The Trump administration on Monday began the second round of direct payments to U.S. farmers through the Coronavirus Food Assistance Program – an effort some critics see as buying support.
The $14 billion expansion is just the latest aid program approved by the administration, which has given agricultural payouts to farmers at record levels. Since 2018, the U.S. Department of Agriculture has paid farmers more than $33 billion as a result of trade disruptions caused by the administration’s trade war with China and the coronavirus pandemic, according to FarmDoc Daily.
The ad hoc payments, designed to be temporary and address specific events, have propped up farm income, which the USDA projected to be the highest since 2014 despite low commodity prices. Even before the latest federal expansion, the USDA projected total payments to farmers in 2020 would be $37.2 billion.
But economists told the Midwest Center for Investigative Reporting that the record level of aid may not be temporary and may not make up for long-term harm caused by the administration’s trade policies and the pandemic.
“I think that’s the central question: How much permanent damage has there been done?” said Carl Zulauf, an agricultural economics professor at Ohio State University.
This latest program is extended to farmers who have been excluded from the other programs, including hemp and bison producers – farmers that haven’t been as helped by the previous programs.
The National Bureau of Economic Research found that the Trump administration’s trade disruption harmed U.S. farmers. The U.S. lost $14.4 billion in trade, while countries in South America and Europe gained more than $13.5 billion in additional foreign sales.
Instead, farmers have likely been more harmed by Trump than helped, studies found. Many critics see the payments as little more than buying votes.
“He took actions that cost U.S. farmers a lot of money, and potentially have a lot of long-term downsides,” said Joseph Glauber, a former USDA Chief Economist and senior research fellow at the International Food Research Center. “But you can have as bad of policy as you want, if you can silence the critics by giving them a bunch of money.”
Future payments?
Lost export markets. Packing plant shutdowns and slowdowns. Less demand for ethanol. The past three years have resulted in a lot of uncertainty and unpredictability for industrial agriculture.
Ad hoc payments generally mean the government does not believe the current farm safety net is adequate, said Zulauf. In the past, when administrations have invested in large ad hoc payments, the programs have often been later made permanent farm policy in the Farm Bill, a massive bill approved every five or so years that is the primary tool for changing U.S. Farm Policy, he said.
Recent farm budget projections from FarmDoc found that without continued federal aid, Illinois corn and soybean farmers would lose $75 and $35 per acre on rented land in 2021. In 2020, ad hoc payments covered most of that gap, Zulauf said.
Even with all of the disruptions caused by the administration’s policies and the pandemic, the loss in income is a result of a few long-term factors. These factors include other countries across the world producing more and more crops, as a result of improving farm practices and an increasing desire for food security caused by high crop prices from 2008-2013, Zulauf said. The recent disruptions are likely to exacerbate those concerns, leading to less need for U.S. farm products.
“It’s really about almost every country in the world,” Zulauf said. “Countries take food supply pretty seriously when they see disruptions for whatever reason, they want to produce more domestically.”
“Once it expands, it’s very hard to get it out of production,” he said.
Zulauf said that leaves four options for farm policy: providing ad hoc assistance; rewriting the existing safety net to increase assistance; allowing the cost of production to adjust downward; or artificially expanding demand.
Artificially expanding demand, through a program such as the renewable fuel standard, could result in losing export markets at a time when the U.S. has a declining world share of export markets and world production.
Joe Janzen, an assistant professor at agricultural economics at the University of Illinois, found in a recent study that the long-term harms caused by the Trump administration’s trade policies are likely going to outweigh the benefits, but the ad hoc payments make up for the policies right now.
“This is probably supporting farm profits and supporting land values in the short run, and it keeps things going for a short but indefinite period of time,” he said.
“One way you could justify large ad hoc payments is you’re paying for those damages up front,” Janzen said.
Aid issues
Even so, the aid hasn’t worked for all farmers, and U.S. producers are likely to be harmed by the administration’s trade policies, as well as long-term trends, economists told the Midwest Center for Investigative Reporting.
Glauber said the aid doesn’t actually help farmers as much as landowners and other industries from whom farmers buy inputs – or supplies like seeds, fertilizers and pesticides.
“I think it means a lot less than you might think. It’s good if you own the land. If you’re renting land it’s more of a wash,” Glauber said.
Of the $33 billion in federal payments handed out so far, soybean farmers have been the largest beneficiaries, receiving 45.1% of payments, with cattle producers (12.8%) and corn producers (11.5%) receiving the next most.
A report issued last week from the watchdog Government Accountability Office found that the $23 billion Market Facilitation Program, in response to trade disruptions caused by the administration’s trade war with China, disproportionately benefited farmers in the South and large farming operations. An earlier study from Kansas State found that cotton farmers received 33 times more aid from the program than the losses they incurred from the trade policies.
The Environmental Working Group found that the top 10% of farms received half of the money issued through the Market Facilitation Program, and the top 1% of farms received 22% of the money from the Coronavirus Food Assistance Program.
Farmers aren’t the only ones who benefit from the boost in income. The single largest recipient of trade dollars was an alternative farm lender called Ag Resource Management, according to a 2019 analysis by the Midwest Center.
Large agribusiness companies and landowners also benefit. When farm income declines, so does cash rent and spending on farm inputs like machinery, seeds, chemicals and fertilizer, Zulauf said.
Ad hoc programs are administered by the USDA and exist outside of traditional Congressional oversight. Senate Democrats have criticized the programs as mismanaged and favoring states that support Trump. The GAO report found that farmers in Georgia, the home state of Sec. of Agriculture Sonny Perdue were most likely to benefit.
President Donald Trump has taken a lot of pride in awarding farmers money, and farmers widely support Trump.
Still, like the Market Facilitation programs, CFAP may not be as needed as originally thought, Glauber said. The first round of CFAP payments only paid out $9.9 billion of a potential $16 billion.
Commodity prices didn’t decline as much as originally anticipated. Cattle prices were down 21% from the beginning of the year as of April 15, but only down 10% as of September 15.
Soybean prices were down 11% on April 15 but up 2% from the beginning of the year as of September 15. Hog prices were down 31% in April but only down 12% in September.
