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Commodity groups say USDA trade aid falls short

Focus now turns to regaining market share lost in trade turmoil.

Jacqui Fatka

December 18, 2018

4 Min Read
Commodity groups say USDA trade aid falls short

The U.S. Department of Agriculture announced its second round of trade mitigation payments Monday. However, many groups say that the assistance remains unbalanced and that more focus on regaining market access is needed.

USDA kept the formulas and payments identical to what they for were the first round and did not account for the many comments the agency received in recent months regarding the tip in the balance to certain commodities over others.

For instance, corn received just 1 cent/bu. for production, but the National Corn Growers Assn. (NCGA) said an economic analysis it commissioned estimates that corn farmers suffered an average loss of 44 cents/bu. from the beginning of May, right before tariffs were announced, through July, when tariffs were implemented. Based on USDA yield averages and acres of corn planted, that amounts to a $6.3 billion loss to corn farmers.

NCGA president Lynn Chrisp added that 1 cent/bu. "is woefully inadequate to even begin to cover the losses being felt by corn farmers. USDA did not take into account the reality that many of our farmers are facing.”

In a Nov. 19 letter to Agriculture Secretary Sonny Perdue, Chrisp stressed the disappointment with USDA’s approach to calculating Market Facilitation Program payments. Many farmers felt it was too narrow in scope and did not capture real-time impacts of trade disruptions.

Related:USDA issues 2nd round of trade aid payments

NCGA called on USDA to add ethanol and dried distillers grains with solubles (DDGS) to the calculation of damages for corn, at roughly $254 million. The organization also asked that farmers who suffered production losses from disasters be allowed to use an alternative to 2018 production for their MFP calculation, ensuring that those suffering losses from natural disasters would not be penalized twice. These requests were repeated in subsequent conversations between NCGA and Administration officials but ultimately were ignored in USDA’s final payment calculation for round 2.

Dairy producers were another segment seeking additional retribution. In October, the National Milk Producers Federation (NMPF) shared with Perdue four studies illustrating that milk producers have experienced more than $1 billion in lost income since May, when the retaliatory tariffs were first placed on dairy goods in response to U.S. levies on foreign products. In contrast, the first round of USDA trade mitigation payments, announced in August, allocated only $127 million to dairy farmers.

NMPF analyzed the CME dairy futures-based milk prices through the end of 2018, based on the settlement prices in late May, just before retaliatory tariffs were announced, with those same prices after tariffs had been thoroughly incorporated into market expectations. The expected impact of the retaliation may result in roughly $1.5 billion in lost revenue for producers during the second half of 2018.

Related:INSIDE WASHINGTON: Ag waits for second round of trade aid

NMPF president and chief executive officer Jim Mulhern said following the second round announcement, “The tariff mitigation payment for dairy farmers in this second round of payments is less than we had hoped for, but it will provide some assistance during difficult times.”

Mulhern added that more work needs to be done to resolve the ongoing trade disputes with U.S. agricultural trading partners. “The tit-for-tat tariffs that prompted these mitigation payments continue to inflict damage across the farm economy. We urge the Administration to resolve tensions with key trading partners, including China and Mexico, as the best way to assist farmers going forward.”

National Pork Producers Council (NPPC) president Jim Heimerl, a hog farmer from Johnstown, Ohio, said farmers would rather be producing and exporting food than receiving aid.

“We need to end these trade disputes soon and open new markets so we can export to consumers around the globe the safest, most nutritious pork in the world,” Heimerl said.

In addition to asking the Trump Administration to resolve the dispute with China and to drop the U.S. tariffs on steel and aluminum imports from Mexico so that country will rescind its duty on U.S. pork, NPPC has been urging the White House to negotiate new trade deals with countries, particularly ones in the fast-growing Asia Pacific region, beginning with Japan.

Sales to China have dropped dramatically for many U.S. agricultural commodities. Sales to Mexico have also taken a hit. For instance, wheat sales have declined by 569,000 metric tons compared to the previous year, despite Mexico increasing overall wheat imports. The National Association of Wheat Growers estimated this loss at $178 million caused by Mexico’s decision to source wheat imports from alternative markets amid uncertainty of trade agreements and unknown repercussions from Section 232 tariffs.

The American Soybean Assn. (ASA) said it continues to advocate for a negotiated solution to the trade war that would result in China rescinding the 25% tariff and fully opening its market to commercial purchases of U.S. soybeans. ASA president Davie Stephens said, “The sooner the market opens and tariffs are rescinded, the sooner we can start to rebuild the exports we have lost this year.”

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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