“The administration chose these trade struggles by promising agriculture that this would lead to a better world at some point,” said Hamilton. “Instead of suffering any consequences for the poorly conceived strategy, they just said, ‘Hey, let’s touch the bank. We’re going to buy our way out of this. ‘”
Because agriculture is high risk and vital to the food supply, the government has been in the business of helping farmers and ranchers manage economic crises, natural disasters, and other headwinds; Congress passes agricultural bills that include a set of subsidies, conservation incentives, crop insurance, and other safety net programs. Under the Obama administration, total direct payments to farmers ranged from $ 9.8 billion to almost $ 13 billion per year.
But under Trump, trade rescue and coronavirus relief efforts have brought agricultural spending to more than double that level, with much more on the way.
The USDA is currently distributing $ 16 billion in farm bailout payments, in addition to standard farm bill subsidies, plus another round of commercial bailout checks earlier this year. But bipartisan lawmakers are now asking to add up to $ 50 billion to Secretary of Agriculture Sonny Perdue’s arsenal in the next stimulus package to help producers affected by supply chain disruptions.
Agricultural industry groups and their allies on Capitol Hill argue that the money is needed to stop the heavy losses after many of the biggest food buyers, like schools and restaurants, stopped buying. Even when the cost of beef rose in supermarkets during the pandemic, for example, the money did not go to ranchers who received unusually low prices for their cattle from meat packers.
Perdue himself has said there was not enough aid, forcing the USDA to drop entire sectors out of its coronavirus relief program, such as ethanol producers that shut down half of their operations across the country due to the fall. of fuel consumption.
A USDA spokesperson defended the aid programs as necessary to compensate for other countries’ “unfair and illegal trade retaliation” against farmers. The spokesman said Trump is trying to “fix broken trade deals and ensure that all Americans enjoy free and fair trade with countries around the world,” promoting the new USMCA pact, partial deals with China and Japan and ongoing negotiations. with the European Union and the United States. Kingdom.
“Recent estimates indicate that damage to the US agricultural sector alone from the pandemic could be as high as $ 50 billion in the next two years,” the spokesperson said in an email. “The president has issued billions of dollars of support to ensure that American agriculture remains financially viable.”
Even before the pandemic, the industry was already at a vulnerable point after a seven-year recession in farm and farm debt that was rising to historic levels. Commercial aid and coronavirus relief programs have been a vital line for the most affected producers. But the increasing reliance on massive and one-of-a-kind rescue packages could leave a painful hangover as early as next year.
“It’s hard to roll these things back,” said Joseph Glauber, principal investigator at the International Institute for Food Policy Research and a former USDA chief economist. “The headlines are going to scream when [USDA] publishes an agricultural income forecast for February 2021 that shows no ad hoc payment. Those will be uprooted from the balance sheet. ”
For example, the University of Missouri Food and Agricultural Policy Research Institute released its initial estimates in June, showing that government farm payments fell from at least $ 32.8 billion this year to $ 16.6 billion in 2021. Except a strong economic recovery, the drop would leave a big void in the results of many farmers: according to FAPRI’s analysis, the farm’s net income would sink from $ 90.6 billion in 2020 to $ 79.4 billion next year, far away from the 2013 maximum of $ 139 billion.
For some farmers, loss of income could be the difference between staying in business or closing a store. With less money entering the middle of the Trump trade war, a growing number of farmers began to fall behind on their loans; The delinquency rate peaked at eight years in the first quarter of 2020, according to S&P Global Market Intelligence.
That is also a problem for the overall rural economy, from community banks and farm equipment manufacturers to non-farm businesses that still depend on the sector to keep money flowing in the area.
The heart’s reliance on constant farm income means that recurring debates in Washington about extending farm bailout payments for another year are likely to continue.
“Obviously there will be political pressure to ensure the sector is as financially healthy as possible,” said Patrick Westhoff, director of FAPRI. “If we see a sharp drop in farm income in front of us without additional payments, you can bet there will be a lot of pressure for the payments to occur.”
While most farmers and ranchers welcomed much-needed trade aid and coronavirus relief payments, ad hoc payments are considered less reliable than established subsidies, crop insurance, and other programs with which producers They can count year after year. And Washington’s mixed messages each year about whether more ransom payments are on the way can make farmers guess as they try to make critical business decisions, like getting farm loans or choosing which crops to plant.
“It is one more source of uncertainty, and this is a time of great uncertainty,” Westhoff said. “How much more complicated can we do this for producers?”
Pressure for more farm payments
Earlier this year, before the coronavirus began spreading in the U.S., industry groups and legislators from agricultural states were already asking the USDA to extend the commercial bailout program for the third year, to Even though Trump had just signed a phase one pact with China that he touted as a historic win for American agriculture, effectively nullifying the main reason for another bailout.
Among those seeking another round of tariff relief payments in 2020 was the American Federation for Agricultural Development. The powerful agricultural lobbying group, which welcomes Trump as a regular guest at its annual meetings, came out in support of more payments after an internal debate over whether aid was still needed this year.
“We feel like we’ve crossed the deep end of this [trade war]but let’s trust but check, “said Dale Moore, executive vice president of the Bureau of Agriculture, about the group’s thinking at the time.
Perdue repeatedly urged farmers not to plan further trade aid, arguing that direct payments were not intended to become a permanent price support program. But it was overturned by a Trump tweet that promised farmers more bailout money if the deal with China and the NAFTA 2.0 deal with Canada and Mexico did not materialize soon.
Once the coronavirus hit the U.S., any hope of a 2020 farm bounce faded, and the need for increased government payments to keep farmers afloat was widely accepted in Washington. Schools, restaurants, and meatpacking plants closed, and producers who left without buyers were forced to start throwing milk, slaughtering livestock, and plowing fruits and vegetables to the ground.
Between the coronavirus, headwinds, and severe flooding in the Midwest last year, Moore said, “things are so out of control” that farmers need more financial help than annual farm programs can provide. safety nets.
“Right now, that safety net is full of holes,” he said. “We are heading into our seventh year of a declining agricultural economy. Is that trend line going to change? Forget all the other factors that happened in the last two or three years. “
November elections could shape future farm payments
Starting next year, the avalanche of government payments to farmers could be in the air with a new Congress and potentially a new administration. Recent polls have shown that former Vice President Joe Biden has a huge advantage over Trump.
“He has an election in November that could put a very different dynamic in the White House on this,” said Glauber, the former USDA chief economist.
Trump regards farmers and ranchers as some of his most loyal supporters, and is quick to discuss his trade bailout in stump speeches and on Twitter. “Our large farmers will receive another important round of ‘cash’, compliments of China’s tariffs, before Thanksgiving,” Trump tweeted last November, even though US businesses and consumers are paying the tariffs in China place.
That has bought the president significant support in rural America.
“The crossbar that President Trump’s team established, in terms of the number of times I’ve heard the president say ‘farmer, rancher,’ is pretty unusual,” Moore said. “Whether or not a different president will pay as much attention to agriculture as President Trump does, I cannot answer that question.”
Democrats have also increased their reach to rural voters since they were nearly wiped out across the Midwest in 2016. It is unclear whether their renewed focus on agricultural policy would shift to the White House if Biden wins in November.
So far, Biden’s campaign has presented an agricultural and rural policy platform that includes increasing agricultural exports and avoiding the tariff struggles that have plagued the industry under Trump. Biden has also hit the president specifically for ransom payments in campaign ads. An ad features an Iowa farmer who says about Trump’s trade policy: “We’re going to screw you up and pay you with someone else’s money.”
The Trump administration has also faced accusations of using the trade bailout to shore up the president’s political position with a key electorate.
“There is definitely a connection between your supporters and the people who get the money from these huge payments,” said Schechinger of the Environmental Working Group. “I’m not going to say that he created [the trade bailout] give money to your voters, because we really can’t prove that. But we do know that its base was mainly in rural areas, and that’s where this money has gone. ”
