Politics

Farmers eagerly await Trump's trade aid plan but concern grows that it may disappoint

Key Points
  • American farmers are eagerly awaiting the U.S. Department of Agriculture's latest trade aid plan, but there are concerns that producers of corn and wheat could lose out with the package that could top $15 billion.
  • A source briefed on the new round of relief told CNBC the administration is offering "slightly more" than last year's aid in terms of payment levels for several commodities but probably "won't make everyone happy."
  • "If there is going to be an aid package, we want to make sure that it addresses the short-term and long-term effect of what's been happening," said South Dakota soybean farmer Brandon Wipf.
Farmer walks through his soy fields in Harvard, Illinois.
Nova Safo | AFP | Getty Images

American farmers are eagerly awaiting the U.S. Department of Agriculture's latest trade aid plan, but there are concerns that producers of corn and wheat could lose out with the package that could top $15 billion.

"Details on the new trade mitigation 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 statement Tuesday.

The agency declined to discuss details of President Donald Trump's plan to help farmers feeling the brunt of retaliatory tariffs from China. However, a source briefed on the new round of relief told CNBC the administration is offering "slightly more" than last year's aid in terms of payment levels for several commodities but probably "won't make everyone happy."

The source, who didn't want to be identified, wouldn't provide specific payment amounts under consideration but confirmed the package could be announced as early as Thursday and surpass $15 billion. The direct payments to farmers under USDA's Market Facilitation Program announced in December included nine different commodities with soybeans getting about three-fourths of the nearly $10 billion in aid.

On Tuesday, Bloomberg first reported the administration might offer about $2 per bushel for soybeans, or above the $1.65 per bushel given farmers in the earlier round of payments. Bloomberg also reported corn growers might get four cents per bushel, up from one cent last year, and wheat producers 63 cents compared with 14 cents previously.

Corn

"The legal authorities they're using for these payments constrained them to basing it on production or at least actual plantings, rather than historical plantings," said Joseph Glauber, a former USDA chief economist now with the International Food Policy Research Institute. "Corn guys saw their [crop] prices have the same percentage [decline] as soybeans and they feel like four cents is minimal."

Kernels of corn sit at the Kokomo Grain Co. Inc. transloading facility in Edinburgh, Indiana, U.S., on Thursday, March 28, 2019.
Getty Images

USDA's Farm Service Agency administered the payment program previously by tapping into the Commodity Credit Corp., a federal agency given authority during the Great Depression.

"The methodology that the USDA used on the first go-round of the Market Facilitation Program payments they came up with a payment of only one penny for corn," said Nebraska corn farmer Lynn Chrisp, president of the National Corn Growers Association. "We thought that that was terribly misleading in a situation where it didn't take into full account the impact."

For example, Chrisp said the corn association did a study that showed the market impact from the trade war cost farmers over 40 cents per bushel. He said the U.S.-China trade fight has impacted the Chinese buying of two corn-based products, U.S. dried distillers grains and ethanol.

Wheat

Wheat producers also are hoping for more significant aid payments this time around.

"The payment rate for wheat last time, in our opinion, should have been somewhere around 70 cents," said National Association of Wheat Growers CEO Chandler Goule. "We're now in our second year of no exports to China, and we are hearing wheat will have an increase from the 14 cents but whether it will be up north of 70 cents and 75 cents where it should have been last time we're not completely clear on."

Goule said the about half of the wheat grown in the U.S. is exported abroad, with Mexico being the largest customer. A deal reached last week resulted in Mexico agreeing to lift its retaliatory tariffs on a variety of U.S. agricultural products.

"Export markets are what drives domestic price, and we are at the lowest acres that we've seen in 40 years in the wheat industry," said Goule. "If we're going to continue to keep agricultural production, agriculture, and family farmers on their farms and wheat growers in business, we have got to open up these international markets."

The Chinese usually purchase between $500 million and $650 million worth of U.S., wheat, but last year he said exports of the commodity came to a halt and there's no change this year. Last year, China imposed retaliatory tariffs of 25% on a variety of U.S. agricultural products, including soybeans and wheat.

Soybeans

"If there is going to be an aid package, we want to make sure that it addresses the short-term and long-term effect of what's been happening," said South Dakota soybean farmer Brandon Wipf, a board member of the American Soybean Association.

Soybean farmers have been among the hardest hit in the China trade war in terms of dollar value. Before the trade war, China bought roughly half of the U.S. soybean exports. But the value of soybean exports to China fell 74% to $3.1 billion in 2018 from about $12.2 billion the previous year, according to the USDA.

"Last year's payment wasn't enough to make anyone whole," said Wipf. "It was enough to save a lot of businesses and to keep people farming for another year."

-Graphic by CNBC's John Schoen.