Washington Insider -- Wednesday

Farm Aid Payments Planned as Harvest Begins

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

Lawmakers Weigh In On USMCA Timing

Control of Congress could be the key when Congress votes on the U.S.-Mexico-Canada Agreement (USMCA), according to two Republican lawmakers.

"If the Democrats take the House, the vote will be in the lame duck," said Senator Chuck Grassley (R-Iowa), referring to the roughly two-month period between the election and a new Congress starting in January. "If the Republicans keep the House, it will be next year." Grassley says that given the Senate calendar and the need to finish appropriations, it would be better to vote next year.

Grassley, current chair of the Judiciary Committee, may become Senate Finance chairman next year following the retirement of current chair Senator Orrin Hatch (R-Utah). Grassley's new post assumes Republicans keep control of the chamber. He expects the trade deal to pass.

Grassley also said China needs to take note. "Common sense tells me" Congress has the simple majority votes needed to pass the new USMCA, Grassley said. The trade deal is "very positive" for the U.S. agriculture industry, he added. "Beijing should take note," he alerted; the pact shows President Trump can "rebalance" trade deals, Grassley said.

"You know 95 percent of what we will be voting on is the same as NAFTA," Grassley stated.

Meat and poultry industry has mixed reaction to reviving GIPSA rules

While the meat and poultry industry's main focus in recent weeks has been on the new U.S.-Canada-Mexico Agreement and securing a new farm bill, they're also keeping a close eye on the Trump administration's plan to revisit the contentious Grain Inspection, Packers and Stockyards Administration (GIPSA) rules in 2019.

The industry offered a mixed reaction to the Trump administration's announcement last week that it would revisit the GIPSA rules, and that the rules would reappear in the spring 2019 regulatory agenda, which sets out a list of priorities for the coming year.

The rules, which were published in the waning days of the Obama administration, were designed to balance the power between meatpacking companies and contract growers.

The plan to revive two of the three GIPSA rules emerged at a Sept. 26 hearing in a case challenging USDA's decision to scrap the two rules. The case was brought by the advocacy group Organization for Competitive Markets and legal nonprofit Democracy Forward.

During the hearing, a Department of Justice attorney, arguing on behalf of USDA, told a panel of judges the department intends to place a proposed rule on its upcoming regulatory agenda. That's a sign, he said, that USDA has not abandoned a congressional farm bill mandate to write regulations to aid farmers who do business with meatpacking companies.

Washington Insider: Farm Aid Payments Planned as Harvest Begins

Well, nobody is much surprised to see that the administration is moving quickly to provide aid to farmers to compensate for negative effects of the administration's China trade fight. Bloomberg reported this week that that sign-up for payments has begun and that there have been 59,275 applications as of this week.

It notes that the top 5 states where farmers have applied for aid are Iowa, Kansas, Illinois, Indiana, and Wisconsin, and that the top 5 commodities where farmers are seeking assistance are wheat, dairy, hogs, corn, and soybeans. USDA says farmers will get $4.7 billion in a "first round of direct government aid" to compensate for market losses caused by retaliatory tariffs from China and other trading partners.

Also, nobody was surprised by the complex reaction among farmers, who Bloomberg says "largely bemoan" the need for the program "even as they welcome the assistance."

Soybean growers, the hardest hit by retaliatory tariffs, will get $3.6 billion in this round, according to the plan the government released Monday. Pork producers will receive the second-highest payments, totaling $290 million. Others who will receive aid include dairy farmers as well as producers of sorghum, corn, wheat and cotton.

An example of the reaction by producers to the program came from the American Farm Bureau Federation (AFBF), the largest farm group. It said, "Today's aid announcement gives us some breathing room, but it will keep many of us going only a few months more," according to Zippy Duvall, AFBF president. He also noted that "the real solution to this trade war is to take a tough stance at the negotiating table and quickly find a resolution with our trading partners."

Farmers are a key part of the rural political base that elected President Donald Trump, who has promised they will emerge better off from a trade war — and many agricultural producers are accepting that message, Bloomberg said. Results of the latest DTN/The Progressive Farmer Agriculture Confidence Index and the recent Progressive Farmer Magazine 2018 Zogby poll, reported elsewhere, back up that overall satisfaction.

Still, an extended trade dispute that lingers into the fall harvest — and the Nov. 6 congressional election, is thought to hold the potential to shake that support.

As soybean and other commodity prices have tumbled in the wake of the trade tensions, Trump has been under pressure from lawmakers representing rural districts to back away from tariffs. Those districts may play a key role in the November elections.

USDA Secretary Sonny Perdue said the payments don't need new congressional approval, as they will be administered under USDA "disaster procedures" from the Depression of the 1930s.

The USDA will spend an additional $200 million promoting agricultural exports as part of the aid. The government also will step up commodity purchases to help boost prices, making at least $1.2 billion of purchases, including $559 million of pork.

The Trump administration "will not stand by while farmers are targeted by countries who are acting in bad faith," Perdue told the press recently.

The total size of the package, which the USDA estimated at $12 billion when it was announced last month, may be less than that should trade conditions change, said the agency's chief economist, Rob Johannson.

Bloomberg also cites the National Pork Producers Council President, Jim Heimerl, who said, "While we're grateful and commend the administration for its action to help us, what pork producers really want is to export more pork, and that means ending these trade disputes soon."

So, we will see. Export markets are extremely important to producers because they are growing. In many developing countries consumers are becoming more affluent, while most domestic food markets are already well supplied and much more stagnant. Traditionally, producers have been "unforgiving" toward politicians who interfere with their access to export markets, so their reactions is being watched very closely this fall, even as the newly-agreed, three-nation NAFTA is considered, and the U.S.-China fight continues—policies producers should watch closely as they intensify, Washington believes.

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