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A reason to plant beans?

Updated: USDA releases details of trade aid package.

Updated 11:18 a.m. May 23 with USDA press release

The latest trade aid package will resemble the 2018 package with three components: Market Facilitation Program, Food Purchase and Distribution Program and an Agricultural Trade Promotion Program. The majority of money will go to the Market Facilitation Program, with $14.5 billion earmarked for direct payments to farmers. Food purchases will be allocted $1.4 billion and the Ag Trade Promotion Program will receiver $100 million.

Updated 3:30 p.m. with statement from USDA

“Details on the new farming support program will be forthcoming shortly, but we want to be clear that the program is being designed to avoid skewing planting decisions one way or another," USDA said in a media statement. "Farmers should continue to make their planting and production decisions with the current market signals in mind, rather than some expectation of what a farming support program might or might not look like based on inaccurate media stories.”

by Mike Dorning and Jennifer Jacobs

The Trump administration is preparing to announce another round of aid to farmers hurt by the trade war with China as soon as Thursday, people familiar with the plan said, a package of assistance that could exceed $15 billion.

The aid plan is largely modeled on the program the administration put in place last year after China slapped retaliatory tariffs on U.S. agricultural products, though the payments will be more generous.

The administration is considering payments of about $2 per bushel to soybean growers, 63 cents per bushel to wheat growers and 4 cents per bushel to corn growers to compensate for losses from the trade war, according to two people familiar with the payment levels, who asked not to be identified because the aid plan hasn’t been made public.

The administration last year paid $1.65 per bushel for soybeans, 14 cents per bushel for wheat and 1 cent per bushel for corn.

Other commodities also will receive payments in this year’s aid package, as they did last year, said the people, who didn’t provide the rates.

The outlines of the plan still could change since President Donald Trump can make adjustments any time before it’s officially announced. The White House referred questions to the Agriculture Department. A USDA spokeswoman, Michawn Rich, declined to comment, saying the support package will be released at a later date.

The standoff with China over trade is compounding the financial strain of five years of falling commodity prices and losses from spring flooding. American farm income dropped 16% last year to $63 billion, about half the level it was as recently as 2013. It’s directly hitting a key part of Trump’s political base: the rural voters that he won by a wide margin in 2016 and who are key to his re-election campaign.

Payments to Farmers

The current plans call for some direct purchase of food by the government, as Trump indicated when he first announced the new round of trade aid, but payments to farmers would be the main element of the assistance.

Agriculture Secretary Sonny Perdue said last week that the aid package could go as high as $20 billion, more than the $15 billion Trump announced earlier this month.

Corn growers argued they were short-changed in last year’s $12 billion trade assistance plan and campaigned for better treatment in the new round of aid. The National Corn Growers Association sent out a call to action last week urging farmers to call the White House to seek a higher payment for corn.

While the payments last year were based on farmers’ current production, the basis will be modified, the people familiar with the plan said. The administration is considering basing payments on the acreage farmers plant this year and their historic yield of crops per acre, the people said.

Former Agriculture Department officials and economists have warned that a decision to base payments on current acres planted risks skewing farm production decisions and adding to the rising stockpiles of crops, particularly soybeans. That risks depressing commodity prices even after the current trade dispute is resolved.

The combination of a disparity in payments favoring soybeans over corn and rainy weather in the Midwest could encourage farmers to change plans and decide to plant soybeans rather than corn. Soybeans have a shorter growing season, so they can be planted later.

As of Sunday, farmers nationwide had planted only 49% of the corn they had said they intended to plant, according to the U.S. Department of Agriculture, the slowest progress in data going back to 1980. On average over the past five years, farmers had planted 80% of their intended crop at this point in the year.

Since Congress passed the Freedom to Farm Act in 1996, U.S. farm subsidies had moved away from payments based on current crop production in an effort to avoid distortions in agriculture markets. Instead, subsidy payments are based on an average of how many acres a farmer has planted of an individual crop in previous years and crop yields for the area.

The payments last year were made through the Commodity Credit Corporation, a New Deal-era entity administered by the U.S. Department of Agriculture. The trade aid last year also included some food purchases.

To contact the reporters on this story:

Mike Dorning in Washington at mdorning@bloomberg.net;

Jennifer Jacobs in Washington at jjacobs68@bloomberg.net

To contact the editors responsible for this story:

Joe Sobczyk at jsobczyk@bloomberg.net

Laurie Asséo

© 2019 Bloomberg L.P.

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