Washington Insider -- Tuesday

Farm Worries Grow in Spite of New Aid

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

USDA's Perdue talks more about farmer aid

USDA Secretary Sonny Perdue confirmed to Reuters in an interview that the aid package for U.S. farmers unveiled by the administration will see dollars start to flow to farmers by late September and into October.

That matches the expectation when the plan was announced given that farmers have to harvest their crop or know what their production is before getting the payouts.

And, he signaled that around $8 billion would be the amount paid out to farmers with another $200 million for trade promotion efforts.

That would leave around $4 billion for the purchase of surplus commodities from the market for use in food/feeding and donation efforts.

USDA is still developing the regulations to make the payments a reality, with a target date of completing that work by in August and Perdue signaled the start of signup could be around September 4 which would most likely mean for wheat producers and those in the southern U.S. that have already harvested their crops and know their actual production for 2018.

USDA's Perdue Marks Return of US Pork to Argentine Market

U.S. pork is back on the table in Argentina, with USDA Secretary Sonny Perdue marking the occasion while in Argentina for a meeting of global ag ministers.

“The U.S. is the world’s third-largest pork producer and a top exporter,” Perdue said as he sliced a 10-pound honey-baked ham. “This new market is a big victory for American farmers and ranchers. I am confident that once the people of Argentina get a taste of American pork products, they will only want more. This is a great day for our agriculture community and an example of how the Trump Administration is committed to supporting our producers by opening new markets for their products.”

The event has been a while in the making, with agreements reached earlier this year for the return of U.S. pork to Argentina that was announced by President Donald Trump.

Since that time, U.S. and Argentine trade officials have been finalizing details of the terms of trade and those agreements were completed in April.


Washington Insider: Farm Worries Grow in Spite of New Aid

There was a good bit of farmer angst across the farm belt last week in spite of the administration’s new farmer assistance plan, Bloomberg and others are reporting. While USDA’s plan buoyed markets, “it didn’t win over skeptics on Capitol Hill, including Republicans from politically important agricultural states.” Bloomberg said.

Recently, the administration has been pointing to an expected bump in export sales to the European Union (EU) as a result of a U.S.-EU conference, but analysts are downplaying those efforts as solutions for expected impacts of the administration’s “get tough” policy. As an example, Senator Ron Johnson, R-Wis., said, “My thoughts are the thoughts of farmers. They want trade, not aid. It’s really just that simple."

One reason that farmers are concerned is that many are convinced that their market losses from the administration’s policies may be much larger than the improved European market access promised by the president. For example, Bloomberg says it expects that the promise President Trump extracted from the European Union to buy more U.S. soybeans “won’t put much of a dent in the potential losses from a continuing trade war with China.”

The EU is the second-biggest buyer of the U.S. oilseed, but is “a distant second to China,” which bought $12.3 billion worth of U.S. soy last year compared with the $1.6 billion exported to the EU.

Even if the EU bought soybeans exclusively from the U.S., it would add about 10 million metric tons of demand and offset only about 35 percent of the 27 million tons of demand lost if China completely halted U.S. purchases, said Michael Magdovitz, an oilseeds analyst at Rabobank International.

Still, Republicans are hoping the EU agreement helps offset some of the potential political damage. House Agriculture Committee Chairman Michael Conaway, R.-Texas, thanked the Trump administration on Wednesday “for having our farmers’ and ranchers’ backs, including today’s announcement on expanded market access in Europe."

In addition, the administration recently unveiled a new $12 billion farm aid program that was welcomed in many farm areas but was widely seen as having limited impacts. For example, Sen. Ben Sasse, R-Neb., said the administration’s tariff policies had been “cutting the legs out from under farmers” and yet its plan “is to spend $12 billion on gold crutches.” Sens. Rand Paul, R-Ky., Bob Corker, R-Tenn., Chuck Grassley, R-Iowa, and Jerry Moran, R-Kan., also joined in the criticism.

Part of the concern about the administration’s aid program may be the result of administration efforts to minimize its potential impacts. For example, USDA Secretary Perdue echoed the comments of White House economic adviser Larry Kudlow who said Wednesday that the aid package is only temporary and that the entire $12 billion in assistance that was announced might not be needed.

“Nobody’s really thrilled about this,” Kudlow said. “We’re just trying to protect American agriculture from some of the unfair trading practices.” Both Kudlow and Perdue emphasized that the aid is temporary and “unlikely to be extended in future years” even if tariff battles continue, Perdue said.

Farmers who planted this year "had no idea what was coming about" on trade, Perdue said. Once a new market equilibrium is established, there would be much less, if any, need for additional assistance, he said. "We don’t expect trade disruption as much in future crops."

The administration continues to promise that farmers will “emerge from a trade war better off” and many farmers are accepting that message, Bloomberg says. Still, an extended trade dispute that lingers into the fall harvest – and midterm elections — could weaken the President’s political support and he has been under pressure from lawmakers representing rural parts of the country to back away from imposing tariffs.

That pressure won’t work, President Trump said last week. "China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S.," Trump tweeted. "They are being vicious in what will be their failed attempt."

So, we will see. Much of the uncertainty is a deep and growing disagreement over the purpose of the ongoing fight — focused on trade deficits, rather than market access or growth. Most economists are highly skeptical over the importance of the trade deficit metric and question the policies being used to reduce it. At the same time, several key officials deeply believe that deficits are crucial and must be confronted.

So, we are likely to experience deeper, more-bitter disputes over trade policies in the near future, especially if severe market declines are experienced. This is a fight producers should watch closely as it proceeds, Washington Insider believes.

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