“Mr. President, thanks for the cash, it will help pay year-end bills. But the announcement that trade is being re-established with Mexico means even more. The cash is short term, but trade with a growing Mexican population is a long-term tool to help rebuild our struggling farm economy.”
That would be the basic thank-you note most any Corn Belt farmer might write after Monday’s busy day at the U.S. Department of Agriculture.
First there was an announcement of an agreement in principal with Mexico’s trade negotiators. But the bi-lateral agreement between the U.S. and Mexico leaves Canada without a NAFTA voice or involvement.
Mexico had been the top customer for U.S. corn and right behind China for being the top soybean and pork market. And Mexico’s previous threats of seeking corn and soybean supplies from Brazil were quite upsetting to the U.S. grain market.
In addition to the welcome news about renewing trade with Mexico, the administration also announced a financial payment program to reduce farmers’ exposure to trade retaliation. That had been promised by the White House for months, but took shape in the past several days; and was met with different reaction from commodity producers.
Soybean producers who will be receiving $1.65 per bushel understandably had a different perspective of the program than corn growers, who will be receiving 1 cent per bushel. Sorghum will be indemnified at a rate of 80 cents per bushel, wheat at 14 cents per bushel, and cotton at 6 cents per pound. Dairy producers will be 12 cents per hundred pounds of milk, and pork producers will be $8 per pig.
The USDA calculates the total payment to farmers at $3.6 billion, well under initial estimates because the payment is being made on 50 percent of 2018 production, and benefits will be capped at $125,000 per individual.
The corn growers are the most irate, not because they thought they deserve some government handout, but because of the penny payment, when an economist for the National Corn Growers calculated that the Chinese trade retaliation actually impacted corn by 44 cents per bushel.
While many non-farmers will take issue with even a one-cent payment, the compensation is being made because the tit for tat tariffs and retaliation removed billions of dollars from the commodity market through no fault of any farmer. USDA officials have indicated that compensation also will be distributed to producers of fruits, nuts and numerous other commodities for which China has applied tariffs and prevented opportunities for being marketed in that nation.
To claim the funds, farmers will have to sign up for the program at local Farm Service Agency offices beginning Tuesday, Sept. 4, and provide proof of production for the fall 2018 harvest by the end of January.
Some farmers may pass on the opportunity because of the “handout” concept, but most will take it because their commodity marketing plan was torn asunder by the tariff battle between Presidents Trump and Xi. And lenders will likely have a “trade aid” check box for those farmers who seek operating loans over the winter.
Whatever financial benefit comes from the program will undoubtedly be overshadowed by the opportunity to keep Mexico as a customer. That is 400 million bushels of corn right there at $3.50 per bushel, and possibly double that if Mexico pursues its plan to adopt ethanol.