When you sit at Andy Stickel’s kitchen table, a damp field neatly framed by the panoramic window, it seems almost ridiculous to ask about the prospects for his farm for 2020.
It could be another wet year that seriously delayed planting in 2019, or a dry one. Growing conditions in Brazil or Argentina could push prices up or drop them. The new trade agreement with Beijing may or may not result in new US $ 40 billion sales of US agricultural products, given the sudden appearance of the corona virus, which is disrupting imports to China.
The only thing that’s clear is that the common narrative about American agriculture and trade is wrong. It turned out that last year’s Chinese tariffs on grain and other products did not devastate farmers. In fact, studies suggest that they did better overall and received more subsidies than lost sales.
Instead, this year looks extremely uncertain despite an existing trade agreement with Beijing.
“The trade agreement? It was welcome, don’t get me wrong. It was a weight off my shoulders, ”says Mr. Stickel, who grows cattle, soybeans, corn, and other crops here in northwest Ohio. However, the outlook for 2020 remains as cloudy as the weather outside: “2019 could possibly be better than 2020,” he adds.
The reason lies in politics, bureaucracy and a long-standing conservative paradox: While Republicans dislike state subsidies, they have been defending agricultural flyers for decades, mainly in rural areas in red states where the GOP is strongest. Democrats have generally participated because farm bills also provide money to grocery recipients, many of whom live in democratically controlled urban areas.
The Trump administration has worked through this tacit bipartisan agreement in Congress. The first of three proposals to save approximately 10% of the 36 million people now supported by the Federal Supplemental Nutrition Assistance Program (SNAP) is proceeding. At the same time, It implemented a $ 28 billion subsidy program to protect farmers from the drop in sales after China imposed tariffs on agricultural products in the middle of the trade war. And the government did this by bypassing Congress using an obscure rule that allowed the White House to implement its program unilaterally.
The subsidies known as the Market Facilitation Program (MFP) worked too well. The U.S. Department of Agriculture based the subsidies on losses from Chinese tariffs, partly for bureaucratic reasons of cultural coherence and trade policy, without taking into account the returns. For example: When Beijing bought more soybeans from Brazil last year, US farmers were able to meet the soybean needs of other Brazilian customers that the country could no longer meet.
The result: According to half a dozen recent studies, farmers received more MFP payments than they lost on Chinese sales. The studies have shown that they may have received twice or maybe four times as much as they lost.
Senate Democrats and the environmental working group have criticized MFPs because the majority of the subsidies went to the largest farms. This is the case with all agricultural subsidies. The EEC found that the top 1% of farmers who received MFP payments received an average of $ 183,000, while the bottom 80% received an average of less than $ 5,000.
However, the most violent criticism comes from Vincent Smith, an economist at Montana State University and visiting scientist at the right-wing American Enterprise Institute. “Payments for market facilitation were clearly about the current president, who was trying to increase support for the country voters in states like Iowa, Illinois and Indiana,” he says. “It is literally Donald Trump buying votes.”
Farmers recognize the paradox.
“We don’t want to rely on government support all the time,” says Stickel. “The constant thoughts were: trade, no help. [But] We cannot control Mother Nature. [And] We have seen more variability in recent years. … The protection of our food supply is important. “
More trade – in the form of the new Chinese agreement – could not prove to be a panacea for farmers, as the Trump administration announced.
“The markets and many economists weren’t quite convinced that we would go back where we were,” said Scott Gerlt, an economist at the Food and Agricultural Policy Research Institute at the University of Missouri, Columbia.
Even Trump officials are now admitting that because of the corona virus, Beijing may not be buying the $ 40 billion in additional U.S. agricultural products it promised in the trade agreement. The epidemic has not only slowed down China’s growth, perhaps dramatically, but the resulting travel restrictions have also resulted in imports of food and other products in ports being cut back, Gerlt emphasizes.
And with MFP payments ending after this month, the prospect of a farm income is in the air. The USDA predicted last week that farmers’ net income would decrease 9% this year compared to 2019 (although total agricultural income could rise due to depreciation and other non-cash factors).
Another reason for caution for soybean farmers like Mr. Stickel is that swine flu may have decimated a third of the Chinese pig population, significantly reducing Beijing’s need for soybean imports.
“I never thought [big boost in soybean sales] would happen, ”he says. “What we’ll see is that the $ 40 billion addition is protein” – US pork sales to China. So the biggest change this year might not be in soybeans, but in corn, he adds. And agricultural income? “The optimist in me says” on “.”
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