American farmers, many of whom helped get President Donald Trump elected, have tried to be patient. They admit trade injustices have been going on for years around the world, most notably with China. However, agriculture has become collateral damage for the ongoing trade war, which some experts predict could last another year.
No one wins in a trade war, even when you try to fix it with a bandage. So, the $12-billion trade compensation package falls short of helping farmers at a time when they need markets and higher commodity prices after five years of a depressed farm economy.
This trade aid package mocks the notion – one we support strongly – that U.S. farmers, foreign consumers and the world in general are better off when government gets out of the way.
Many in agriculture have labored for decades to develop and expand international markets for their products. It has taken millions of dollars and countless hours to build relationships that have led to U.S. sales.
The American Soybean Association opened its first trade office in Beijing more than 35 years ago. The ASA worked to build China into its top customer and has maintained that market by being a reliable supplier. The trade war has dismantled those years of work in just a few weeks. What dollar amount can be put on those future losses? Trade wars have long tails, to which many who came through the Carter Grain Embargo can attest. That led to Russia and the Black Sea region becoming the top wheat export region in the world, taking market share from the U.S.
The Trump administration is trying to alleviate some of the pain Trump’s policies have caused.
But a $12 billion bandage for a wound of his making is still a bandage. Now, with congressional elections nearing, Trump wants us to focus on the bandage. Far better, we think, if he would focus on the wound.
Details of the trade aid, intended to make up for market losses, are still sketchy. U.S. Agriculture Secretary Sonny Perdue announced the program would include direct payments, government food purchases and additional dollars for trade promotion, with payment calculations released by Labor Day.
Our sources believe the direct payments will be between $7 billion and $8 billion. Those payments will be based on 2018 production and, for soybean farmers, could result in payments of between $1.10 to $1.50 per bushel. However, many farmers have questioned how market losses can be assessed equitably since some farmers sold crop ahead while others didn’t.
They also are questioning if these payments will be adequate if the soybean market continues to stay depressed.
Soybean farmers aren’t the only ones hurt by the trade war. It has impacted the dairy, cotton, corn, wheat, sorghum and pork sectors. Iowa State University research has indicated U.S. pork producers lost $18 per head on market hogs from the time the tariffs were first discussed in March through May. This includes tariffs imposed by Mexico, now at 20 percent on U.S. pork, and 62 percent tariffs from Canada.
The largest and most economically viable farmers will suffer with the rest, but they’ll be there after some of their smaller, younger farmers fall away. One Minnesota dairy farmer privately tells us he’s losing $30,000 a month but will probably survive to pick up the pieces after smaller farmers have fallen.
While a trade compensation package on the surface may seem like a positive move by the Trump administration, it will be too little too late for many farmers who are financially strapped after five years of low commodity prices. These farmers will become casualties of the trade war and won’t be around to see the great outcome Trump is promising.
This article provided by NewsEdge.