Trade dispute cash helps farmers, but their incomes decline
Wheat grows in Oklahoma. Payments to Oklahoma farmers from the Trump administration to soften the effects of a trade dispute with China are helping a little, but many farmers are still struggling with a years-long decline in incomes. OKLAHOMA WATCH
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Payments to Oklahoma farmers from the Trump administration to soften the effects of a trade dispute with China are helping a little, but many farmers are still struggling with a years-long decline in incomes.
Over 18 months, the federal Market Facilitation Program will pump up to $24.5 billion into farm states in cash payments for everything from dairy and hog production to cotton, corn and pecans. The funding is intended to make up for lost international sales due to the U.S.-China trade war.
Oklahoma farmers have received more than $156 million in payments from the facilitation program, putting the state in 20th place.
The funding comes not through Congress, but through the Commodity Credit Corporation, a Depression-era government entity created to stabilize farm income and prices.
Despite the help, Oklahoma farm incomes continue to decline – dropping every year since 2015 – and land values remain stalled in the region. Farmers also are dealing with the aftermath of several bouts of severe weather that affected planting schedules and production.
“Farm incomes have continued to decline, although at a slower pace than in recent years,” the Kansas City Federal Reserve Bank said in its latest report on the Oklahoma economy. “More positively, farmland values generally have held up despite some volatility in recent years, providing some support to farm finances.”
Through a records request to the U.S. Department of Agriculture, Oklahoma Watch asked for all Market Facilitation Program payments to Oklahoma farmers since the program started in summer 2018. The agency provided data through Oct. 4, 2019.
More than 21,000 payments went to Oklahoma farmers. The amounts ranged from $2 to $596,000. By far, most payments were for crops, with just 1% going to livestock, the data indicate.
In Oklahoma, $48 million, or almost one-third of the payments, have gone to five counties: Kay, Jackson, Grant, Cimarron and Tillman, big producers of either soybeans, wheat or cotton. Two counties, Latimer and Pushmataha, had no payments through Oct. 4. Why has China levied tariffs on U.S. goods and commodities?
The dispute started in early 2018, when the Trump administration decided to clamp down on what it considered unfair trade practices and imposed higher tariffs on imported products in general and on U.S. imports from China specifically. China and other countries then imposed higher retaliatory tariffs on many U.S. goods, including farm products. In 2017, China was the United States’ second-largest agricultural export market; it was the top export market for soybeans. To make up for the disruption, the Trump administration started the Market Facilitation Program in July 2018 to protect farmers from what it called “unjustified retaliation.” Where does the money come from?
The Commodity Credit Corporation is allowed to borrow up to $30 billion from the U.S. Treasury to fund its programs. By law, the corporation automatically receives an appropriation equal to the previous year’s losses. That allows it to circumvent the normal Congressional budget process.
The secretary of Agriculture has broad authority to use the credit corporation for administration priorities. The corporation has no employees and its programs are run by the USDA. Has the federal government helped farmers like this before?
Yes, but nothing this big. The Congressional Research Service said the scope and scale of the trade aid increased congressional and public interest, especially in the way the USDA calculated the payments.
The program’s 2018 version was criticized by corn growers, who thought the payment rates for corn were too low. Others said the payments could unduly influence what farmers choose to grow. The 2019 version sought to minimize those concerns by going to a county payment model and expanding the list of eligible commodities, according to the Congressional Research Service. What are the top five states for the program in 2019?M
The latest payment report for 2019 shows the top states as Iowa ($1.2 billion); Illinois ($1.1 billion); Texas ($807 million); Minnesota ($802 million); and Kansas ($748 million). More than $10.7 billion was paid out through Dec. 23.
What do Oklahoma agricultural groups say about the payments?
The trade groups said their members would rather be farming under fair trade rules than relying on government payments to supplement farm incomes. The short-term uncertainty will be worth it if the U.S. can negotiate better trade deals with China and other countries.
“There were some real serious problems with our (existing) trade deals, and there needed to be some long-term solutions,” said Rodd Moesel, president of the Oklahoma Farm Bureau. “(Farmers) have been unusually patient through all this. But I think they’re very hopeful that there will be some meaningful reforms and corrections that will set the table for many new decades of dealing with other countries.”
Moesel said Oklahoma’s agricultural production leans more toward beef and wheat, so the state doesn’t benefit as much from facilitation payments as do states with heavy corn and soybean production.
Harvey Schroeder, executive director of the Oklahoma Cotton Council, said most farmers are producers, not marketers, and rely on others to market their products internationally.
“This program has helped. It’s certainly not a cure-all, but we look forward to having trade normalized,” Schroeder said. “We had much rather sell a good crop than go to the mailbox.”
He rejected criticism that Trump was currying favor with farmers ahead of the 2020 election.
“Being a businessman, he understands what we’re up against and is trying to do something that will benefit the country first and the farmer second,” Schroeder said. Who has been critical of the program?
The biggest criticism has come from groups traditionally opposed to farm subsidy programs.
The Environmental Working Group maintains much of the money has gone to wealthy farmers and there’s no prohibition on double-dipping into the Market Facilitation Program and other farm subsidy programs for things like soil conservation. A group of Senate Democrats, meanwhile, have criticized the program for “picking winners and losers between regions and crops.” How do farmers get the payments?
Farmers apply through their local Farm Service Agency office. The USDA authorized two rounds of payments under the facilitation program. The first round totaled $10 billion in summer 2018; the second round was $14.5 billion in summer 2019. The latest round had three application deadlines, the last of which was Dec. 20. Are there payment and eligibility limits?
Yes. Under the program’s latest version, each county has a payment rate per acre for crops. In Oklahoma, the payment rates ranged from $15 to $115 an acre. Applicants must have an adjusted gross income of less than $900,000 a year in each of the previous three tax years. The latest round of facilitation payments is capped at $250,000 per person or farm business. When will the program end?
The U.S. and China are still engaged in a trade war that resulted in several rounds of retaliatory tariffs affecting U.S. agricultural products. Earlier this month, the two sides announced a tentative “Phase One” agreement that would ease Chinese tariffs on some agricultural products in exchange for more Chinese purchases of U.S. agricultural products.
At this point, it’s unclear if the Trump administration will continue the Market Facilitation Program in 2020.