Washington Insider -- Monday

Considering a New Farm Bailout

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

India Now Downplaying Expectations For US-India Trade Deal Soon

Expectations for a U.S.-India trade deal to be inked when President Donald Trump visits the country next week continue to fade, with the U.S.-India Business Council the latest to lower those expectations.

“As new issues have continued to emerge, including the introduction of new tariffs in the most recent budget,” the group’s president, Nisha Biswal, told reporters in a teleconference, “the conversations may have gotten a little bit more complicated.” However, Biswal said there is still a chance for an agreement, but “both governments have been indicating that is unlikely at this juncture.”

Indications are that the situation is linked to India not making the kind of concessions on some issues that the U.S. sought as they were wanting to put some kind of trade deal together that Trump could announce while in the country.

Boost in Guest Workers Coming From Trump Administration

The Trump administration plans to allow 45,000 additional seasonal (H-2B visa program) guest workers to return to the U.S. this summer, the highest number since the president took office, according to administration officials.

The Department of Homeland Security plans to announce the additional seasonal-worker visas next week. They will become available in two waves: the first 20,000 will be immediately available, while employers can apply for the remainder for jobs beginning June 1.

The additional visas are being made available ahead of the summer, when demand for short-term work is typically highest.

Washington Insider: Considering a New Farm Bailout

It appears that the administration is seriously considering another farm bailout, in spite of its own recent negative comments regarding such an effort. The Washington Post is reporting that President Trump “for the first time Friday” vowed to continue his multibillion-dollar bailout of the farm industry “if necessary.”

The White House comments appeared to surprise a number of administration officials, the Post said. However, the report noted that the comments came amid growing signs that last month’s partial trade deal with China is “falling far short of the levels initially promised.”

As recently as Thursday, a senior U.S. Department of Agriculture official said China might end up buying just $14 billion in U.S. farm products through the end of September and that total purchases for the year could be much less than the $40 billion the president had promised.

The Post said the President’s political support among farmers appears to continue to be strong “but White House officials have long been worried about a backlash if prices remain low and bankruptcies continue.”

USDA reported at its recent outlook conference that total farm debt was at an all-time high and that there had been no “bump” in commodity prices following either the new China trade deal or the separate pact with Canada and Mexico — in spite of the president’s promise of a farming renaissance and his exhortation to farmers “to buy a bigger tractor and more land.”

“We are frustrated with the situation. We understand the broader trade implications but feel we have been targeted in a bigger political battle we did not sign up for,” said Jamie Beyer, a soybean farmer in Wheaton, Minn. and president of the Minnesota Soybean Growers Association. “We are all very excited about the USMCA (U.S.-Mexico-Canada Agreement) and the trade deal with China. But we are all waiting for that to be reflected in commodity prices and orders… it’s disheartening."

A third multibillion-dollar bailout could cast a shadow over administration claims about the “big, beautiful” trade deal reached with China last month, an agreement expected to form a key part of his 2020 reelection message on the economy. The outbreak of the coronavirus has wreaked havoc on the Chinese economy, making it more difficult to forecast how large farm purchases by China will ultimately be this year, the Post said.

The farm bailout program began in 2018 as a way to address fury from farmers who said Chinese tariffs on their exports had pushed many to the brink of collapse. The program continued in 2019, but White House officials had suggested it would not be renewed in 2020 — until the President reversed course Friday.

“Farmers are no dummies. They’ve seen this get rolled out the past two years, programs invented out of whole cloth,” said Roger Johnson, president of the National Farmers Union. “The president is going to do whatever he can to appease the farmers because it’s an election year."

The need for what would amount to a third round of bailout funding highlights the immense challenges the administration has faced in its international trade war conflicts. It imposed tariffs on a range of Chinese imports, including steel, as a way to ramp up pressure on the Chinese government to boost U.S. imports. But China retaliated by targeting agricultural producers in politically critical Midwestern states.

The administration “has said from the beginning that the trade war is nothing but rainbows and unicorns. The reality is that it’s not just us being tough on China; China and other countries are being tough on us,” said Rory Cooper, a former Republican aide who now works at Purple Strategies, a political consulting firm.

Zippy Duvall, president of the American Farm Bureau Federation said that he was optimistic that China would purchase more than $14 billion in agricultural products, based on conversations with China’s minister of agriculture but that the final outcome was uncertain. “The difficult times farmers are having today are not getting any better because of slow implementation,” Duvall said.

The President’s talk of additional bailout money may be meant as a signal to China that the White House will not wait patiently for Beijing to comply with the new trade deal, Sen. Kevin Cramer, R-N.D., a farm-state ally of the President, said.

GOP lawmakers worry that the President’s trade war “weakened the impact of their 2017 tax law, slowing U.S. economic growth.” The bailout’s price tag is now more than twice the cost of the Obama administration’s auto bailout, which was criticized by conservative lawmakers, the Post said. Unlike with many other government bailout programs, farmers are not required to pay any of the money back.

Still, Democrats may be in a difficult position to exploit the intra-GOP rift on the issue, the Post said. Congressional Democrats passed up an opportunity last year to force the White House to scale back the program amid pressure from lawmakers in their own caucus representing farm states. And party leaders such as Senate Minority Leader Charles Schumer, D-N.Y., have argued that the administration has “not been tough enough on China.”

Senior administration officials previously expressed alarm about the administration’s legal justification for the bailout, which they have based on a New Deal-era program. It was modified from its initial form to include additional crops, among other changes.

So, we will see. The administration’s heavy reliance on tariffs appears to be attracting growing criticism — at least in some quarters — especially as the coronavirus appears to continue to spread, a trend producers should watch closely as the season progresses, Washington Insider believes.

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