Washington Insider -- Wednesday

Helpful Farm Trade Aid

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

China Hits Back at New US Tariffs with WTO Complaint

China is challenging the latest round of U.S. tariffs targeting $110 billion in Chinese goods that took effect over the weekend, in a new complaint filed at the World Trade Organization (WTO).

The U.S. asserts that the duties, which it imposed over alleged Chinese theft of U.S. intellectual property, are not subject to review by WTO – but China repeatedly rejected that assertion.

In a statement, the Chinese Commerce Ministry said the U.S. reneged on an agreement not to impose new tariffs that was reached at the June G20 summit in Osaka, Japan. That, in turn, prompted China to lodge the complaint at WTO, the ministry said.

The U.S. and China have 60 days to resolve the dispute. If they are unable to reach a mutually agreed solution China could then request the establishment of a WTO dispute panel to adjudicate the matter.

USDA Announces 2019 ARC, PLC Enrollment Now Open

Producers can now enroll in the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs for the 2020 crop year, USDA announced Tuesday (September 3).

Enrollment for the two programs will be open through March 15, 2020. If no election is made by the deadline, it will default "to the current elections of the crops on the farm established under the 2014 Farm Bill," USDA said. No payment will be earned in 2019 if the election defaults, the department noted.

Under changes introduced by the 2018 Farm Bill, farmers may enroll and elect program year 2019 coverage in crop-by-crop ARC-County or PLC, or ARC-Individual for the entire farm. The 2019 election will apply for both the 2019 and 2020 crop years. Farmers will then have an opportunity to change their program elections in crop years 2021 through 2023.

Once 2019 crop year elections are completed, producers can submit an enrollment contract for the 2020 crop year beginning October 7, 2019 and ending June 30, 2020.

"The ARC and PLC programs, in combination with crop insurance, are the bedrock of the farm safety net for crop farmers and something I hear about frequently on the road," USDA Secretary Sonny Perdue said in a statement. "This exciting opportunity for enrollment in these programs marks the first time folks will have the opportunity to switch their elections since the 2014 Farm Bill was implemented. I am pleased to add that today’s announcement means our staff met yet another major Farm Bill implementation goal and they are continuing to move full speed ahead," he concluded.

Washington Insider: Helpful Farm Trade Aid

Bloomberg and other urban media are taking note of the effort the administration is making to downplay ag producers’ economic problems with weak markets as the trade war with China escalates. An example is the recent USDA report that “farmers are doing better than previously thought,” as new forecasts show farm profits rising 5% in 2019--the best in five years “because of the president’s trade aid program.”

The report and its “more favorable portrait of agricultural finances” comes as the administration faces increasing criticism from farmers over losses from the president’s intensifying tariff war with China. Bloomberg notes that farmers openly challenged Agriculture Secretary Sonny Perdue last month at an event in Minnesota.

USDA emphasized that projected net farm income this season will reach $88 billion, up from $84 billion last year. It called the projection “a rosier financial picture for farmers than prior estimates, which didn’t anticipate the level of aid” the administration would provide to compensate for lost sales to China, said Jeffrey Hopkins, the economist who supervised the forecast.

Hopkins said that the previous forecast, made in March, also didn’t include the level of aid payments farmers received for being unable to plant because of floods.

However, producers were not exactly thrilled by the news, Bloomberg reported. For example, Rob Larew, vice president of public policy for the National Farmers Union, the second-largest general farm organization, said the boost in profits “belies the economic difficulties that most farmers are still facing” and relies entirely on aid from taxpayers.

“Though those payments are helpful in the short term, they ultimately are not a sustainable solution to the ongoing farm crisis,” Larew said. “Unless the government plans to either keep throwing money at these problems or implement real solutions, farm income will likely fall again next year.”

John Newton, chief economist for the American Farm Bureau Federation, the largest general farm group, said a 13% increase in farm bankruptcies in the 12 months through June and an uptick in delinquent farm loans suggest a tightening financial squeeze.

“A lot of real-time indicators don’t show signs of a stronger farm economy, but you can’t deny the impact of the trade aid,” Newton said, adding that most farmers haven’t yet received payments from this year’s trade assistance package.

The revised forecast suggests farmers will have their most profitable year since 2014—but that the projection is still 2.3% below average farm profits since 2000 and 36% below their net income in 2013 when adjusted for inflation, Bloomberg said.

Farmers will receive $19.5 billion in direct government aid by year-end, the most since 2005, according to the projections. That doesn’t include an additional $10.5 billion in federally subsidized crop insurance payments forecast for the year.

Rural voters are a key constituency for President Donald Trump as he heads into the 2020 election and the farm economy was under stress even before the trade war with China. The administration announced $16 billion in trade aid for farmers this year after providing $12 billion last year. Congress also appropriated $3 billion in disaster assistance for farmers on top of payments they receive from existing farm subsidy programs for those who were unable to plant.

The new USDA projections also include big upward revisions for net farm income for last year and this year based on a 2018 survey on farm production practices and finances. The survey showed farmers’ expenses were considerably lower than previously estimated, Hopkins said.

The USDA had previously estimated last year’s farm profits at $63.1 billion. The 2019 projection of $88 billion is up from a $69.4 billion forecast released in March.

Many producers have been critical of the sweeping scope of the “get tough” trade policies that include products and markets like those for many farm products that have been built steadily over many years and which are not been the focus of the most damaging Chinese trade policies, observers say.

The administration’s “trade aid” payments are controversial in some quarters and are widely seen as inadequate by producers. Still, such subsidies have been used by many administrations over decades — with varying degrees of success – that create policy and political issues that should be watched closely as they intensify, Washington Insider believes.

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