Farm Bill Update

The naming of Senate farm bill conferees was left undone this week.  Negotiations over numbers and naming of conferees, in addition to farm policy issues not contained in the current farm bills under consideration, were rumored to be in active discussions.  The Senate left Thursday with these issues unresolved but will return next week.  There is general optimism that the Senate will be able to approve a motion to proceed and name conferees next week.

In the meantime, the four farm bill principals, Pat Roberts R-KS, Debbie Stabenow D-MI, Mike Conaway, and Collin Peterson D-MN, met on Thursday to begin informal discussions on the farm bill.  Afterwards, they issued a joint statement: “We look forward to working together to get a Farm Bill finished as quickly as possible, and we’re committed to finding solutions to resolve the differences. We must keep working to provide American farmers and families with the certainty and predictability they need and deserve.”

Remember Your Grandfather’s Rice Market?

2018 will be a year to remember.  In the rice market we have always said there are no two years alike and certainly there are specific years when something special happened that make them stand out.  The first one that comes to mind is 2008 when the market thought the world was running out of food and prices of rough rice reached $600/ton FOB New Orleans.  From that point forward, we heard the term “food security” and every country around the world developed a food security program as a result.

However, 2018 is something completely different, something unexpected.  This is certainly not your grandfather’s market.  Times have changed.  Developing countries are more developed than before and are producing grains, including rice at record levels due to increased technology and government programs in some markets.

The announcement this week by the White House of emergency aid for farmers to the tune of $12 billion as a result of the administration’s commercial trade wars is of serious concern to farmers.  Their livelihoods are at stake.  This trade war and related threats are hurting U.S. exports.  U.S. rice shipments to Mexico are being displaced by a duty-free quota of 150,000 tons from Southeast Asia and Mercosur are being used and there is talk of increasing that volume.  The announced emergency aid package for farmers is merely a band-aid on a stab wound in the chest.  Farmers do not want government payments but prefer to have open and free markets where they are on a level playing field with their competition.

U.S. farmers do a very good job when they work in a fair marketplace.  If this trade war continues then there will be farmers going out of business and will take years to recuperate.  Now where is that book grandfather used to read to me called “It Could Be Worse”?

USDA Announces $12 Billion Trade Assistance Plan

This week U.S. Secretary of Agriculture Sonny Perdue announced a $12 billion plan to support farmers hurt by retaliatory tariffs imposed by U.S. trading partners.  In acknowledgment of the disproportionate effect on U.S. farmers of trade retaliation, President Trump directed Secretary Perdue to implement a plan to protect U.S. farmers and agricultural interests. USDA’s trade assistance package will help offset the roughly $11 billion in negative effects suffered by U.S. agricultural producers.

“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,” Secretary Perdue said.

In announcing the trade assistance package, USDA Secretary Sonny Perdue stated, “USDA will not stand by while our hard-working agricultural producers bear the brunt of unfriendly tariffs enacted by foreign nations. The programs we are announcing today help ensure our nation’s agriculture continues to feed the world and innovate to meet the demand.”.

Recent U.S. decisions to impose tariffs on steel and aluminum in addition to other imports from China have provoked retaliation in the form of countermeasures by China, the European Union, Mexico, and Canada on thousands of U.S. exports, including corn, rice, soybeans, sorghum, cotton, fruits, nuts, wine, wood, cheese, and pork.

In providing this aid to farmers negatively impacted by tariffs, USDA is exercising its authority under the Commodity Credit Corporation Charter Act. USDA will provide aid via three programs:

  1. Market Facilitation Program: This program will provide payments directly to the farmers who have been the most affected. Producers of soybeans, sorghum, cotton, wheat, corn, dairy, and hogs will receive direct payments associated with the 2018 production year.
  2. Food Purchase and Distribution Program: USDA’s Agriculture Marketing Service will purchase any unexpected surplus of affected commodities such as fruits, nuts, legumes, beef, pork, and milk. The purchasing process is expected to continue over several months.
  3. Trade Promotion Program: USDA plans to implement a new trade promotion program similar to the existing Market Assistance Program and Foreign Market Development Program. The program will work to enhance current export markets and develop new ones through trade shows, promotions, and by alleviating regulations and other barriers. Unlike the other two programs, this program will be open to all agriculture commodities.

While Congressional approval is not required to implement the trade assistance package, specific details will be subject to a formal administrative rulemaking process. There is still a lot that is not known about the plan. USDA has not disclosed the amount of payments, although officials mention payments will be based on production. Other determinants for assistance remain unclear.  USDA officials expect to announce more details around Labor Day.

USDA dismissed concerns that the new trade assistance package violates WTO commitments with regard to trade-distorting subsidies. When the U.S. joined the WTO, negotiators agreed to cap trade-distorting domestic subsidies at $19.1 billion annually. USDA says that even with the new assistance, U.S. subsidies remain well below that cap.