Federal aid may come short of covering losses

Issue Date: September 5, 2018
By Ching Lee

California farmers stand to receive some relief from a federal aid package meant to help farmers hurt by ongoing international trade disputes, though agricultural leaders say the assistance would offset only a small fraction of potential lost sales.

For the most part, farm leaders and groups welcomed news that the U.S., Mexico and Canada are closer to updating the North American Free Trade Agreement. The White House announced last week that it had reached a preliminary agreement with Mexico to revise key portions of the trade deal, with Canada also rejoining discussions following the news.

For now, some farmers may begin applying for trade-aid funding, sign-up for which started Sept. 4. As previously announced, those who grow specialty crops such as nuts, fruits and vegetables will not be eligible for direct payments through the Market Faciliation Program option, which is available only to producers of cotton, corn, dairy, pork, soybeans, sorghum and wheat.

In recent months, a wide range of California agricultural products have been hit with retaliatory tariffs stemming from U.S. trade disputes with China, Mexico, Canada, the European Union, India and Turkey. Since the tariffs took effect, some farmers have seen export sales slowed or market prices fall as their products became more expensive and foreign buyers turned to other sources.

U.S. Agriculture Secretary Sonny Perdue said the aid package is intended to buy time "for the president to strike long-lasting trade deals to benefit our entire economy."

In detailing how it will distribute roughly half of the $12 billion it plans to spend on the aid package, the U.S. Department of Agriculture said $4.7 billion will go toward direct payments to the seven commodities listed above, with further payments to be announced later, if needed. Another $1.2 billion will be used to buy specialty crops, beef, pork and dairy products, while $200 million will be made available to help expand export markets for U.S. farm products.

"We're still analyzing the full package, but it appears a large portion of the assistance will ultimately go to farmers of grain and field crops, plus pork and dairy farmers," said California Farm Bureau Federation President Jamie Johansson.

The relief for dairy farmers, he added, "does not appear to meet the scale of our production in California."

Producers of cotton, corn, dairy, pork, soybeans, sorghum and wheat may apply for direct payments after harvest is 100 percent complete and they can report their total 2018 production. The initial payment will be calculated by multiplying 50 percent of the producer's total 2018 actual production by the applicable rate set by USDA. Payments are capped per person or legal entity at a combined $125,000. Applications are available at www.farmers.gov/mfp.

Under the program, dairy farmers, for example, will receive a payment of 12 cents per hundredweight. Payment for dairies is based on historical production reported for the Margin Protection Program for Dairy. For existing operations, the production history is established using the highest annual milk production marketed during the calendar years 2011, 2012 and 2013. To be eligible, they must have been in operation on June 1, 2018.

For the food-purchase program, USDA said it will buy affected products in four phases. The more than two dozen products USDA listed are mostly specialty crops such as fruits and nuts, although pork will receive the largest share of funding, at $558.8 million, followed by apples, $93.4 million; pistachios, $85.2 million; and dairy, $84.9 million.

Program details are still being worked out for almonds and sweet cherries, although USDA has targeted $63.3 million for almonds and $111.5 million for cherries.

In a statement to its members, Blue Diamond Growers said although almonds are not one of the crops eligible for direct payments, "we understand that the damage amount of $63 million will be provided as a direct payment to growers."

"Due to our advocacy efforts, this was a last-minute adjustment and will need to go through a separate rule-making process at the Office of Management and Budget," the cooperative said. "It is hoped that the dollars will be ready for distribution shortly after our harvest is completed but have been told that it may not be until late fall or early winter."

Johansson said benefits of the food purchases would reach farmers eventually, but they would only partially and indirectly offset the impact of lost markets.

"We hope the trade-promotion program will expedite expansion of markets for farmers who have seen sales reduced because of the tariffs," he added. "Ultimately, resolving the trade disputes will be the best assistance farmers can expect, before they lose markets for their products to other countries."

Along those lines, Johansson said he was encouraged by the so-called handshake agreement between the U.S. and Mexico in their renegotiations of NAFTA, which he said would "strengthen relations with a key trading partner." Despite the development, Mexican retaliatory tariffs related to steel and aluminum remain in effect.

The U.S.-Mexico agreement keeps the zero-tariff status between the two North American nations. It also includes commitments to strengthen science-based sanitary and phytosanitary standards and to enhance information exchange and cooperation on agricultural biotechnology.

Instead of the five-year sunset proposal that was previously discussed, the agreement is for 16 years, with a review after six years to determine if the agreement should be extended another 16 years.

Mexico is the fifth-largest export market for California agricultural products, with sales valued at more than $1 billion in 2016, according to the California Department of Food and Agriculture. Dairy products represent the state's No. 1 farm export to Mexico, valued at $421 million in 2016. Other top California farm exports to Mexico include processing tomatoes, almonds, table grapes and walnuts.

"The promise of continued free trade in agricultural products will ultimately benefit California farmers," Johansson said. "We hope this agreement signals continued progress in resolving agricultural trade disputes."

Dave Salmonsen, senior director of congressional relations for the American Farm Bureau Federation, said the U.S. still has issues to solve with Canada in the NAFTA renegotiations.

"For agriculture, we still have the issues on dairy and poultry and supply management," he said. "But these things have been negotiated over the last year."

With Canada expected to continue discussions this week, Salmonsen said the hope is that these issues "can get resolved quickly and we can move forward with a complete NAFTA product for Congress to take up next year."

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.