Washington Insider --Thursday

Trade Policy Criticism from the Farm Belt

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

US Ag Trade Negotiator Lashes Out At China, India on Ag Subsidies

China and India are both guilty of providing excess support to their farmers, according to comments from U.S. chief ag trade negotiator Gregg Doud to a U.S. sugar industry meeting in Michigan.

"We think China has done in excess of $100 billion more in subsidies to its farmers than it was allowed to do,” Doud said, noting China has not reported its subsidies to the WTO since 2010.

As for India, Doud said the country has exceeded its subsidy limits on rice and wheat and has boost subsidies to sugar producers in a bid to prop up its sugar industry.

“I cannot think of a commodity that is more distorted,” he said in relation to sugar. “If you think there is a problem in steel, take a look at the sugar market.”

USDA Unveils New Nationwide Dairy Revenue Protection Plan

Availability of a new insurance plan for dairy producers developed by American Farm Bureau Insurance Services (AFBIS) that insures against unexpected declines in quarterly milk sales - called Dairy Revenue Protection (DRP) - was announced by USDA's Risk Management Agency.

DRP "provides insurance for the difference between the final revenue guarantee and actual milk revenue if prices fall," USDA said in a release. It increases flexibility for producers seeking coverage by providing "a greater choice of prices, from those that focus on cheese to fresh milk, protein or butterfat."

Coverage levels available under the program range from 70% to 95% of revenue (in 5% increments), and coverage is available in all counties in all 50 states.

Further, producers who elect for coverage under the new program are not precluded from participation in the existing Margin Protection Plan - Dairy (MPP-Dairy) from USDA's Farm Service Agency (FSA).

Sign-up for DRP opens October 9, 2018, with the first available coverage taking effect for the first quarter of 2019.


Washington Insider: Trade Policy Criticism from the Farm Belt

There have been numerous reports of growing opposition to administration trade policy from groups, members of Congress and others in recent days. In addition, this week, The Hill is carrying a snapshot of at least one producer’s feelings in an opinion letter from “a Nebraska farmer from Rising City, Nebraska.”

The writer, Bart Ruth, is something of a high visibility aggie, chair of the 25x’25 renewable energy alliance and past president of the American Soybean Association (2001-2002). He writes to say that ag policy, especially for trade, is on the wrong track.

Ruth remembers that candidate Trump promised to open new markets to trade, rein in regulatory overreach, cut government spending, and rebuild infrastructure and communication networks to enable rural America to compete in the global economy.

And, Ruth credits the President with “some positive changes.” But, he argues that overall, the administration has shown “a blatant disregard for international institutions, sound science, proven economic theory, and the history of protectionist policy.”

Not only that, but “we have seen this movie before,” he says—from the Smoot-Hawley Tariff Act in 1930 to the Carter grain embargo after the Soviet invasion of Afghanistan in 1980. Agriculture suffered greatly from both, Ruth says. The Soviet embargo in particular crippled the ag economy and led to farm foreclosures and bankruptcies across the country throughout the decade, he thinks.

He says his own experience bears this out – since the recent “tariff saber rattling began, prices for the corn and soybeans that I produce have dropped by 15% to 20%. The good markets I had for biofuel production, animal feed, and exports have been diminished.”

Ruth’s arguments are basic. He thinks that “the markets that we have nurtured and developed over decades have been decimated by the administration’s tariffs. Having personally been involved in promoting U.S. soybeans in China, Mexico, and around the world, it is heartbreaking to see all that hard work, not to mention farmer- and taxpayer-invested funds, tossed aside due to a flawed protectionist theory. Yes, we have issues with China — but many of those could have been addressed by joining the Trans-Pacific Partnership or working with allies within the World Trade Organization.”

He also is upset that “potential markets for renewable energy produced in rural America are being harmed by the United States walking away from the Paris Climate Agreement, by EPA granting renewable fuel waivers and by the administration’s favoritism toward coal and fossil fuels.” The Energy Independence and Security Act of 2007 contributed to the recent high-profit years for American agriculture and yet we continue to backslide on its objectives, he charges.

He also criticizes the administration’s newly-proposed ag support program. Following the “lack of enthusiastic response from farmers across the country to the proposed $12 billion bailout,” the president expressed surprise that we don’t want a government check. “That shows how little he understands farmers and rural America in general. We want to be free to produce feed, food, fiber and energy for the world,” Ruth says.

If the president were to ask him for advice, Ruth says he would tell him that farmers should not be used as pawns and negotiating chips in a wider trade war and “that the administration should not disrupt what had been an expanding opportunity for U.S. agriculture to compete in global markets.”

Still, Ruth thinks that there is time to correct these missteps and regain the trust and confidence of the sector that helped propel the President into office.

But, he notes “The president often says that America's farmers have been treated badly by our trading partners but I can think of no treatment worse than the tariffs implemented by our own government.”

The pushback is presented as one man’s opinion amid press reports that indicate that producers across the country are still tending to stick with the President.

So far, the administration has had a difficult time explaining why its “get tough” trade policy with its increasingly certain prospects for widespread retaliation is either well designed or fully necessary. This is a confrontation that can be expected to intensify, and one which producers should watch closely as it emerges, Washington Insider believes.

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