USDA Rolls Out Trade Aid

OMAHA (DTN) -- Under a plan announced Tuesday by the Trump administration, farmers growing soybeans, corn, sorghum, wheat, cotton, milk and hogs will be able to apply for tariff aid payments sometime this fall to offset the impact of lost trade markets.

Agriculture Secretary Sonny Perdue, stressing that President Donald Trump continues to support U.S. farmers, announced an aid package of up to $12 billion for agriculture, which will be available through three separate programs.

Perdue called the trade response "a short-term solution" that would give President Trump time to work on long-term trade deals that would end the retaliatory tariffs.

Perdue said the $12 billion figure "is directly in line with the estimated $11 billion impact of illegal tariffs on agriculture." The funds will help farmers deal with the costs of lost markets due to retaliation by other countries.

"Unfortunately, America's hard-working agricultural producers have been treated unfairly by illegal trading practices by China and other nations for a while, and they have taken a disproportionate hit when it comes to illegal retaliatory tariffs," Perdue said.

One of the programs through which the aid will be available to farmers is the Market Facilitation Program. The program will come out this fall with more specific details and enrollment. It will specifically provide payments to farmers who raise soybeans, corn, sorghum, wheat, cotton, milk and hogs, which USDA officials said have been most affected by retaliatory tariffs.

A second program will be the Food Purchase and Distribution Program, which will buy products such as beef, pork, fruits, nuts, rice, legumes and milk that then will be sent to food banks and used for other food-aid programs.

The final program would be a trade promotion program tied in with the private sector to help open up more export programs. This sounded similar to the Market Access Program and Foreign Market Development Program, but USDA officials did not say whether the new program would be directly linked to those established programs.

The programs are authorized under the Commodity Credit Corporation, which means USDA will notify Congress of its initiatives, but Perdue does not need congressional approval.

Farm groups that have largely been calling for the administration to back off tariffs and negotiate trade deals still called the aid a welcome measure of relief.

"This should help many of our farmers and ranchers weather the rough road ahead and assist in their dealings with their financial institutions," said Zippy Duvall, president of the American Farm Bureau Federation. "We are grateful for the administration's recognition that farmers and ranchers needed positive news now, and this will buy us some time."

The American Soybean Association said the group appreciates the administration's recognition of the market impact of the tariffs, but also stated, "ASA continues to call for a longer-term strategy to alleviate mounting soybean surpluses and continued low prices, including a plan to remove the harmful tariffs."

Roger Johnson, president of the National Farmers Union, called the USDA announcement "stopgap assistance" that is a "short-term fix to a long-term problem."

"The administration must develop a support mechanism that will mitigate the significant damage that is being inflicted upon our most vital international markets for years to come," Johnson said.

USDA will have to draft rules in the coming weeks, detailing exactly how the Market Facilitation Program will pay farmers, which would include estimated rates that producers would be paid. It will likely be after Labor Day before program details will be fully available to producers.

"This will obviously be playing out over time, and we do look to allowing the administration to successfully negotiate a deal with our trading partners and the program will be flexible to allow that," said Rob Johannson, USDA's chief economist.

Johannson later added, "I think it's fair to say soybeans are the largest sector affected."

Brad Karmen, USDA's assistant deputy administrator for farm programs, said on the press call that producers would likely be required to provide their production numbers for this crop year to enroll in the program. That would then be multiplied by a payment rate. "We need producers to harvest to know their production before we can calculate a payment," Karmen said.

USDA officials rejected the idea that they were prompted to quickly detail the aid programs.

Greg Ibach, undersecretary for marketing and regulatory programs at USDA, said department officials have been analyzing options since April when Trump asked Perdue to look at mitigation measures.

"We were able to work as a one-USDA team to put together what we feel is a great three-different-component plan that will be able to address some of agricultural producers' immediate concerns," Ibach said. "Since we had a good plan in place, we decided to go ahead and make the announcement so farmers and ranchers would understand USDA, Secretary Perdue and the president had made good on their promise not to have farmers and ranchers at the tip of the spear."

Ibach later added that he hoped the programs would help farmers deal with some of the financial stress they may be facing. But he and others at USDA also repeatedly said they believe these programs will be a one-time effort and not renewed.

Looking at market impacts, November soybeans are down more than $1.80 a bushel from their highs in May, pressured by a combination of good crop conditions in 2018 and the trade dispute with the world's largest buyer of soybeans, DTN Analyst Todd Hultman noted.

For other commodities, December corn prices are down 60 cents from their May high with good weather pointing to another big corn harvest in the fall. September Chicago wheat has been holding in a sideways range for the past five months while the world looks forward to a roughly 3% reduction in global wheat production in 2018-19.

Hog prices were up close to $84 per hundredweight in the latter part of June but have dived closer to the mid-$60s price range in recent days.

The trade battles continue as the U.S. Trade Representative's Office is holding hearings this week on the prospect of adding tariffs on up to $200 billion more in imports from China.

President Trump also continues to tell the public that placing tariffs on other countries is a strong hand for the United States in trade talks. Early Tuesday, the president tweeted, "Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It's as simple as that - and everybody's talking! Remember, we are the "piggy bank" that's being robbed. All will be Great!"

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/SK)

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