Agriculture Department Gave Farmers Band-Aids To Heal From A Trade War
Bret Davis leans against a work bench at a farm north of Delaware. He and his partners are casting about, trying to stay busy while the rain keeps them from planting.
Davis received a six-figure payment to supplement the return on last year’s soybean crop. He doesn’t want to see that happen again.
“We do not want another market facilitation loan. We want open trade with all countries so we can grow what the world needs,” Davis says.
It’s been just over a year since China imposed tariffs on an array of American imports, from cars to crops, in response to U.S. duties on aluminum and steel. To buoy farmers threatened by the added fees, the U.S. Department of Agriculture created a program to pay producers based on their output.
The agency has so far doled out north of $8 billion through what’s known as the Market Facilitation Program, or MFP. And they are payments—not loans.
Agriculture Secretary Sonny Perdue introduced the initiative last year as a lifeline to producers of crops like corn, wheat and soybeans affected by the country’s trade dispute.
“It’s important to note that all this could go away tomorrow if China and the other nations would simply correct their behavior,” Perdue said in a video message last August. “But in the meantime, the program that we are announcing today will allow time for the president to strike the long lasting trade deals that will benefit our entire economy.”
Shielding the agricultural sector from a precipitous drop in prices appears to have worked fairly well. But the move was a one-time fix, buying time as much as buying down potential losses. A comprehensive trade deal with China has yet to develop, and some local farmers believe that’s more important for the long-term future of the industry.
MFP payments have amounted to nearly $75 million so far in Franklin County and nine other Central Ohio counties. The largest check was more than a half a million dollars for Hendren Farms’ soybeans. The smallest was just $2 for Sharon Washburn’s corn. Just over 3,400 farms received payments, and about 140 of them cracked the $100,000 mark.
At almost $12 million, Pickaway County received the most among the 10 counties, while predominately urban Franklin County received the least with about $1.5 million.
Nearly all of the money—about 97% of it—went to soybeans, which Ohio State agricultural economist Ben Brown says earned $1.65 a bushel from the government.
“We were looking $8.60, $9.00 soybeans, somewhere around that range,” Brown says of market prices last year. “You add $1.65 on that and now all of the sudden we’re back over $10, which for most soybean famers across Ohio, $10 returns you a pretty healthy margin.”
Brown says between historic yields and the federal payments, most farmers in the region were able to stave off the massive losses his early models projected. Last year, Brown and other economists at Ohio State predicted a 59% decline in income for a model farm due to the drop in soybean prices.
Those calculations didn’t account for a subsidy like the MFP, though.
“But it was really kind of an inefficient policy to match an inefficient policy,” Brown says. “So the inefficient policy we started was the tariffs on the Chinese, right? As an ag industry we benefit from open and free markets because we produce a product and a commodity that people want around the globe and we want to be able to sell that in those markets duty free.”
Brown says propping up growers could send a signal to keep planting at the same level rather than respond to downward pricing pressures. But he notes early reports suggest farmers are being conservative and dialing back on how many acres they’re planting with soybeans.
South of Columbus, Christian Hoffman raises cattle to stay busy between soybeans, corn and a handful of other crops. He says the federal payments kept him in the black this year, but he and other farmers need a longer-term solution.
"I mean we just can’t keep putting a band-aid on it, putting a band-aid on it, and then just depending on government subsidies to make a profit,” he says. “That’s not good for us in the long run. So really like the best thing would be that we could get good markets and we can trade.”
U.S. officials are in Beijing this week working on a trade compact with China, and Bret Davis is watching closely. In addition to farming in Delaware County, Davis serves as secretary of the American Soybean Association, a trade group working to promote soybeans at home and abroad. He explains restoring some sense of normalcy will take time.
“Settling the trade dispute and taking the tariffs off help, but we’ve also kind of marred that market to China,” Davis says. “It’s going to affect us for up to the next five years actually until we get into the full swing again, because we spent 40 years working on that market in China to develop it.”
Farmers still have until May 17 to file federal claims for their 2018 crops. Perdue said he does not expect a new pot of money for crops grown this year.