The U.S. just unveiled $16 billion more in federal aid for agriculture. Farmers were of course happy for the funds, but mainly, they want an end to Donald Trump’s trade wars.
“America’s farmers ultimately want trade more than aid,” said Zippy Duvall, president of the American Farm Bureau Federation, the nation’s largest general farm organization. “It is critically important to restore agricultural markets and mutually beneficial relationships with our trading partners around the world.”
The fresh package comes after last year’s $12 billion tranche for farmers. Agriculture incomes have been depressed in the wake of China’s retaliatory tariffs which hurt demand for everything from cotton to pork to soybeans. For Trump, appeasing his rural-voter base has become crucial ahead of 2020 elections.
“This is a band-aid when we really need a long-term fix,” said Ben Scholz, president of the National Association of Wheat Growers, adding producers understand holding China accountable for “unfair trade practices. But a trade war is not the solution, especially when farmers are the casualties.”
The second round of aid payments will help shore up farmer incomes and give Trump time to strike a deal with China, Agriculture Secretary Sonny Perdue said on a conference call Thursday. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to travel to China Monday for the first high-level, face-to-face trade talks between the world’s two biggest economies since discussions broke down in May.
But in the meantime, farmers are suffering. American farm income dropped 16% last year to $63 billion, about half the level it was as recently as 2013. Years of overproduction have kept crop prices near historical lows, with the trade spat only adding more pressure. In the meantime, rival Brazil has taken advantage of the U.S. dispute to strengthen its ties with China.
Not only are farmers wary of the prolonged trade war, but there are also concerns over how the latest aid package was constructed.
The aid uses similar damage criteria as last year’s $12 billion aid package. But rather than funds based on crop type, the new program sets a per-county rate based on the blend of crops grown in the area, with payments ranging from $15 to $150 an acre.
“We harbor some concerns about disparities in payments from county to county, which could put some farmers at a financial disadvantage,” said Roger Johnson, president of the National Farmers Union, the second-largest U.S. general farm group. “This assistance is desperately needed, but the ad-hoc rollout and convoluted structure of these programs has caused significant confusion among producers.”
Debbie Stabenow, the top-ranking Democrat on the Senate Agriculture Committee echoed the criticism.
“Today’s announcement only confirms my previous concerns that this aid is not equitable and favors certain farmers over others,” the Michigan senator said. “Bottom line — it’s not fair.”
Agricultural markets largely took the announcement in stride, given the package is designed to avoid distorting planting decisions.
“It’s a discussion point, but not really” a factor for prices, said Rich Nelson, chief strategist at Allendale Inc. in McHenry, Illinois. The payments may be a consideration for acreage decisions next year, and so could influence trading further down the road.
The new payments will be based on the shortfall in exports of each crop compared with the highest year of exports over the past decade, said USDA Chief Economist Robert Johannson. Last year’s payments were based on the shortfall in exports compared to 2017, so this tranche may end up being more generous.
Still, Perdue said individual farmers shouldn’t expect the aid will fully compensate them for trade losses.
“There’s no promises and no thoughts this will make anyone whole,” he said.
Overall trade aid is capped at $500,000 per person.
Trump announced the new package in May as he stepped up his trade war with China by threatening new tariffs against the Asian nation.
With aid flowing to farmers, he has avoided erosion of his political support in rural areas. In June, 54% of rural voters approved of Trump’s job performance versus a national approval rating of 42%, according to a Gallup survey of 701 self-identified rural voters.
John Brengle, a fifth-generation farmer who grows corn and soybeans on 5,000 acres in Metcalf, Illinois, said in a telephone interview the aid was “very necessary” after “the trade war has hurt us tremendously.”
He’s had to cut costs because of the trade dispute’s impact and delay replacement of equipment. Still, he stands by Trump.
“There’s no doubt in my mind” that something had to be done about China, Brengle said. “I’m not 100% sure the American farmer can afford the” war, but as long as Trump’s standing up to China, he’s backing him, he said.