The US Department of Agriculture (USDA) announced some details of the upcoming round of financial support for feed crop and agricultural producers on Thursday [May 23].
Much like last year’s support program, the new up to $16bn support plan includes three elements – a market facilitation program (MFP), food purchase and distribution program (FPDP) and an agricultural trade promotion program (ATP).
The USDA was asked to put the new found of support for feed crop and agricultural producers together following the break down of trade talks with China, said Sonny Perdue, US secretary of agriculture on a conference call regarding the program.
“All of us were very hopeful and looking forward to a renewed, or the signing of a fair trade deal,” he said. “When the Chinese decided late in the game after several visits to renege on several of the commitments they’d already made, to his credit, President Trump immediately directed me to again create a program because he knew that farmers would bear the brunt of the lack of a trade deal with China.”
The program is an acknowledgment that agricultural producers, farmers and ranchers will bear the “brunt” of trade disputes based on production practices, he said.
“We’ve been working very hard to assess those trade damages again,” he said. “The package we’re announcing today ensures that farmers will not bear the brunt of those trade practices by China or any other nation.”
Agricultural producers may say that they would rather have “trade than aid,” but without trade they need support, Perdue said. “It’s a food security issue, which leads to a national security issue,” he added.
“All of this would have been moot if China had acted appropriately and fairly in many areas including intellectual property theft and non-tariff barriers that they’ve put up for many years,” he said. “The US-China economic relationship is very important, and the Trump administration is still committed to reaching a deal for agriculture and other American industries whenever China wants to play by the rules of the WTO and the world economy.”
In August 2018 a similar program was announced to support feed crop and other agricultural producers from tariff-based disruption to export markets. The program provided up to $12bn in funding to producers of crops including corn, sorghum, soybeans and wheat.
Producer support program development and overview
The support program has been redeveloped to address some of the comments about the model used last year, said Perdue.
Many of the main elements of the new program are similar to what was done last year, said Robert Johannson, chief economist with the USDA. However, the way that payments for individual crops or products are calculated has changed.
“We’re looking at trade damages not just from the past year’s tariffs but also going back to previous actions by China and also some of the other trading partners that are levying these unjustified tariffs on our producers and on ag trade,” he said on the call. The damage is calculated by examining exports after tariffs with pre-tariff years, he added.
“We’re looking back a number of years to look at what China has purchased from us in the past and we’re bringing that into our baseline to refine what those tariffs do,” he said. “That does get us to a slightly larger number than we had last year.”
The change informed the decision to provide up to $16bn in trade support, rather than the 12bn provided last year, he said.
The market facilitation program will be able to provide up to $14.5bn in direct payments to producers from the Commodity Credit Corporation Charter Act, said the USDA.
The food purchase and distribution program will have $1.4bn through the Agricultural Marketing Service to buy surplus commodities that will be distributed by the Food and Nutrition Service and the agricultural trade promotion program will be administered by the Foreign Agriculture Service and provide $100m.
The market facilitation program has been expanded to cover a larger range of feed crops and other agricultural products, said Bill Northey, undersecretary for farm production and conservation at USDA. Funds for producers will be delivered through Farm Service Agency county offices.
Unlike last year’s program, there will be a single rate of payment for all products, he said. The amount is set to be calculated based on trade damage for those crops by county.
Feed crops that will be covered by the program include alfalfa hay, barley, canola, corn, sorghum, soybeans and wheat, the USDA said. Payments will be established based on total’s plantings
“This year we’re still in a place where some producers are making planting decisions and we need to make sure that folks have the complete flexibility in this challenging planting season to plant what works for them – they need to make the best economic decisions,” Northey said. “That economic decision will not be impacted by the payment they receive depending on which production they choose.”
“We [want to] make sure producers are planting for the market, their own agronomic situation and encourage folks in this challenging time to not have to worry about what differential payments may be between crops,” he added.
In addition to crops, there will be some support for pork and dairy producers along with specialty crops, he said.
Payments are set to be made three times throughout the year – depending on the outcome of trade negotiations, he said. The first is slated for late July or early August, the second for November and the third potentially in early 2020.
“We plan and hope to be able to have a trade agreement well before those second and third payments are made,” Northey said. “We know we’ll make the first payment – the second and third payments will depend on if we still have damage to our producers or we’re able to be celebrating a new trade agreement.”
Feed crop producer response
Members of the feed crop production industry welcomed the news of the new support program.
National Corn Growers Association (NGCA) members were in favor of the announcement.
Industry members have been facing challenging spring weather in addition to the trade disputes and tariffs, said Lynn Chrisp, NCGA president.
Soybean producers with the American Soybean Association (ASA) added that they were thankful for the funding to offset tariff damage and support the development of new markets. However, the association said that the program provides a temporary solution and repeated a call for better trade access.
“Trade assistance will only facilitate soy growers’ ability to farm, not make their losses whole or tariff woes disappear long term,” said Davie Stephens, ASA president. “Trade assistance will only help in the short term.”