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What was he thinking?

Is anyone in government thinking before they speak and act, or is Washington full of bluster and backtrack? 

That is something that folks in agriculture are becoming more concerned about with each passing day.  That is because their projected financial losses are increasing with every new headline.

Purdue economist Brent Gloy this week compared crop budgets for a typical 2,600 acre corn and soybean farm, which earlier this year would have lost $36 per acre based on projected typical production expenses. 

However, spring market rallies in those commodities minimized the loss to only $12 per acre by the end of May, with a break-even price becoming a possibility with the increased demand for corn and beans. 

Then, by mid-June and after a flurry of trade actions by the White House, the per-acre loss had ballooned to $90, even with estimated yields of 206 bushels for corn and 63 bushels for soybeans

“Oh, that’s OK, we’ve got your back,” says Agriculture Secretary Sonny Perdue. “President Trump appreciates all of the support he got from farmers, and he’s got your back.” 

But after a $78 per-acre loss from ratcheting up threats to China, which has cut off $12 billion in soybean purchases from U.S. farmers, they are wondering if their back has a target on it, rather than body armor.

Earlier this spring, when the initial shots were fired at our trading partners, the president was quoted telling steel workers that “Trade wars are good and easy to win.” But suddenly the trade war with China is in the hundreds of billions dollar range for both sides and the stakes are increasing. 

With tariffs equated to higher taxes on a given product, consumers are paying the freight, whether it is 50 cents more for children’s clothes at Walmart, or steel that increased the cost of farm equipment and grain bins by 15 percent.

While there is a lot of angry discourse on whether trade wars are good, there is increasing concern about how easy they are to win. While the president has a number of advisors pushing and pulling on policy, is anyone doing any research on what happens in trade wars? The government has nothing to lose, but consumers laden with high tariffs have a lot to lose. 

In all of the run up to why it is necessary to levy tariffs, nothing has been said about the impact on those having to pay higher prices. And there is a good chance the tax cut earlier this year has been negated. 

Was that rolled into the pre-tariff thinking, along with how commodity prices would drop?

The House and Senate Agriculture Committees have been doing a lot of thinking in the past two years, with dozens of hearings, hundreds of experts testifying, and many hours considering the new Farm Bill. But the House and Senate Committees are coming up with divergent opinions about agriculture policy, despite both having Republican majorities.

As the farm economy is at its lowest point in more than 10 years,  the House Agriculture Committee has called for expansion of farm program payments. But the Senate has declined to expand such a safety net, knowing that one of its members, Iowa Sen. Charles Grassley, will fight hard for cuts in maximum payments per person. While his views did not make it into the committee bill being voted on this week, he may find friends during the floor debate on his expected amendments. It is an issue that has had a lot of debate over the years and most senators are quite familiar with the pluses and minuses.

But another amendment being proposed, designed to penalize users of crop insurance, causes a lot of head-scratching in the Corn Belt.  Farmers have piled onto social media questioning why Illinois Sen. Richard Durbin would limit indemnity payments to farmers who are buying insurance to manage risk.  Farmers have pushed and pulled on his controversial positions, but now, they contend that his plan would cause up to one-third of farmers to not use crop insurance, which would reduce the risk pool, and make premiums much more expensive for those remaining in the program.

Was that considered when he made his proposal?

Stu Ellis is an observer of the Central Illinois agriculture scene. In addition to his weekly column, you can view his “From The Farm” and “Harvest Heritage” reports on WCIA 3 News.

 

 

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