Plan similar to MFP but will address some complaints from corn, wheat growers
The Trump administration could make as much as $20 billion available to the U.S. ag sector in a second round of assistance to help offset losses from China's latest retaliatory tariffs, USDA Secretary Sonny Perdue said late Wednesday from Seoul, South Korea, according to a transcript of the press conference.
The second installment of trade aid is being modeled after the one last year, called the Market Facilitation Program (MFP). USDA last year pledged up to $12 billion in assistance for 2018 production, mostly via direct payments to farmers, commodity purchases and ag export marketing assistance.
Perdue, speaking from South Korea, said the second round of assistance would likely include more direct payments and commodity purchases. "Our calculations initially probably range between $15-and-$20 billion," he said of the estimated economic damage to farmers and the range of the potential aid package, but he said many details are still being decided.
Regarding the price tag, Perdue said it is based on an "early estimation of the trade damage based on our calculations from last year," adding, “We’ve asked our economists at USDA to be very precise" and that the total will be "legally defensible."
Perdue stressed USDA was taking into account feedback from last year's trade aid package, including feedback from corn, wheat and other commodity groups, some who were not pleased with the amount of assistance their farmers received under MFP. "We will look at the history of what happened with that program and we’ll try to learn from it and improve from it and address some of those stakeholder comments,” Perdue said.
Regarding when the aid plan will be announced, Perdue did not provide an estimate, but said USDA was "expediting" its work at President Trump's request.
Under USDA’s first aid package, about $9.5 billion was for direct payments to farmers and ranchers, though outlays for that portion of the program to date are about $8.5 billion. The initial program included $1.2 billion for purchase of surplus commodities, which were to be donated to federal nutrition programs and food banks. Another $200 million was allocated for efforts to promote U.S. goods overseas.
Funding for the program will again come from USDA’s Commodity Credit Corporation (CCC), but Perdue added that President Trump "is committed" to using a portion of the money collected from current U.S. tariffs and that the total will ultimately depend on "what's needed in order to offset the trade disruption that farmers are experiencing."
The effort will not push the U.S. past its WTO aggregate measurement of support (AMS) limit of around $19 billion, Perdue said. "We're very mindful of those limits," he remarked, adding the program will comply "with all aspects" of U.S. obligations at the world trade body.
Disappointment at the recent setbacks in U.S./China talks across the ag sector are understandable, Perdue noted, but he stressed his conviction that the administration “does not believe there will be any long-term harm" as some ag stakeholders have suggested.
"Commodity markets are fungible in the way that they are based on supply and demand production histories around the world weather," Perdue said. "We understand that people go to where the best value is, and we think U.S. producers, year in and year out, are the best value for the crop commodities and products China needs."
The ag sector aid effort will show China "that they cannot use the political impact of damaging our farmers" to short circuit negotiations for meaningful and enforceable reforms that address U.S. trade concerns, Perdue concluded.
Asked if the program would compensate U.S. producers for all of the trade disruption caused by the ongoing U.S./China trade war, Perdue responded: "I believe it will.”
Perspective: Among remaining issues are what other adjustments of this year's program will be unveiled versus the 2018 plan. One topic is whether or not the new version will include aid for the ethanol industry, which did not get any assistance in the 2018 package.