First a trade war. Now coronavirus. The roller coaster life of a US farmer.

February 15, 2020 Off By HotelSalesCareers

Sitting at Andy Stickel’s kitchen table, a soggy field neatly framed by the picture window, it seems almost laughable to ask about his farm’s prospects for 2020.

It could be a wet year again, which seriously delayed planting in 2019, or a dry one. Growing conditions in Brazil or Argentina could send prices soaring or plunging. The new trade deal with Beijing might lead to $40 billion of new sales of U.S. agricultural products – or not, given the sudden appearance of the coronavirus, which is disrupting imports into China.

About the only thing that is clear is that the common narrative surrounding American agriculture and trade is wrong. It turns out farmers were not devastated by last year’s tariffs by China on grain and other products. In fact, studies suggest that overall they did better, reaping more in subsidies than they lost in sales.

Instead, it’s this year that looks wildly uncertain, even with a trade deal with Beijing in place.

“The trade deal? It was welcome, don’t get me wrong. It was a weight off the shoulders,” says Mr. Stickel, who raises cattle, soybeans, corn, and other crops here in northwest Ohio. But the outlook for 2020 remains as cloudy as the weather outside: “2019 could potentially be better than 2020,” he adds.

The reason involves politics, bureaucracy, and a longstanding conservative paradox: While Republicans dislike government subsidies, they have defended for decades agricultural handouts, which primarily go to rural areas in red states, where the GOP is strongest. Democrats generally have gone along because farm bills also provide money for food stamp recipients, many of whom live in Democratically controlled urban areas.

The Trump administration has run roughshod over this tacit bipartisan agreement in Congress. It is moving forward on the first of three proposals that in all would cut about 10% of the 36 million people now helped by the federal Supplemental Nutrition Assistance Program, or SNAP. At the same time, it pushed through a $28 billion subsidy program to shield farmers from the plunge in sales after China imposed farm-good tariffs in the middle of the trade war. And the administration did it by circumventing Congress, using an obscure rule that it said 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, partly for bureaucratic reasons of consistency among crops and with trade policy, based the subsidies on losses from Chinese tariffs without taking into account offsetting gains. For example: When Beijing bought more soybeans from Brazil last year, U.S. farmers were able to fill the soybean needs of other Brazilian customers, which the country could no longer satisfy.

The result: Farmers got more in MFP payments than they lost in Chinese sales, according to a half dozen recent studies. They may have gotten twice or perhaps four times as much as they lost, the studies found.

Senate Democrats and the Environmental Working Group have criticized MFP because the bulk of the subsidies went to the biggest farms. That’s a common occurrence for all farm subsidies. The EWG found that the top 1% of farmers getting MFP payments received an average $183,000 while the bottom 80% averaged less than $5,000.

But some of the fiercest criticism comes from Vincent Smith, an economist at Montana State University and a visiting scholar at the right-leaning American Enterprise Institute. “The Market Facilitation payments were clearly all about the current president attempting to shore up support among rural voters in states like Iowa and Illinois and Indiana,” he says. “This is literally Donald Trump buying votes.”

Farmers acknowledge the paradox.

“We don’t want to continually rely on government support,” says Mr. Stickel. “The constant thoughts were: trade, not aid. [But] we cannot control Mother Nature. [And] we’ve seen more variability over the last few years. … Protecting our food supply is important.”

More trade – in the form of the new Chinese deal – might not prove to be the panacea for farmers that the Trump administration touted it to be.

“The markets and a lot of economists have not been quite convinced yet that it will get us back to where we were,” says Scott Gerlt, an agricultural economist at the Food and Agricultural Policy Research Institute at the University of Missouri at Columbia.

Even Trump officials now concede Beijing might not buy the $40 billion in extra U.S. agriculture products that it promised to buy in the trade agreement, because of the coronavirus. The epidemic has not only slowed China’s growth, perhaps dramatically, but the resulting restrictions on travel have also caused imports of food and other products to back up in ports, Mr. Gerlt points out.

And with MFP payments ending after this month, the prospects for farm income are up in the air. The USDA last week forecast that farmers’ net cash income would fall 9% this year from 2019 levels (although with depreciation and other noncash factors, overall farm income might rise).

Another reason for caution for soybean farmers like Mr. Stickel is that a swine flu has decimated perhaps a third of the Chinese hog population, substantially reducing Beijing’s need to import soybeans.

“I never thought that [big boost in soybean sales] was going to happen,” he says. “What we are going to see is, the $40 billion addition is in protein” – sales of U.S. pork to China. So the biggest change this year might not come in soybeans at all, but in corn, he adds. And farm income? “The optimist in me says ‘up.’”

First a trade war. Now coronavirus. The roller coaster life of a US farmer.

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