How Farmers, Others Think Trump Tariff Aid Plan #2 Should Change From Initial Package

Posted on 05/16/2019 10:25 AM

Farm-state lawmakers, farm groups and the ag sector pushing for changes


Ever since word came that a Trump tariff aid plan #2 could be $15 billion to $20 billion, farmers, ranchers, the meat and ethanol industries, farm groups and farm-state lawmakers have pushed ideas for a better aid package the second time versus the Market Facilitation Program (MFP) for 2018. Stakeholders are lobbying USDA and urging lawmakers to push for requested changes to the MFP, which some of them found wanting.

 

Some ag sector lobbyists want Congress to make improvements to MFP. But a congressional contact said, “All of the proposed changes (for 2018 and 2019) can be made by the Trump administration. MFP is their creation … created under authority provided by Congress decades ago. At this point, Congress wouldn’t need to act.”

Meanwhile, USDA Secretary Sonny Perdue said late Wednesday that his department has been reviewing the 2018 program amid calls portions of the aid program should be altered to make the concept more equitable and efficient.

The following is a look at some suggestions:

  • Change how MFP payments are based to a producer’s recent history of acres planted or prevented from being planted, using the higher of actual yields, the APH of the farmer under crop insurance, or the yields used under PLC.
     
  • Regarding crop insurance, farmers know it is essential but it is not intended to make producers whole. For example, policies include deductibles. Depressed prices partly due to ongoing trade disputes mean lower insurable coverage, in turn meaning farmers are less able to demonstrate to lenders they can cash flow. This raises major concerns over the ability of farmers to secure loans, especially those who have suffered crop losses. A different approach to MFP — one based on historical plantings — would help address this issue while also avoiding delays in the MFP. Some in the ag sector say this should also be applied with respect to the 2018 MFP.
     
  • Another ag sector idea: MFP should consider indirect and direct impacts of ongoing trade disruptions, including cross-commodity effects and impacts on input costs. Cross-commodity impacts ought to be compensated under the MFP to ensure that farmers of all commodities impacted, whether directly or indirectly as a result of retaliatory tariffs, receive needed aid. Lenders don't consider if the inability of a farmer to cash flow stems directly or indirectly from ongoing trade disputes so relief that tempers damages that are caused by lost export markets (and higher input costs due to tariffs on imports) is logical.
     
  • Some farmers want payments rather than commodity purchases, because they say purchases have not had the price recovery impacts needed while a payment will get to the farmer.
     
  • Some producers also want the second MFP to omit pay limits or at least increase limits relative to the first MFP. There are no pay limits on the amount U.S. farmers and ranchers may sell into the export market, the reasoning goes, so effectively mitigating the loss of these export opportunities would be furthered by omitting any arbitrary limit on help under MFP. Aggies say this must also be done on the supplemental legislation. Pay limits are a big threat to recovery in places like Nebraska and Iowa due to flooding, observers note.

Perspective: As previously noted, most if not all of the suggested changes can be done via executive action by the Trump administration. One issue is WTO considerations. USDA Sec. Sonny Perdue on Wednesday said he was confident that Tariff Aid Plan #2 would keep the U.S. within its WTO commitments. But a trade policy expert told Pro Farmer that, “Round II will be interesting to see how payment rates stack up for each commodity. Also, whether they are based on actual 2019 planting or tied to historical base. I worry that if they are tied to actual or intended plantings, that you could inadvertently distort planting decisions, particularly if details are released soon since so little has been planted to date. $20 billion is a lot of money.” Asked to comment, a congressional contact said, “USDA is all over this” relative to living within the U.S. WTO commitments.


 

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