Perdue estimates $7 billion to $8 billion in cash payments to producers

Two-thirds of the Trump tariff bailout of U.S. agriculture will be paid in cash to crop and livestock producers, said Agriculture Secretary Sonny Perdue over the weekend. Some $200 million will be used to develop new export customers, Perdue told Reuters, and the remainder of the aid package, which in total is worth up to $12 billion, would be spent on purchases of food for donation, to indirectly help other producers.

During the Reuters interview, Perdue said the bailout would include $7 billion to $8 billion in direct payments to producers. “Obviously, this is not going to make farmers whole,” he acknowledged.

When the three-part package was announced last week, Perdue put its value on par with the estimated $11 billion impact of “illegal retaliatory tariffs” on U.S. agricultural goods. At the time, the USDA did not respond to requests for details about how it had calculated the impact, but at an agricultural transportation forum, Perdue told reporters that the agency had looked at factors beyond commodity prices. Some analysts say the impact of the tariffs will be much larger than the USDA’s estimate. While farm groups welcomed the aid, they said they would prefer an end to the trade war.

Commodity prices slumped in June as trade disputes intensified with the top four customers for U.S. farm exports: China, Canada, Mexico, and the European Union. USDA officials say that $20 billion worth of exports, or $1 of every $7, are jeopardized by tariffs.

“Given the drop in crop prices that has occurred since late May, expected earnings are expected to be relatively low again this year,” said Purdue economists Michael Langemeier and Michael Boehlje at the farmdoc Daily blog. At current prices and with average yields, a typical corn and soybean farm in Indiana could lose $84 an acre, they said. For their analysis, Langemeier and Boehlje priced corn at $3.80 a bushel and soybeans at $9.25 a bushel, which are similar to prices at the Chicago futures market.

Under the administration’s plan, the USDA will write checks to soybean, sorghum, corn, wheat, cotton, dairy, and hog producers based on production this year. It will purchase the “unexpected surplus of affected commodities such as fruits, nuts, rice, legumes, beef, pork, and milk for distribution to food banks and other nutrition programs.” And it will fund efforts by private-sector groups to develop new markets for U.S. farm goods. “These programs will assist agricultural producers to meet the costs of disrupted markets,” said the USDA.

Details of the package, such as payment rates for commodities, will be released in coming weeks, said the USDA. “We’re looking forward to the tail end of August, when the Federal Register notice is published, so that we can get into some of these details,” said Dale Moore of the American Farm Bureau Federation.

The aid package is a one-time offer, said Perdue at the ag transport forum. Administration officials said they do not plan aid to other sectors of the U.S. economy.

The American Soybean Association said it “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.” Soybeans are the largest U.S. farm export to China, the No. 1 customer for American ag products.

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