President Trump says his administration will “make it up” if farmers and ranchers are hurt by Chinese trade retaliation. Two agricultural leaders in Congress were skeptical of possible politically driven bail-outs on Tuesday, with Senate Agriculture chairman Pat Roberts saying, “We don’t want another subsidy program. We need to sell our product.”
The Democratic leader on the House Agriculture Committee, Rep. Collin Peterson, said a one-time government payment will not placate producers, who would prefer to make money from export sales. Roberts and Peterson spoke separately at the North American Agricultural Journalists meeting.
Trump directed Agriculture Secretary Sonny Perdue last week, when the United States and China threatened tit-for-tat tariffs on each other’s products, “with the support of other members of my cabinet, to use his broad authority to implement a plan to protect our farmers and agricultural interests” from “unfair retaliation” by China.
Perdue and other USDA officials say they are studying a variety of steps, including purchase of excess farm commodities to bolster prices. Two widely known sources of money for an agricultural relief program are the so-called Section 32, which is funded by import duties, and the Commodity Credit Corp (CCC), known as USDA’s bank. Both are Depression-era creations and have broadly defined powers. The administration also could ask Congress to enact a relief program.
“We don’t need another CCC program,” Roberts said, because crop subsidy programs and federally subsidized crop insurance already is available to growers. “We need a market. If we have that, we don’t need a crazy quilt assistance program.” The Kansas Republican said he was worried by the potential for favoritism or other misuse of the program.
While Roberts said trade tensions have created an impetus for passage of the 2018 farm bill, Peterson said growers in his area were more concerned about trade, regulatory relief and biofuels than about the farm bill.
“I am against a one-time bail-out of a situation that was created by the [Trump] administration,” said Peterson. “This is not going to placate [farmers]. They want to see these markets that they spent years building up to stay intact.”
Peterson said a long-term change in farm supports would be a better idea, in view of the 50 percent decline in farm income since the 2013 collapse of the commodity boom. “We ought to have a 10-percent increase in target prices in PLC,” he said, referring to the Price Loss Coverage subsidy offered to grain, oilseed and peanut growers.
When the season-average price for a crop is below the target price in a program like PLC, the USDA issues payments to growers. The 2014 farm law set PLC reference prices of $3.70 a bushel for corn and $8.40 a bushel for soybeans, for example.
The USDA routinely uses Section 32 funds, generated by import duties, to purchase food for donation to school food and other public nutrition programs. According to a 2016 Library of Congress report, about $10 billion a year is available to USDA through Section 32 and the bulk of the spending was earmarked. The USDA “has had broad discretion in how to spend the remaining non-transferred (un-obligated and carryover) money,” which was a bit more than $1 billion in 2015, said the report.
Section 32 funds could swell dramatically if Trump’s plans for steep tariffs take effect, said Agri-Pulse, with the result that Chinese-made goods would indirectly generate the money for farmer relief. “For years, there had been a restriction on USDA from using Section 32 funds for emergency aid as well as a hard cap on how much of those funds can be used. That ended when Congress passed the omnibus spending bill for fiscal 2018.” Now, Perdue can use the money for emergency aid so long as he gives Congress two weeks’ notice.
Perdue and other senior USDA executives are the board members of the CCC, created in 1933 to stabilize, support and protect farm income and prices “through loans, purchases, payments and other operations,” according to a fact sheet. The CCC has authority to borrow up to $30 billion at a time from the Treasury to carry out its activities and programs authorized by the farm bill. It has no employees because USDA agencies execute farm support programs funded by the CCC.