Washington Insider -- Friday

House Clears Spending Plan With CCC Funding

House Clears Spending Plan With CCC Funding

The House Thursday passed a continuing resolution (CR) to keep the government funded through Nov. 21 and avert a shutdown when Fiscal Year (FY) 2020 arrives Oct. 1.

The bill won approval 301-123, sending the measure off to the Senate where it is expected to pass and be signed by President Donald Trump.

The measure included restocking funding for the Commodity Credit Corporation (CCC), but calls on USDA to provide a report by Oct. 31 detailing the Market Facilitation Program (MFP) payments and other aid efforts used by the administration to help the ag sector deal with trade impacts.

The efforts also revealed that partisanship has worked its way into the usually bipartisan world of agriculture, prompting a contentious exchange between Democrats and Republicans during a joint House Agriculture Subcommittee hearing on implementation of disaster and farm programs.

China Officials to Visit US Farms

A portion of the Chinese delegation in the U.S. for deputy-level trade talks this week in Washington will stick around a little longer -- some of the group will visit U.S. farms with reports indicating stops in Nebraska and Montana.

The South China Morning Post initially reported the visits would take place. CNBC Thursday also reported the delegation's plans. USDA Secretary Sonny Perdue confirmed the development after he appeared at a Washington event.

"I think they want to see the production of agriculture," Perdue said. "I think they're trying to build goodwill and we welcome that. Specifically, where they will go and what they will do is not clear to us."

Perdue also said the U.S. still expects China to make additional purchases of U.S. agricultural products. "They know our shopping list and we hope that they come and are prepared," he said.

It is not clear if the trip will result in any signing ceremonies for the purchase of U.S. ag products or whether it is merely a goodwill gesture by China ahead of what have been expected to be higher-level U.S.-China talks in early October.

Washington Insider: Farmer Politics and Trade

Bloomberg is reporting this week that the administration has what it calls a "$28 billion bet that rural America will stick with the president." It begins with a long public phone call the White House made to a group being addressed by Ag Secretary Perdue. The President said, "horrible dishonest reporters will say that 'oh jeez, the farmers are upset.' Well, they can't be too upset, because I gave them $12 billion and I gave them $16 billion this year," he said.

A couple of years ago, such a pep talk might have drawn raucous applause from one of the president's key constituencies, Bloomberg said, but notes that this time the crowd was "subdued."

It cited a farmer who attended the event and said, "The aid package that has come in is a relief, and it softens the landing, but it's not a solution, it's a Band-Aid." When asked if the payments make him whole, the producer who grows 500 acres of soybeans near Decatur, responded, "Of course not." He'd rather have free trade, he said.

China hawks in Trump's administration want Beijing to quit subsidizing strategic industries, "but that hasn't deterred the White House from doling out billions in aid to American farmers who have become more dependent on government money than they've been in years," Bloomberg said. At $28 billion so far, the farm rescue is more than twice as expensive as the 2009 bailout of Detroit's Big Three automakers, which cost taxpayers $12 billion. And farmers expect the money to keep flowing: A Purdue University survey in August found the almost 60% of producers said "they anticipate another round of trade aid next year."

Farmers became collateral damage in the president's tit-for-tat tariff war with China, which is being waged primarily for the benefit of such sectors such as manufacturing and tech, Bloomberg notes.

Efforts to cultivate China's appetite for American soybeans stretch back almost four decades and China bought more than $12 billion worth in 2017. Sales have declined sharply in recent years as the tariff wars accelerated. The administration slapped additional tariffs on about $110 billion in Chinese imports on Sept. 1 and China responded with tariffs on American-raised pork, beef, chicken, and other agricultural goods.

Since then, the two sides have warmed, and in early September, China has reported that it will exempt some American soybeans, pork, and other agricultural products from more tariffs.

For American producers, the hit to exports has further strained finances amid a six-year slump in prices for agricultural commodities. Net farm income is projected to be down 29% this year from 2013 levels, and debt is expected to reach $416 billion.

Also, bad weather prevented farmers from planting about 11.4 million acres of corn and 4.5 million acres of soybeans, according to government estimates. Producers also have been dismayed that the administration has faltered on campaign pledges to uphold national consumption mandates for renewable fuels.

Bloomberg thinks farmers will receive $19.5 billion in direct government aid this calendar year, the most since 2005 -- a figure that does not include the $10.5 billion forecast this year in federally subsidized crop insurance payments, the main vehicle for the regular farm subsidy program.

Those funds won't cover all of farmers' losses. Iowa producers, for example, were purported to receive $973 million in direct payments from the first round of trade aid, covering a period in which Iowa State University estimated the trade war cost them $1.7 billion.

So, the stakes are unusually high just now as the U.S. and China begin to take what the press calls "baby steps to ease tensions in their trade war," through face-to-face talks in Washington.

However, Bloomberg warns, taken together the measures likely to be considered "pale in comparison to the oncoming hit from U.S. tariff increases still in the pipeline for October and December." At the same time, as evidence mounts in both nations of the economic damage that the trade war is doing, there appears to be more urgency for a deal.

Also, despite the goodwill gestures, the two sides remain far apart on fundamental issues and officials continue to trade barbs. China wants the U.S. to remove all extra tariffs, and the U.S. has long sought concessions on intellectual property and state-subsidies for industry that Beijing has been unwilling to give.

Clearly, producers should watch extremely closely as trade talks are undertaken in both the Atlantic and Pacific markets and as new trade interventions continue to be considered, Washington Insider believes.

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