Tariff-assistance measures to be made available

Issue Date: August 1, 2018
By Ching Lee

To help ease some of the effects international trade disputes are having on farmers and ranchers, the U.S. Department of Agriculture said it will provide up to $12 billion in assistance programs while the Trump administration continues to pursue long-term changes to U.S. trade relationships.

The plan, announced last week, includes three parts: direct payments to farmers of certain crops affected by lower market prices resulting from retaliatory tariffs; government purchases of affected commodities; and funding to help develop new export markets for U.S. farm products.

Some farmers have seen export sales slowed or market prices fall as a result of trade disputes that in recent months have led China, the European Union, Mexico and Canada to impose retaliatory tariffs on American goods, including agricultural products. The trading partners represent top export markets for California farm products including fruits, nuts, wine, cheese and beef that are subject to new tariffs.

California Farm Bureau Federation President Jamie Johansson said the one-year assistance package promises short-term relief, but that long-term resolution to the trade disputes remains urgent.

"Ultimately, farmers and ranchers want what we have always wanted: to trade on a fair basis with customers around the world who want to buy our products," he said. "We will continue to urge the administration and our congressional delegation to resolve the trade disputes as quickly as possible."

USDA said it will use its authority under the existing Commodity Credit Corporation Charter Act to carry out a three-pronged aid package, which does not require congressional approval. Agriculture Secretary Sonny Perdue emphasized the programs are short-term in nature and intended to mitigate tariff impacts through the 2018 crop production year.

The assistance package will include incremental payments to producers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs. USDA officials said work is underway to develop rules and calculate terms of payment rates, with signup for the program expected to start around Labor Day and run several months.

"Producers will tell us production, we'll multiply it times a payment rate and give them a payment based on that formula," USDA Farm Service Agency Acting Deputy Administrator Brad Karmen said.

The other two programs appear to be most applicable for California producers, and are enhanced versions of current USDA programs. One involves USDA buying surplus food crops such as fruits, nuts, rice, legumes, beef, pork and milk, and distributing them to food banks and other nutritional programs. The other deals with trade promotion; it is similar in purpose to the current Market Access Program and is aimed at opening additional foreign markets.

As an exporter, Kurt Friedenbach, sales representative for Sierra Valley Almonds in Madera and Firebaugh, said announcement of the aid plan appears to indicate the administration is "digging its heels in for a long fight" that could last at least a year.

"I don't think most farmers are looking to get handouts," he said. "It can help on a short-term basis, but stable markets are what we want."

Friedenbach said Chinese importers are increasingly looking to other sources such as Australia for almonds, while others are replacing almonds with other nuts. He reported "a big uptick" in purchases of cashews and macadamias, with Chinese buyers establishing business and trade routes for these products in places such as Madagascar and Australia.

Marco Albarran Arozarena, CEO of Imalinx, which promotes California milk and dairy products in Mexico for the California Milk Advisory Board, said some importers and exporters of U.S. cheese absorbed the initial impact of the tariffs, which took full effect in early July, but other importers have reduced their purchase volume—some by as much as 25 percent.

He said dairy products from Mexico, Europe and South America "have dramatically increased their presence in Mexico."

Though he has not lost any customers in the ongoing U.S.-China trade dispute, Satoshi Tanaka, president of East West Wine Trading in Marin County, said he expects to see tariff impacts later this year, because many importers made purchases in late spring to avoid shipping during the summer heat, which can damage wine.

Mid- and lower-priced wines are particularly price-sensitive, he added, and face competition from Chile, Australia and France that offer "very low-priced wines that are amazing value for the money." Those countries also have negotiated free-trade or other agreements with China, he noted, "so we are at a disadvantage to start with."

Joel Nelsen, president of California Citrus Mutual, said for specialty crops such as citrus fruit, the potential revenue the commodity purchase program could generate for growers "is far less than export revenue," because USDA historically buys excess inventory at reduced prices.

"A quick survey of the industry indicates that growers and shippers do not generally utilize this distribution channel," he said.

Federal funds aimed at spurring export demand do provide value over time, Nelsen said, though "the benefits to growers are not instantaneous and would not necessarily provide immediate relief." For the current Market Access Program to offset the effects of retaliatory tariffs, he added, "it would have to be modified so that fruit currently or soon to be in the market can be redirected, potentially to numerous destinations, immediately."

With respect to beef exports to China, Joe Schuele, spokesman for the U.S. Meat Export Federation, said the real damage from the higher tariff rate will be not so much the loss of existing business, which remains relatively small after China reopened its market to U.S. beef last year.

"The damage is from lost growth potential, as the U.S. is likely to fall even further behind its competitors in the fastest-growing beef import market in the world," Schuele said.

(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.

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