Farmer Trade Aid Detailed

USDA Plan Draws Some Criticism From Commodity Groups as Soybean Payments Dominate

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Despite the trade deal announced with Mexico on Monday, Agriculture Secretary Sonny Perdue said trade aid to farmers was needed because of "recalcitrant and intransigent" behavior by some trading partners, particularly China. (Logo and photo courtesy of USDA)

OMAHA (DTN) -- Commodity farmers can expect to collect a combined $4.7 billion in trade aid payments from USDA with soybean farmers receiving the bulk of those funds as USDA works to spread money around based on retaliatory trade tariffs against U.S. farm commodities.

USDA leaders announced more details of the trade aid package on Monday. Sign-up starts Sept. 4, but farmers will need to show actual production for fall-harvested crops such as soybeans, corn, sorghum and cotton before they can sign up for the aid checks.

The heart of the aid program, the "Market Facilitation Payments," will total $4.7 billion and are based on 50% of a farmer's production this year for the commodity. That 50% figure is multiplied by the payment rates below:

-- Soybeans: $1.65 a bushel; total payments expected, $3.7 billion;

-- Sorghum: 86 cents a bushel; total payments expected, $156 million;

-- Wheat: 14 cents a bushel; total payments expected, $119 million;

-- Corn: 1 cent a bushel; total payments expected, $96 million;

-- Cotton: 6 cents a pound; total payments expected, $277 million.

To pencil out a payment, for example, a farmer with 1,000 acres of soybeans that yield 50 bushels per acre this fall would calculate 25,000 bushels x $1.65 for a payment, resulting in a payment of $41,250 on those soybean acres.

Pork farmers also will be paid $8 a head for 50% of the pigs they owned on Aug. 1. Pork producers combined are expected to receive $290 million.

Dairy farmers will receive a payment based on the Margin Protection Program historical production figure, multiplied by 12 cents per hundredweight to calculate a payment. For dairy farmers who are not in the MPP and don't have that number, USDA has alternative ways to come up with a calculation, said Bill Northey, USDA's undersecretary for farm production and conservation.

To be eligible, a farmer must have an adjusted gross income under $900,000 and be in conservation compliance. The aid payments will have a cap of $125,000 per person, but that payment cap will also be separate from any payments a farmer might receive this year from the Agricultural Revenue Coverage (ARC) or Price Loss Coverage (PLC) programs.

Northey reiterated it is important for farmers to have the information on this year's crop production before going into the local FSA office. "But this should be, potentially, one visit for producers with that production evidence, signing the form," Northey said. He later added, "Producers obviously need to have their production evidence certified."

The aid is based on this year's production. It will not be adjusted for those who suffered low yields due to factors such as drought.

Payments could go out within weeks for farmers once their crops are harvested and they sign up for the aid.

Some groups were not happy with the payment amounts, arguing they do not begin to equate to the damages.

The National Milk Producers Federation President and CEO Jim Mulhern said the aid package of roughly $127 million in payments to dairy farmers "represents less than 10% of American dairy farmers' losses caused by the retaliatory tariffs imposed by both Mexico and China."

The National Corn Growers Association put the onus of the trade aid back on the White House's own tariff actions, stating USDA's package "would be insufficient to even begin to address the serious damage done to the corn market because of the administration's actions." NCGA also indicated the trade disputes had lowered corn prices by 44 cents a bushel, which equates to about $6.3 billion in lost value to the corn crop."

National Corn Growers Association President Kevin Skunes, a North Dakota farmer, said, "NCGA has understood from the beginning that this aid package would neither make farmers whole nor offset long-term erosion of export markets. But, even with lowered expectations, it is disappointing that this plan does not consider the extent of the damage done to corn farmers."

In announcing the details, Agriculture Secretary Sonny Perdue first praised President Donald Trump for getting a trade deal done with Mexico and looking forward to completing trade work with Canada.

"I would take a look at this announcement with Mexico today and say 'This is how you do it,'" Perdue said. "This validates the president's approach to bringing other nations to the negotiating table."

However, Perdue said the farm payments were necessary because other countries have been "recalcitrant and intransigent" in agricultural trade barriers, especially by placing what Perdue and other USDA officials called "illegal retaliatory tariffs" against the U.S. because of the Section 232 and Section 301 tariffs the U.S. has imposed because of steel, aluminum or national security purposes.

"For months now, President Trump has been standing up to China and other nations, sending the clear message that the United States will no longer tolerate their unfair trade practices," Perdue said. "Those practices include non-tariff trade barriers to American trade products and the forced transfer or outright theft of or intellectual property."

Payments could be "bifurcated" depending on what else happens on the trade front this fall, USDA said.

The second piece of the program, the Food Purchase and Distribution Program, will have USDA buy up to $1.24 billion in commodities, which includes some major buys such as $558.8 million for pork purchases, up to $84.9 million for dairy and $93.4 million in apples, for example.

Still, there will be a broad array of specialty crops, such as nuts and fruits, that will be bought then distributed to local feeding programs. The purchases will be made over four different phases in the coming months.

"Many of the commodities we will be purchasing are different from the regulated commodities we purchase through a program many people are more familiar with, our Section 32 purchases," said Greg Ibach, the undersecretary for marketing and regulatory affairs at USDA. "That means we are working to attract new vendors and have them qualify to make new purchases."

Another $200 million will be added to Foreign Market Development for both trade programs with existing trade partners and opening up new foreign markets. This program will operate more as a cost-share effort -- similar to current programs already in place -- with commodity checkoff organizations and companies submitting proposals to tout agricultural goods overseas.

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Chris Clayton