Conaway: MFP3 May Be Needed

OMAHA (DTN) -- With questions growing about China's commitment to buy U.S. agriculture commodities as that country deals with the coronavirus outbreak, the ranking member of the House Agriculture Committee on Wednesday urged the Trump administration to consider approving a third round of Market Facilitation Program payments.

U.S. Secretary of Agriculture Sonny Perdue told the committee during a hearing on the state of the agriculture economy that President Donald Trump's tweet last week indicating another possible round of MFP was his way of letting farmers and ranchers know he's willing to act if needed.

As part of the phase-one trade agreement with the U.S., China committed to buying $40 billion to $50 billion of ag products this year. Perdue told the committee the Chinese currently remain on track to fill that commitment.

Democrats on the committee questioned what they said was a regional bias in which producers received payments, a claim Perdue said was untrue.

Committee Ranking Member Rep. Mike Conaway, R-Texas, said the administration's action likely saved the livelihoods of many farmers across the country.

"I know that you and the president have taken some heat for providing market facilitation payments to farmers, but I would hate to see what the situation in farm and ranch country would be right now if you had not taken those steps," Conaway said.

"We would be having a very different conversation today akin to the kind of discussions that were taking place in the 1980s farm financial crisis."

PAYMENTS NECESSARY

Conaway said MFP payments were necessary in 2019 because China "targeted" farmers and ranchers as a result of trade actions taken by the Trump administration.

Perdue told the committee the administration's plan is to not make a third round of MFP payments this year, unless the situation warrants it.

Conaway told Perdue a third round of MFP payments may be necessary as producers across the country wait to see a payoff from a reopening of markets to China in 2020.

"So the first and second MFP payments were as justified as they were critical to our farmers and ranchers, and I strongly believe that unless something gives here very soon, an announcement of an MFP three will be absolutely vital to the survival of our producers," Conaway said.

Perdue said although 2019 was tough for agriculture, farmers and ranchers are "optimistic" for better times in 2020.

"I'm telling farmers to plan for the market," he said. "We always read things as we want to see them. I'm telling farmers not to expect one (MFP payment). I'm telling farmers if we get the trade and don't see prices increase, that's a market signal to farmers who are producing too much.

"Don't look for us to support MFP as a price-disruption program. It is for trade disruption. They've made it perfectly clear they'd rather have trade and not aid."

Committee Chairman Rep. Colin Peterson, D-Minn., said he remains skeptical about how soon markets to China can reopen.

"I really hope the markets return to normal," he said. "But the president's comments about a third payment also don't give me a lot of hope that we'll see tangible benefits from these new trade deals anytime soon. That's a promise that the administration made to farmers, and without it, the farm economy isn't going to recover."

Perdue said USDA was disappointed commodity prices didn't respond to the signing of the phase-one deal with China, but he said he remains optimistic the markets will return.

"Farmers and ranchers are like those from Missouri and say, 'Show me,'" he said.

PRODUCTS AFFECTED BY TARIFFS

In answering critics of the MFP payments, Perdue said the top commodities affected by China retaliatory tariffs were row crops, hogs, dairy, cherries and almonds. He said those commodities, especially row crops, are generally produced on larger farms "simply by the nature of the commodities themselves."

The top states that received MFP payments include Iowa at $1.6 billion; Illinois, $1.4 billion; Texas, $1.1 billion; Minnesota, $1.1 billion; and Kansas, $1 billion.

Although the China market for agriculture goods has yet to be realized and a third round of MFP payments is not expected, Perdue said the $96.7 billion forecast for farm income in 2020 is expected to be 5% higher than the inflation-adjusted average for 2000 to 2018 of $91.7 billion.

Net cash farm income, however, is forecast to decrease by 9% from $120.4 billion in 2019 to $109.6 billion in 2020.

"Given the poor weather in 2019, producers had to draw down crop inventories in 2019, adding to 2019 net cash farm income, whereas net farm income for 2020 reflects the forecast for better crop production that will allow for holding larger crop inventories," Perdue said.

As a result of spring flooding in the Midwest in 2019, about 20 million acres were recorded as prevented planting -- nearly double the previous record set of 11 million acres in 2011, he said.

Cash receipts in 2020, however, are expected to increase by 1% for crops overall because of expected higher production, and 4.6% for livestock because of higher prices and production, Perdue said.

In addition, he said farm-sector debt continues to grow and is forecast at $425 billion in 2020.

"Our farmers work hard, are the most productive in the world, and we aim to match their enthusiasm and patriotism as we support them," Perdue said.

"When conditions test the resilience of the men and women who feed, fuel and clothe the nation, President Trump has called on USDA to respond, and 2019 was no different."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(AG/CZ)

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