Washington Insider-- Thursday

Farm Size Battleground Revisited

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

Former USTR Official Touts Changes By China That Were Part Of Phase One Agreement

Former top U.S. ag trade negotiator at the Office of the U.S. Trade Representative (USTR) Gregg Doud, Tuesday told a Farm Foundation forum that market access in the agreement was critical. He stressed implementation of nearly all the 57 market access commitments, placing emphasis on the approval of more U.S. facilities to export to China.

“Before we started [Phase 1] negotiations, we had about 1,500 facilities in the U.S. eligible to export agricultural products to China,” Doud said. “So that would have been beef processing facilities, dairy facilities, pet food facilities… 1,500 of those. Today, we now have well over 4,000 facilities in the U.S. eligible to export their products to China.” That gives the U.S. access to the Chinese market “we never had before, and this is a major change,” Doud said. “The improvements in market access that we now have in place are going to treat us well here going forward.”

As for the purchase commitments, Doud simply said it comes down to U.S. competitiveness, a point focused on by Chinese negotiators.

He also noted the two sides spent a considerable amount of time talking about ethanol, with trade in the corn-based fuel something Doud said he believed China was truly interested in. “My sense is that China really is trying to think through this whole notion of infrastructure for the use of ethanol,” Doud said. “You know, it took us a long time to build that infrastructure in the United States.”

As for overall market conditions moving ahead, Doud predicted continued volatility, notable with China involved in the market. He said there is no way to say with certainty that in two or three years whether China would be importing 30 million metric tons of corn or just 5 million ton. The shift by China away from feeding swill to hogs is a key that Doud has focused on in his comments on China before, and said that is “maybe one of the biggest things that ever happened in the history of world agriculture.”

Vilsack Wins Senate Approval To Again Head USDA

Tom Vilsack was sworn in Wednesday evening to lead USDA under the Biden administration, a post he held for eight years in the Obama administration.

The Senate approved the nomination 92-7 on Tuesday, with six Republicans voting against his nomination and Sen. Bernie Sanders, I-Vermont. Sanders caucuses with the Democrats and is the first lawmaker from that side of the aisle to vote against a Biden administration nominee.

In explaining his vote, Sanders said he didn't have a major issue with Vilsack but thought that Biden “could have done better” with his choice of someone to lead USDA.

Republican Sens. Rick Scott of Florida, Rand Paul of Kentucky, Josh Hawley of Missouri, Marco Rubio of Florida, Ted Cruz of Texas, and Dan Sullivan of Alaska, opposed returning Vilsack to head USDA.

Now the attention will quickly shift to lower-level appointments at USDA that require Senate confirmation.

Washington Insider: Farm Size Battleground Revisited

One of the perpetual battles in Washington concerns the extent to which government programs focus on larger farms. The issue crosses party lines and Congress has written many complex limits on benefits for farms of various sizes for many years.

This week, it seems that battle is rejoined. A new report by an ag advocacy organization says that the Trump administration aimed its “bailouts” increasingly to the nation's biggest farms. The report was written by the Environmental Working Group (EWG), an environmental advocacy group that highlights issues of equity, which it is watching closely as the Biden administration designs potential new climate-related and other financial incentives for farmers.

The report said that only 1% of farm aid recipients collected 23% of subsidy payments in 2019, up from 17% in 2016 as former President Donald Trump's trade bailout swelled payments. Their portion crept up to 24% in the first half of 2020, the most recent period covered in the data, as farm aid hit a record level with coronavirus relief payments, the EWG said.

That is the largest share of federal farm subsidies going to the top 1% – the 7,873 subsidy recipients who got the highest payments – since 2007, according to the analysis. The average payment for that group was $497,907.

The findings followed earlier criticism from Democrats concerning inequities of Trump administration farm bailouts. In addition, Bloomberg said that a number of academic studies concluded that trade aid payments were greater than farmers' actual losses from the tariff conflict with China. A Government Accountability Office report issued in September found the top 25 recipients of trade aid in 2019 received an average of $1.5 million per farm.

“This certainly adds to the questions about the way that program was designed,” said Jonathan Coppess, a University of Illinois professor who ran the federal agency that administers farm subsidies during the Obama administration, but wasn't involved in the advocacy group's analysis. “Why all of a sudden did you see this big a shift?”

American farmers in 2020 had their most profitable year since 2013, largely because of federal aid which accounted for 38% of their net income, USDA reported earlier this month. Crop prices also rose late in the year as China stepped up agricultural imports.

“The largest and wealthiest farms should not be getting most of the money, because they have large assets to fall back on in times of trouble,” said Anne Schechinger, a senior analyst with the group. “We're at a time when so many Americans have lost their jobs, are struggling to put food on the table or keep their businesses open, it makes you wonder why so much money is going to farmers, especially the largest, wealthiest farmers.”

She said the shift in subsidy payments toward larger farms in 2019 likely was driven by Trump's adoption of a more generous formula for computing trade losses that year and a decision to double the maximum trade aid benefit per person. Large operators sometimes increase their subsidy payments by including relatives, even those who live in distant cities, as actively engaged in management of the farm, multiplying the benefits they are allowed, EWG said.

Trump administration officials defended the program against criticism, arguing that they tend to be more productive and so suffer larger losses from trade-related commodity price drops.

Schechinger said the Environmental Working Group, which advocates re-directing farm subsidies to smaller operators and conservation programs, released the findings in part to focus attention on inequities in aid distribution as the Biden administration considers financial incentives to encourage farmers to adopt climate-friendly practices.

Administration officials have floated ideas including a carbon bank to finance payments to farmers who take steps to sequester additional carbon in soil and other measures to reduce greenhouse gas emissions. Schechinger said her organization wants the USDA to avoid advantaging larger operations over smaller ones when it makes proposals.

The Environmental Working Group regularly obtains data on federal farm subsidy payments from USDA through the Freedom of Information Act. Its analysis covered total farm subsidy payments, which includes both one-time programs under President Trump and continuing farm programs authorized by Congress.

The issue of how farm benefits are allocated among farms of varying sizes is thorny and has long persisted. Many farm operations are highly capitalized now into larger units that are very efficient--and account for the vast bulk of U.S. food and fiber production, even although their numbers are relatively small. As a result, programs intended to affect production or other key aspects of the sector often prominently include larger units – a highly controversial outcome especially for those who focus closely on social aspects of the sector.

So, we will see. Recent government supports have been important to the sector and almost certainly will continue to be highly controversial, especially as they are deeply involved in issues of trade policy, along with conservation, supplemental nutrition and income support, Washington Insider believes.

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