Farm subsidies, prices temper Trump trade tariffs
The outlook may be improving for America’s farmers, whose famous resilience has been tested by President Trump’s trade policies as well as by lower prices driven by several years of bountiful harvests.
The retaliatory tariffs many countries have placed on U.S. agricultural products have twisted America’s farm landscape, but rising prices and the Trump administration’s program to subsidize farmers hit by the tariffs mean the plight isn’t as dire as some have said, according to farmers and government reports.
“As I stand here today, I’m about as optimistic as I was on this day last year,” said Brandon Whitt, manager of Batey Farms in Murfreesboro, Tennessee.
Mr. Whitt tempered his mood with some foreboding, however.
“But overall, I’m less optimistic,” Mr. Whitt said. “It’s not easy to hear someone gambling with your livelihood, and at this point, history doesn’t give me confidence that the people in charge are going to get it all fixed.”
The Agriculture Department predicts a 10 percent uptick from last year in farm profit to $69.4 billion, according to the agency’s first forecast for 2019, released last month. That would make up for some of the 16 percent decline in 2018 but would leave farmers below their historical averages from 2000 to 2017.
“The higher net farm income projection comes despite continued retaliatory tariffs on U.S. agricultural products, but largely reflects expectations for trend yields and slightly higher prices for some commodities,” said John Newton, chief economist for the American Farm Bureau Federation.
Batey Farm grows soybeans and corn, which appear poised for another bumper harvest but face considerable headwinds in international markets.
In response to tariffs that the Trump administration has imposed on goods to combat market dumping, intellectual copyright theft and other issues, the European Union and China have slapped tariffs on U.S. farm exports.
That smacks America’s farmers and consumers disproportionately, say supporters of free markets and economists who criticize the administration’s policies.
The combination of Mr. Trump’s trade policies and several years of big harvests driving down prices have produced a double whammy for America’s farmers, the farm bureau federation says.
“We don’t really know what part of price drops is attributable to the tariffs and what part to the laws of supply and demand,” said Will Rodger, the farm bureau’s director of communications.
For Glenn Brunkow, 48, a Kansas farmer of soybeans and corn as well as some livestock, “the tariffs have hit us very hard, with soybean prices being significantly lower, and that has dropped my income by a great deal.”
Mr. Brunkow said farmers can’t endure without long-term optimism, given the cyclical nature of agriculture, but U.S. policies have now warped that rotation of up and down years, bumper harvests and thin harvests.
“Recently, it has not necessarily followed those patterns, and that makes it harder to see the upside,” he said.
Farmers suffered their biggest drop in incomes long before Mr. Trump was president. Incomes plummeted from a record high in 2013 and have been volatile since 2016.
“We had a lot of goals to really grow our operation,” said Kelly Whiteman Snipes, who runs a 300-acre farm with her husband in Indiana. “But these last five years we’ve just been in maintenance mode. Our goal the last five years has really been to break even.”
‘Farmers are very resilient’
Snipes Farm specializes in oleic soybeans, a sort of niche product that has found a market with a fast-food industry looking for a lower-fat cooking oil. Ms. Whiteman Snipes, 33, and her husband hold down other jobs and, as minor farmers, have not availed themselves of the USDA’s Market Facilitation Program for the administration’s subsidies, she said.
The program, though, is helping many other farmers survive lean times.
“Thank God for Sonny Perdue as the secretary of agriculture,” Mr. Whitt said. “The MFP payments we received have made an incredible difference. It’s allowed people to hold on and given a glimmer of hope that we can ride this thing out.”
The program’s first round, announced in September, distributed some $8 billion in federal grants to more than 860,000 farmers feeling the tariffs’ pinch, according to the USDA.
Mr. Trump authorized the second round of payments in December. Grants were made available to almond, corn, cotton, dairy, hog, sorghum, soybean, fresh sweet cherry and wheat producers. It’s not clear how much money will be handed out in the current round.
Farmers usually have crop insurance on three-fourths of their estimated harvest, but those prices were locked in last month. Prices stand at about $9.50 for a bushel for soybeans, Mr. Whitt said, which is below its historical highs and does not cover the cost of production.
The USDA program helps mitigate that hit.
“Farmers are very resilient, and these payments are helping agricultural producers meet some of the cost of disrupted markets in 2018,” USDA Undersecretary Bill Northey said in announcing the latest distributions.
Given a choice between the Market Facilitation Program and the market, however, some farmers said they much prefer the latter.
“We got MFP grants, and they helped, but we would much rather have free trade and higher commodity prices,” Mr. Brunkow said. “I don’t know of any farmer who wants to depend on government payments.”
Although prices are creeping up and bankruptcies have not swept across America’s rural landscape, the trade situation is casting a long shadow over the spring season because the global market has become as significant to the farming business as rainfall.
“While these projections suggest 2019 could be ‘better’ than 2018 for many farmers, much is up in the air,” Mr. Newton wrote. “Retaliatory tariffs are still in place, and recently both Mexico and the European Union threatened additional tariffs if [national security] tariffs on steel and aluminum are not removed, or if auto tariffs are put in place.”
Any trade deal reached this year would improve the outlook for a variety of exports, but farmers then would need to repair business relationships.
“At the end of the day, it’s not really the U.S. and China making a deal; it’s people throughout the chain making deals and using the business relationships they’ve built up over the years,” Mr. Rodger said.
With Brazil, Russia and other producers swooping in to meet demand, U.S. farmers may have to fight to regain their long-held market dominance.
“The world demand is still high, but where is the world going to get it from?” Mr. Whitt said. “We’ve got to play in a global market, and I’m afraid we might have lost a pretty valuable seat at the table.”