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Aid coming to ag producers as USDA announces second round of farm payments to offset tariffs

May 24, 2019

SCOTTSBLUFF — U.S. Ag Secretary Sonny Perdue announced Thursday that the USDA will be making a second round of payments to American farmers bearing the brunt of the trade war with China and other countries.

The $16 billion aid package will be issued through the Commodity Credit Corporation (CCC) and administered by the Farm Service Agency (FSA). The money is split into three separate programs: the Market Facilitation Program’s direct payments to farmers (MFP-2, $14.5 billion), commodity purchases through the Food Purchase and Distribution Program (FPDP, $1.4 billion), with the remaining $100 million earmarked for the USDA’s Agricultural Trade Promotion Program (ATP).

“Unfortunately, the Chinese decided late in the game to renege on many of the commitments they’d already made,” Perdue said in a call with the press to announce details of the program. “To his credit, President Trump immediately directed me to again create a program. He knew that farmers would bear the brunt of this lack of a trade deal with China once again. So he has demonstrated his great affection and affinity for America’s farmers and ranchers.”

Perdue said that while farmers would rather have “trade than aid,” without a fair trade deal with China and other nations, farmers need profitability support and assistance to be flexible with marketing their commodities once trade and tariff issues are rectified.

“We honestly and sincerely know and believe it is a food security issue which leads to a national security issue,” Perdue said. “Our team at USDA reflected on what went well last year, and what could have been done better when we ran last year’s program.”

MFP-2 and what’s different

Payment rates in this round will depend on the county where a producer farms, rather than on the crop a farmer grows.

Unlike the last round of the $12 billion MFP program, which was based on fixed rates per commodity, MFP-2 will instead be a single rate per county based on the acres planted in a county. The number of acres will be multiplied by the trade damage impact calculated for that county. USDA Chief Economist Rob Johannson said the administration has looked at trade damages per county — not only from the past year’s tariffs, but retroactive to previous actions by China and other trade partners who have levied retaliatory tariffs on American ag exports. Despite the adjustments, the formula is the same; trade with tariffs versus trade without them.

Undersecretary for Farm Production and Conservation Bill Northey said the non-specialty crops, pork and dairy, and expanded specialty crops will be eligible for MFP payments.

Producers of alfalfa hay, barley, canola, corn, crambe, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton, and wheat will receive a payment based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019.

“We looked at the trade damage each county is feeling, then divided that by the acres planted in the county,” Northy said.

While last year’s payments looked at total production of crops that were already planted, Northey said producers this year are still in a position where they are making planting decisions.

“We need to make sure that folks have the complete flexibility in this challenging planting season to plant what works for them,” he said. “They need to make the best economic decision — that economic decision will not be impacted by the payment they receive depending on which (crop) they choose.

“We want to make sure producers are planting for the market, and for their own agronomic situation, and encourage folks — certainly during these challenging times — to not have to worry about what differential payments may be between crops.”

In the second piece of MFP-2, dairy producers will receive a per hundredweight payment on production history and hog producers will receive a payment based on hog and pig inventory for a later-specified time frame.

For specialty crops, tree nut producers, fresh sweet cherry producers (who were included in the last round of MFP), cranberry producers, and fresh grape producers will receive payments based on the trade impact to the commodity times the acres of production.

Payments are set on three increments, the first of which will come in July or August. Northey said that will be sometime after the deadline to report acres planted to county FSA offices.

The second and third increments are dependent on whether or not a trade deal can be reached with China before the fall and what the damage to producers ends up being. Should no such trade agreement come through, the second increment will be paid in November, and should trade disputes continue, the third increment will be paid in early 2020.

While President Trump is expected to meet with Chinese President Xi during the G20 summit in Japan in late June, Perdue said a trade deal from that meeting is unlikely. The gestation period required for negotiations will likely go beyond July or August.

Food Purchase and Distribution Program

Greg Ibach, former Nebraska secretary of agriculture and undersecretary for Marketing and Regulatory Programs, said the Ag Marketing Service (AMS) will purchase $1.4 billion in surplus commodities affected by trade retaliation such as fruits, vegetables, some processed foods, beef, pork, lamb, poultry, and milk. The commodities will be distributed by the Food and Nutrition Service (FNS) to food banks, schools, Indian reservations, and other outlets servicing low-income individuals.

“One of the main purposes of this program is to clear inventories of products that have been impacted by the tariffs,” Ibach said. “We worked closely with industry groups through the last program to design the purchase specifications to target those segments within each commodity that are most directly impacted by the tariffs.”

Ibach said the purchases will come in phases, which helps match up purchases with the capacity for food banks, but allows hungry citizens who are assisted by commodity programs to have a wider variety of food available to them.

“The second big benefit is feeding hungry people and introducing them to a wider variety of commodities than they’re used to having available to them at a food bank,” he said.

Ag Trade Promotions

The remaining $100 million ear-marked in will go to the Agricultural Trade Promotion Program (ATP) administered by the Foreign Agriculture Service (FAS), Ted McKinney, the undersecretary for trade and foreign ag affairs said.

McKinney said the $100 million is in addition to the $200 million let through ATP funds a year ago that will allow the cooperators to advance marketing around the world.

“You might recall with the program last year, there were some $600 million in requests from our cooperators,” he said. “The desire was to make sure that they targeted those monies to either reestablish markets that might have been in trouble, but also to develop new markets.”

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