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Trump's trade war aid to farmers risks worsening crop stockpiles

Mike Dorning, Bloomberg News on

Published in Business News

WASHINGTON -- President Donald Trump's escalation of the trade war with China without a concrete plan to aid farmers could worsen the rising stockpiles of U.S. crops such as soybeans and depress commodity prices even after the current dispute is resolved.

The Trump administration is signaling that the aid package it's assembling would make payments to farmers based on their current crop production, raising concern among analysts and some lawmakers.

"This is serious," said Joseph Glauber, former chief economist for the U.S. Agriculture Department. "It's worrisome to me that you could set prices that would really influence planting decisions, potentially distorting production."

The administration's signals on trade aid has sowed confusion and the sense that a $15 billion or even $20 billion program with major ramifications for agriculture and commodity markets is being improvised on the fly.

Just weeks ago, Agriculture Secretary Sonny Perdue said there were no plans for trade aid in addition to assistance provided last year. Trump then announced, in tandem with new tariffs on China last week, that he would seek to offset the lost demand by bolstering purchases of domestic farm products for humanitarian aid. After criticism that the humanitarian program was unrealistic, Perdue said Wednesday the new aid would mirror the earlier assistance.

Historic Plantings

 

Last year's $12 billion trade assistance program broke with more than two decades of American agricultural policy, which has tied payments to farmers' historic plantings rather than current production. Disparities in the way crops were treated also provoked criticism, particularly a $1.65 per bushel rate for soybeans versus 1 cent per bushel for corn.

Farmers are crucial part of Trump's political base. He dominated rural America with a 28 percentage point advantage over Democrat Hillary Clinton in 2016, according to exit polls.

Farm-state lawmakers have been lobbying the administration behind the scenes to address disparities in this year's payments, according to several congressional aides. Corn growers started a public campaign Wednesday to address grievances over last year's payment rate.

Last year's trade assistance package was announced near the end of the growing season, when it was too late for farmers alter their production plans. This time, much of the crop has yet to be planted. As of Monday, only 30% of the corn crop had been planted and 9% of the soybean crop, according to the Agriculture Department.

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