With the Sino-U.S. trade war unresolved, the Trump administration released $3.625 billion in trade-war payments to farmers and ranchers on Friday to offset losses on 2019 production. Payments will begin this week and Agriculture Secretary Sonny Perdue said they “will give farmers, who have had a tough year due to unfair trade retaliation and natural disasters, much needed funds in time for Thanksgiving.”
The new round of payments are the second this year. The administration has said up to $14.5 billion is available for cash payments to producers. Half of the money was offered in the first tranche, released in August. The new tranche amounts to one-fourth of the $14.5 billion with the remaining $3.625 billion possible in January.
National Cotton Council chairman Mike Tate applauded the second tranche and urged the administration to release the final round as well. Cotton prices down sharply since the trade war began and the U.S. cotton stockpile is headed for its highest level in 11 years, equal to a four-month supply. “We are encouraged from administration reports about the state of the trade talks with China in an effort to finalize a Phase 1 agreement that would include a significant commitment by China to purchase U.S. agricultural commodities,” said Tate.
China is the world’s largest importer of cotton and soybeans. The trade war has reduced U.S. ag sales to China by more than two-thirds, to a forecast $6.5 billion this fiscal year.
Negotiations are moving slower than expected on a “phase one” agreement with China that would include a commitment by Beijing, according to President Trump, to purchase up to $50 billion of US ag exports in two years. The purchases have become a sticking point in trade talks, according to published reports.
“We need more permanent solutions than this current plan can provide,” said president Roger Johnson of the National Farmers Union. “Even if and when these trade disputes are resolved, farmers will still be coping with the fallout for years to come.”
So far, USDA has disbursed $6.8 billion this year in Market Facilitation Program payments, the official name of the stopgap system created in 2018 to mitigate the impact of retaliatory tariffs on the agriculture sector.
“While we continue to have confidence in the president’s negotiations with China, this money shows President Trump following through on his promise to help and support farmers as he continues to fight for fair market access,” said Perdue.
Michigan Sen. Debbie Stabenow said there were serious inequities in MFP. “While farmers need help to weather the administration’s trade uncertainty, the payments continue to favor certain farms over others,” said Stabenow, the senior Democrat on the Senate Agriculture Committee. The South is home to 95 percent of the counties with the highest payment rates and the payment limit of $250,000 per farmer favors large operators, said Stabenow, who faulted MFP for “no long-term investment or plan for rebuilding markets” disrupted by the trade war.
Besides the $14.5 billion in cash offered to farmers, the USDA said it will purchase and give away $1.4 billion of commodities affected by the trade war. It also awarded $100 million in funds to trade groups for export promotion work.
The trade-war assistance may turn out to be smaller than offered. In 2018, the USDA paid $8.6 billion to producers out of the $9.6 billion that was available in Trump tariff payments. Total payments through MFP, including commodity purchases and market-development grants, was $10 billion, compared to the $12 billion that was announced as available. USDA officials said cash payments to farmers fell short of the amount offered because some operators did not apply for aid. Payment limits and eligibility rules also reduced the payout, they said.