The Trump administration could pay substantial amounts to soybean growers under its $12-billion plan to shield U.S. agriculture from harm in the tit-for-tat tariff war with China, said the head of a University of Missouri think tank on Thursday. Soybeans are the largest ag export to China, so payments could amount to $1 a bushel if soybeans get half of the money that could be available to soybean, sorghum, corn, wheat, cotton, dairy, and hog producers.
On July 24, when it announced the three-part package of up to $12 billion in aid, the USDA said details, including payment rates, would be provided by Labor Day. Then, last weekend, Agriculture Secretary Sonny Perdue said that $7 billion to $8 billion might be paid directly to crop and livestock producers.
Pat Westhoff of the Food and Agricultural Policy Research Institute pointed to USDA estimates of an 11 percent drop this year in soybean exports, accompanied by a lower season-average price, while calculating potential farm bailouts. There are other factors affecting soybean prices, such as a large U.S. crop nearing maturity, he said, but “the lion’s share” is probably Chinese tariffs. Ordinarily, China buys one-third of the U.S. soybean crop. Last year, the purchases were worth $14 billion out of U.S. sales of $22 billion.
If the USDA decides that the trade war costs growers $1 a bushel, payments would total $4.3 billion, said Westhoff during a University of Arkansas webinar. If the impact is 75 cents a bushel, the total would be $3.2 billion.
Soybeans and sorghum are the crops most reliant on sales to China — although sorghum is by far the smaller of the two — followed by cotton. But payments could be substantial even for crops that have small entree to the Chinese market because of the indirect impact on plantings and prices. As an example, Westhoff said, a decline in soybean prices could pull down corn prices. If the USDA decided the trade disruption impact on corn amounted to 10 cents a bushel, the payment on this year’s crop would be $1.4 billion.
“We know that President Trump is aware of how hard this is hitting agriculture and specifically soybeans,” said American Soybean Association president John Heisdorffer, an Iowa farmer. “Given the scale of potential damage from the tariff, we need more market-opening measures if we are going to survive the long-term repercussions on soybean exports.” The group said it would like to see the new NAFTA in place by the end of 2018 and the administration begin trade talks with Japan and other countries that could be new or larger-volume customers.
Earlier, farm groups said they would prefer the removal of tariffs to a USDA payment. The administration announced on Wednesday that it was considering higher tariffs — 25 percent instead of the original 10 percent — on $200 billion worth of Chinese products to increase pressure on Beijing. Chinese officials told the United States to drop the idea of economic blackmail.