Washington Insider-- Wednesday
USDA Payments Unfair, GAO Says
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
CFAP Payments Close In On $10 Billion
Payments under the Coronavirus Food Assistance Program (CFAP) increased to $9.9 billion as of September 13, including $4.9 billion for livestock, $2.6 billion for non-specialty crops, $1.7 billion for dairy and $647 million for specialty crops.
Payments for cattle make up the biggest share at $4.2 billion out of the $4.8 billion paid out for livestock. Payments for hogs are at $597 million. The $2.6 billion for non-specialty crops accounts for 26% of all payments, with $1.7 billion of that for corn, $499 million for soybeans, and $255 million for upland cotton.
Payouts by state have shifted slightly, with Iowa still the top state at $961 million, followed by Nebraska ($701 million), California ($606 million), Minnesota ($601 million and Texas ($598 million. Wisconsin is the only remaining state at $500 million or more at $519 million.
It is not clear how much the totals for CFAP will increase in coming reports as the signup deadline was September 11.
US Issues Five WROs On China Products
The U.S. Customs and Border Protection (CBP) Monday issued five Withhold Release Orders (WROs) on various products from China linked to state-sponsored forced labor in the Xinjiang Uyghur Autonomous Region. The WROs direct CBP officers at ports of entry to withhold release of the following:
All products made with labor from the Lop County No. 5 Vocational Skills Education and Training Center; hair products made in the Lop County Hair Product Industrial Park;
-Apparel produced by Yili Zhuowan Garment Manufacturing Company, Ltd., and Baoding LYSZD Trade and Business Company;
-Cotton produced and processed by Xinjiang Junggar Cotton and Linen Company, Ltd.;
-Computer parts made by Hefei Bitland information Technology Company, Ltd., in Anhui, China.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
While the action is not as broad as had been feared, acting CBP Deputy Secretary Ken Cuccinelli said the new orders would be in place while the administration conducts more legal analysis of the region-wide import bans, with CBP acting Commissioner Mark Morgan telling reporters that the investigations continue. Reports indicate that some in the Trump administration raised concerns about supply chain disruptions that could evolve with broader bans. Cuccinelli said legal concerns were the factor in the administration opting to further investigate the situation.
“We want to make sure that when we do get challenged - and we assume that we will be challenged, legally - that we will prevail and none of the goods we would ultimately would seize under such a WRO would be shaken loose and released into the United States,” he stated.
Indications are the companies targeted by CBP are smaller suppliers but some remain concerned about the potential impact if the U.S. broadens the actions.
China, as expected, reacted angrily to the U.S. moves. The actions "violate the rules of international trade, and disrupt global industrial, supply and value chains," Foreign Ministry spokesman Wang Wenbin told reporters. “The so-called forced labor issue is entirely fabricated by some organizations and people in the U.S. and the West.” He further noted China will take action to protect the rights and interests of Chinese companies.
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Yet another dust-up is surrounding USDA's ag aid program — and that still another Government Accountability Office report has found wide differences among states and regions and crops in government aid.
Senate Democrats told Bloomberg that the GAO's findings “confirm their long-standing complaints that the administration's $28 billion trade aid program was unfair to family farmers in the Midwest since farms in the South got higher average payments. Also, a large portion of the aid went to bigger farms.
“It's just not been fair,” said Senator Debbie Stabenow, D-Mich., the top-ranking Democrat on the Senate Agriculture Committee. Secretary Perdue “certainly put together a program that favored the crops in his home state.”
Rural voters are a key constituency for the Trump administration as the president heads into the November elections. Government aid has become an increasingly important source of income for farmers amid the financial stresses of the coronavrius pandemic, the trade war with China, a commodity glut and wild weather.
The independent GAO investigation was requested by Senator Stabenow in February after she raised concerns about unfairness and mismanagement of the USDA Market Facilitation Program. Stabenow joined Sen. Sherrod Brown, D-Ohio, and producers to announce the report and discuss the findings.
“From the start, I've been concerned that the Trump Administration's trade payments have picked winners and losers and left smaller farms behind,” said Senator Stabenow. “By favoring Southern farms but providing no help to our cherry growers, USDA has not treated Michigan farmers fairly.
She called the uneven treatment a “pattern that we're continuing to see in USDA's COVID-19 relief program. And she called on the administration “to stop playing favorites and start helping the farms hit the hardest.”
She also called the administration's trade policy with China. and its continued efforts to undercut the Renewable Fuel Standards “mismanaged” and argued that the “administration has betrayed the small farmers who need help the most.”
She noted that eight of the top nine states with the highest payments per acre were in the South. The program paid farmers in Michigan an average of $54 per acre, compared to farmers in Georgia who received an average of $119 per acre, she said. Georgia leads the nation with average payments of $42,545 per farmer, more than double the average payment in Michigan of $15,367.
The payments for certain crops like cotton, which is primarily grown in the South, far exceeded payment rates for others. Less than 10% of payments went to farms that produced specialty crops, dairy, or hogs. “Most Michigan specialty crop producers were not even eligible for direct assistance,” she said.
In addition, she argued that large farms benefitted far more than smaller ones. USDA doubled the maximum payment from the current programs from the $125,000 per person the earlier program allowed to $250,000 per person this time around—a shift that directed more dollars to the largest farms and ignored smaller ones that were struggling. As a result, the top 1.3% of payment recipients received an additional $519 million.
GAO also found that the top 25 farms received an average of $1.5 million per farm, whereas the average Michigan farmer received $15,367.
She concluded that “instead of providing more support for the 9,852 largest farms, USDA could have targeted funding to the thousands of small and beginning farmers that are often more vulnerable to market swings.”
Senator Stabenow's criticisms are not new and she notes that continuing analyses show continued bias in the program. “Kansas State University researchers agreed with these findings in an economic analysis of the distribution of trade assistance, finding that cotton payments were 33 times more than the estimated trade damage,” she said.
A USDA spokesperson said the aid payments were “based on trade damage, not on regions or farm size.” A follow-up statement accused Senate Democrats of trying to twist the data.
She says the “next installment of farm aid for COVID-19 relief should include congressional instructions on distribution rather than giving Perdue a “blank check.”
USDA defended the portion of aid given to larger operations that “account for 10% of all farms, but operate 52% of total farmland and generate 79% of the total value of production. As a result, trade impacts on these farmers were relatively greater, so they received higher payments.”
So, we will see. Certainly, as generation after generation of voters increasingly lose touch with their ag roots — if any — expensive programs to subsidize and protect agriculture are likely to become increasingly difficult to pass. These trends also appear likely to lead to a type of agriculture defined more by social objectives than productivity and efficiency — trends producers should watch closely as they intensify, Washington Insider believes.
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