The US federal government has unveiled a new plan to subsidize American farmers whose business plans just don’t factor current market conditions. The federal handouts are expressed as being in the multiple billions in a plan that is being implemented not in the case of some natural disaster, but in the interest of remunerating farmers for changes in the demand for their products. But farmers are saying that they don’t want a bailout, but rather that they are more interested in extensive market stability. The plan, totally unprecedented in its scope, bypasses the authorization of Congress and authorizes the USDA to meddle in agricultural markets by injecting subsidies to substitute for abbreviated demand. Essentially, it’s a handout to to businesses which simply didn’t competitively account for changing market conditions by doling out funds to farmers in order to subsidize precipitous conditions. The majority of the handout is slated to be focused on producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs. CNBC reports:
“Our farmers, our producers, they don’t want bailouts,” Simon Wilson, executive director of the North Dakota Trade Office, told CNBC’s “Closing Bell” on Tuesday. “They don’t want this help in the short term. They want long-term stability.”
Wilson added, “A lot of people have been hurt, so that’s a lot of money that’s going to have to be shared.”
Payments under the largest part of the federal government’s relief plan would be targeted to producers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs.
Some experts have warned in the past that government aid or new subsidies could distort or disrupt markets and ultimately have negative consequences for the agriculture industry. That also includes the possibility it could lead to more retaliation on other agricultural exports.
In any event, Glauber said the program is likely to be taken as “producer support” and appears to be targeted toward a drop in the market price of certain commodities, meaning it could get counted against the U.S. commitments from the WTO.
“We’ve run pretty low levels of [producer] support in recent years, but it will certainly raise a lot of eyebrows and will make people look at those calculations very, very carefully,” said Glauber. “It also will look at the way we formulate those programs very, very carefully.”
Soybean prices alone have plunged nearly 20 percent since April when China first announced the 25 percent tariff on U.S. soybeans. That means farmers are getting lower prices for the commodity, and at these levels some are not making enough to cover bills. Beijing started collecting the tariff on U.S. soybeans on July 6.
Some of the farm sector tariffs are tit-for-tat measures in response to the White House’s duties on imported steel and aluminum, while others were imposed by Beijing following other rounds of tariffs…
Depression-era authority
Among the authorities that will be utilized are the Commodity Credit Corp., a federal agency set up during the Great Depression. USDA said a “market facilitation program” under the CCC “will provide payments incrementally to producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs. This support will help farmers manage disrupted markets, deal with surplus commodities, and expand and develop new markets at home and abroad.”
At the same time, …plans to tap federal food purchase and distribution programs, including buying surplus commodities of some farm products such as fruits, nuts, rice, legumes, beef, pork and milk for distribution to food banks and other nutrition programs. There also will be trade assistance provided to the agriculture industry through USDA’s Foreign Agriculture Service to help develop new export markets.
The CCC can borrow tens of billions of dollars from the U.S. government to use for its programs and doesn’t require new congressional approval to fund the plan outlined by the administration.
A lot of these are commodities that Americans regularly consume, and supply and demand in this case means that with the decrease in the demand and the increase of the supply that American consumer should be able to expect to pay less for more of the goods which they buy. But, in this case, the federal government is marching in and inserting itself in market conditions to prop up higher prices by absorbing a percentage of the supply by artificially representing vacuous demand, all while President Trump is trying to facilitate better market conditions for the American consumer.
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