States should achieve new trade agreements with the countries involved, the second and third payments could be canceled.
USDA has not announced the rates for each of the more than 2,000 counties that produce farm products, and apparently will not announce them until July when it analyzes farmers’ planting intentions. If farmers don’t plant this year they won’t get payments, Johansson said.
There will also be government purchases of $1.4 billion in fruits and vegetables, processed foods, dairy, lamb and pork products for domestic distribution and a $100 million additional export promotion program.
Although Trump had said that the United States would buy commodities for international food aid, none of the purchased products will go overseas, Perdue said, because when the president learned about the “inefficiency” of distributing food that way, he abandoned that idea. Also the United States did not want to disrupt markets in other countries, Perdue said.
The aid will come through the Commodity Credit Corporation, a government institution created in the 1930s that allows USDA to spend up to $30 billion per year to help farmers without seeking prior approval from Congress.
Trump had said that the aid money would come from tariffs paid by China, but that is not technically correct, Perdue acknowledged today. Tariff revenues go directly into the U.S. Treasury. Perdue said the $16 billion amounts to about 15 percent of tariff revenue.
Farm leaders are expected to attend a White House meeting on the package this afternoon.
“These are dynamic situations,” Perdue said in the telephone briefing. “Farmers would rather have trade than aid. If they don’t get trade they need aid.”
Here are program details released by USDA:
The Market Facilitation Program (MFP) for 2019, authorized under the Commodity Credit Corporation Charter Act and administered by the Farm Service Agency, will provide $14.5 billion in direct payments to producers.
▪ Producers of alfalfa hay, barley, canola, corn, crambe, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton, and wheat will receive a payment based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019.
Those per acre payments are not dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions. Moreover, total payment-eligible plantings cannot exceed total 2018 plantings.
▪ Dairy producers will receive a per hundredweight payment on production history and hog producers will receive a payment based on hog and pig inventory for a later-specified time frame.
▪ Tree nut producers, fresh sweet cherry producers, cranberry producers, and fresh grape producers will receive a payment based on 2019 acres of production.
▪ These payments will help farmers to absorb some of the additional costs of managing disrupted markets, to deal with surplus commodities, and to expand and develop new markets at home and abroad.
▪ Payments will be made in up to three tranches, with the second and third tranches evaluated as market conditions and trade opportunities dictate. The first tranche will begin in late July/early August as soon as practical after Farm Service Agency crop reporting is completed by July 15. If conditions warrant, the second and third tranches will be made in November and early January.
Additionally, CCC Charter Act authority will be used to implement a $1.4 billion Food Purchase and Distribution Program through the Agricultural Marketing Service to purchase surplus commodities affected by trade retaliation such as fruits, vegetables, some processed foods, beef, pork, lamb, poultry, and milk for distribution by the Food and Nutrition Service to food banks, schools, and other outlets serving low-income individuals.
Finally, the CCC will use its Charter Act authority for $100 million to be issued through the Agricultural Trade Promotion Program administered by the Foreign Agriculture Service to assist in developing new export markets on behalf of producers.