How will USDA's market assistance program work?
U.S. Department of Agriculture officials announced last month that the agency planned to help farmers hard hit by trade disputes and retaliation with up to $12 billion in assistance. The news was largely welcomed in farm country as a way to provi...
U.S. Department of Agriculture officials announced last month that the agency planned to help farmers hard hit by trade disputes and retaliation with up to $12 billion in assistance. The news was largely welcomed in farm country as a way to provide short-term relief. But new concerns are emerging.
"This is a short-term solution to allow President Trump time to work on long-term trade deals to benefit agriculture and the entire U.S. economy," said Ag Secretary Sonny Perdue. "The President promised to have the back of every American farmer and rancher, and he knows the importance of keeping our rural economy strong.
The aid program is split into three parts, including a Market Facilitation Program (MFP) that will rely on the Commodity Credit Corporation to provide the funds for direct payments to soybean, sorghum, cotton, corn, wheat, dairy and hog producers. Another part is the Food Purchase and Distribution Program that allows the USDA to purchase surplus commodities that would have been exported if not for tariffs. The third part is the Trade Promotion Program, aimed at developing new foreign markets to replace ones the U.S. is losing in its trade wars.
But like most government programs, the "devil is in the details," and USDA has had few specifics to share publicly since the initial announcement was made. USDA's Chief Economist Rob Johansson said calculations are ongoing on payment rates and will be published as part of a federal rulemaking. The direct payments are expected to be based on production times a payment rate and delivered some time after Labor Day.
Some farm leaders are now questioning how payments will be calculated for those who have little or no production this year - especially with severe drought devastating some crops and pastures.
The proposed MFP will provide "welcome financial assistance," noted Missouri Farm Bureau President Blake Hurst in a letter to Agriculture Secretary Sonny Perdue and Missouri's congressional delegation recently. But he's also worried about how payments will be calculated.
"If the MFP is based on this year's yields, it will provide no help at all to the victims of this isolated but severe drought," Hurst wrote.
Hurst explained that "farmers typically spread marketing of a single year's crop over at least three years, selling some of planned production before planting, some during the growing season, and some in the year following harvest.
"If Missouri farmers suffering from drought don't receive some consideration for the extreme conditions this year, they will have lost market returns for that portion of the 2017 crop that wasn't priced before retaliatory tariffs were in place, and also have market losses for that portion of the 2019 crop that they would typically be pricing right now," he added.
For now, USDA has not provided any additional specific details on what payments will look like. Perdue said recently that, "We want to under-promise and over-deliver in this program."
"I liken it to ... an insurance claim. If you have a crash in your car and it's totalled and you get a check from the insurance company, most of us never feel like we're made whole," Perdue told reporters. "I think we're just trying to make the expectation that if a farmer sees a $2 drop in soybean prices, then they should not necessarily expect a $2 per bushel mitigation payment."