How the Trump Admin plans to bail out farmers

Wanted to take a little bit to discuss this week's release of details on how the farm bailout from the Trump Administration will work.

USDA’s Farm Service Agency (FSA) will administer the Market Facilitation Program (MFP) to provide payments to corn, cotton, dairy, hog, sorghum, soybean, and wheat producers starting September 4, 2018. An announcement about further payments will be made in the coming months, if warranted.

USDA’s Agricultural Marketing Service (AMS) will administer a Food Purchase and Distribution Program to purchase up to $1.2 billion in commodities unfairly targeted by unjustified retaliation. USDA’s Food and Nutrition Service (FNS) will distribute these commodities through nutrition assistance programs such as The Emergency Food Assistance Program (TEFAP) and child nutrition programs.

Through the Foreign Agricultural Service’s (FAS) Agricultural Trade Promotion Program (ATP), $200 million will be made available to develop foreign markets for U.S. agricultural products. The program will help U.S. agricultural exporters identify and access new markets and help mitigate the adverse effects of other countries’ restrictions.

Looking closer to Wisconsin, it is through the MFP part of this that dairy, hog and soybean farmers will be able to be subsidized for their products. For example, the government will pay 12 cents per hundredweight for milk (maximum total payment of $127.4 million) and $1.65 a bushel for soybeans ($3.63 billion max total payment).

If China won't buy them, Uncle Sam will.

However, there are some restrictions in the program that are intended to limit the payments given to corporate farms and others who have large, valuable tracts. No one who had an adjusted gross income above $900,000 in either 2014, 2015 or 2016 is eligible, and the amount a farmer can receive under the MFP is also limited.

The initial MFP payment will be calculated by multiplying 50 percent of the producer’s total 2018 actual production by the applicable MFP rate. If CCC announces a second MFP payment period, the remaining 50 percent of the producer’s total 2018 actual production will be subject to the second MFP payment rate.

MFP payments are capped per person or legal entity at a combined $125,000 for dairy production or hogs. Payment for dairy production is based off the historical production reported for the Margin Protection Program for Dairy (MPP-Dairy). For existing dairy operations, the production history is established using the highest annual milk production marketed during the full calendar years of 2011, 2012, and 2013. Dairy operations are also required to have been in operation on June 1, 2018 to be eligible for payments. Payment for hog operations will be based off the total number of head of live hogs owned on August 1, 2018.

Corn, cotton, sorghum, soybeans and wheat are also limited to $125,000 a person.

The other part of the tariff-related farm subsidy is the AMS, which enables the USDA to buy up $1.2 billion of various farm products, and then give them to adults and (especially) children that are in food and nutrition programs. This includes Wisconsin-centric crops like other dairy products ($84.9 million), cranberries ($32.8 million), pork ($558.8 million) and potatoes ($44.5 million).

This will not make ends meet. /em>

So if I’m reading this right, this won’t necessarily raise the prices that individuals pay for these items at the store (I suppose the extra demand could have an effect), but will allow the farmers to receive more revenue for their product, helping them stay afloat. Interestingly, this is only the first half of the $12 billion subsidy program, and it seems like the Trump Administration is hoping that things will get better on the trade and farm price fronts so that they don’t have to do a second round of this.

I can see where the program’s design fits in, and has a decent chance of working. But let’s not forget that the only reason there’s a need for this tax-funded stabilization program is because of Trump’s recklessness in imposing tariffs that resulted in countermeasures which were keeping American producers from exporting to other countries.

Now maybe this week’s news of Mexico and the US reaching an agreement to renegotiate NAFTA isn’t empty talk from Trump (what, you don't trust our president?), and actually succeeds in improving terms of trade and reopening those markets for US farmers. If so, then maybe prices will bounce back to normal, and less of a crisis will exist.

But in the short term, it’s intriguing to see how the Trump Administration wants to use these policy levers to try to keep getting rural votes keep farmers solvent in these tough times, and I want to see if it actually does anything to avoid the future crises that may be coming due to other dimwitted decisions in DC.