USDA Secretary Sonny Perdue announced last week that a second installment of tariff relief payments will be made to farmers in December. This announcement comes on the heals of concerns that the recent USMCA (NAFTA 2.0) trade deal would lessen the amount of direct payments to producers in a second round. Coverage of the announcement offered insights into the likelihood of the payment schedule changing. Furthermore, Perdue’s statements offer a glimpse on how the administration will react if future tariff pain continues for farmers into 2019.
December Trade Aid Payments
Nicole Heslip of Brownfield Ag News authored a piece titled, “USDA to Grant Second Round of tariff Relief Payments”. Heslip noted this second round of payments is happening later than expected. However, the payments will be made in December. Perdue is quoted as saying:
“I was hoping to get it probably by October/November, but I wouldn’t expect the second tranche should be any later than December.”
Heslip goes on to highlight that Perdue believes the original amount allocated for direct payments, $6 Billion, will be adequate. Therefore, the USMCA trade agreement will not reduce the amount of direct payment trade aid for producers in 2018.
In terms of the payout schedule, Heslip reports
Payment rates are expected to be the same as the first wave for commodities including cotton, corn, milk, hogs, soybeans, sorghum and wheat.
However, the certainty of this remains in doubt.
Lastly, Perdue is quoted as saying
“Farmers will make their best business decisions for 2019 without the expectation of a market facilitation program.”
In other words as farmers plan for the 2019 season, do not consider or assume that a direct cash payment will occur based on production like it did for the 2018 season.
Hoosier Ag Today carried a story last week with the title, “Perdue Talks Possible Trade Aid Adjustments”. The article contents that the USDA may adjust direct payments specifically for factors like hurricane damage. Secretary Perdue is quoted for why he believes this is important:
“I think we’ve got to look at situations where people had good crops that were totally obliterated. These safety-net programs don’t factor that consideration into the equation.”
Commodity Groups Want Adjustments to Formula
Trade aid rate adjustment requests have been made by several commodity groups. The WisconsinAgriculturist covered such a request in its story titled, “NMPF Asks Perdue For More Trade Aid For Dairy Farmers”.
In a letter to Secretary Perdue, the National Milk Producers Federation requested that the next round’s payment schedule for milk producers more closely align with actual trade losses. The NMPF letter cites four studies illustrating that milk producers have lost at least $1 billion of income since May as a result of retaliatory tariffs. This compares with only $127 million in tariff aid payments to dairy farmers.
When the original payout schedule was announced, Ag Nook covered the reaction in the story titled, “Trade Aid Winners and Losers Revealed“. Both dairy and corn groups did not agree that these commodity producers were fairly compensated for the lost revenue because of retaliatory trade tariffs.
Will Perdue be receptive to such arguments? Maybe. Back in late September AgWeek ran a piece titled, “A Conversation on Trade Aid With Sonny Perdue”.
Perdue is quoted as saying:
“We’re not smart enough to say we just nailed it perfectly the first time. But there again, you have to be very concerned about making iterative changes over everything that comes along. So we’re trying to balance that and be very sensitive to people who have a reasonable discussion.”
Trade Aid In 2019
While there may be an outside chance of a payment schedule tweak for the second round of 2018 direct aid payments, do not count on trade aid payments in 2019. Ag Nook covered this topic extensively in a piece titled, “Expect No Trade War Aid in 2019“.
However, the Secretary Perdue illustrated the administration’s thinking on trade aid. In response to a question about if trade aid was possible in 2019, Perdue was quoted in the AgWeek article:
“I don’t think it’s in anyone’s best interest to send a signal that other than the farm safety net that we have out there and crop insurance, that this is anything more than a 2018 kind of issue. And the reason we felt compelled– the President talked about that – was these were things that were not contemplated when seeds were put in the ground in the Spring.”
The administration recognized the significant investment farmers had already made in the 2018 season, ahead of the trade disputes. Furthermore, this impact was to be mitigated by the trade aid announcement, covered in Ag Nook’s “Making It Rain” story. But the Trump administration won’t ‘make it rain’ in 2019.
Producers are expected to make their 2019 plans without anticipating supplemental support for trade war induced depressed commodity market prices. While no one knows for certain, Ag Nook compiled thoughts from experts to answer this question, “Will the US China Trade War Last Longer Than the Cold War?“. Additionally, neither Perdue or the President will hedge one way or another on when the US China trade war will end. However, growers have already responded to these market conditions. Read how in Ag Nook’s “US China Trade Rift Causes Shift in Growers Plans for 2019“.
A second installment of direct aid to producers will occur in December 2018. It is most likely to follow the same payout schedule as the initial installment utilized. See the schedule in Ag Nook’s “USDA Spills the Beans on Trade Aid Formula“. However, despite ongoing trade developments, producers should not plan for or expect a similar package of direct aid in 2019.