Farm prices keep falling, and it'll cost us real tax dollars

Uncle Sam is stepping in to help farmers that are being plagued by plunging prices, with payments scheduled to come out around this time. The New York Times went over the Trump Administration's new farm subsidy, and also looked into whether the handouts will be enough.

The Trump administration is providing up to $12 billion in emergency relief funds for American farmers, with roughly $6 billion in an initial round. The three-pronged plan includes $4.7 billion in payments to corn, cotton, soybean, dairy, pork and sorghum farmers. The rest is for developing new foreign markets for American-grown commodities and purchasing more than two dozen select products, including certain fresh fruits and vegetables, nuts, meat and dairy.

Agriculture Secretary Sonny Perdue announced last month that soybean growers will get the largest checks, at $1.65 per bushel for a total of $3.6 billion. China is the world's leading buyer of American soybeans, purchasing roughly 60 percent of the U.S. crop. But since Beijing imposed a 25 percent tariff on soybean, imports prices have plunged.

There is grumbling in that story about the level of those subsidies (you can click here to see what they are), which varies widely based on the crop. Corn farmers are complaining about only getting 1 cent a bushel, and wheat farmers would only get 14 cents a bushel. Neither of those subsidies seem likely to come close to covering the losses that farmers are taking.

By comparison, soybeans are scheduled to be more than 3/4 of the total subsidy. The Trump Administration claims the subsidy amounts were based on how much prices fell and how much products were affected by the trade barriers, it’ll be intriguing to see if those figures are adjusted in a second round of subsidies later on.

And the trade wars and lowered prices don’t seem likely to end soon. In fact, China and the US just had 10% tariffs go into effect on a number of products Monday, and the Producer Price Index report from earlier this month showed the prices farmers were receiving had been dropping all Summer.

These charts on soybeans and cheese prices show the upcoming months may become even tougher.

Another source of needed help for Wisconsin dairy farmers could come from a new Farm Bill. The current law is set to expire at the end of this week, and the Wisconsin State Journal noted that more assistance to dairy farmers seems likely to be part of a new Farm Bill, if it ever becomes law.

The dairy provision in the current farm bill, the Margin Protection Program, was a disappointment. Based on an insurance system in which farmers paid premiums to get taxpayer-subsidized insurance to protect against losses, the system proved to be a money-loser.

The Senate and House versions of the new dairy insurance program are slightly different, but both offer a stronger safety net. A University of Missouri professor concluded the new program could offer six times the benefits of the old program, depending on the size of a farm and the choice of coverage.

For taxpayers, the new insurance program should be more cost-effective. The current bill’s dairy program has a budget baseline of about $50 million a year. The new program should cost taxpayers about $100 million more over five years. For that extra expense, consumers should gain more stability in dairy product prices and supplies.

Right now, the new Farm Bill is sitting in the House, where Paul Ryan's crew are figuring out if they want to hurt the working poor by taking their food stamps, or if they actually want real policies that might help farmers survive these times. It isn't scheduled for action, despite there being only 5 days left in the current Farm Bill, and the 2018 Fiscal Year.

Those drops explain why the Trump Administration felt that they had to send out the subsidies to help farmers get through in the short term. And the New York Times article notes that even the farmers themselves wish they didn’t have to get it.

"Nobody wants to have an aid package. I mean, if you're a farmer you're in the business of producing a crop. We just want a fair price for it," said Joel Schreurs, a soybean and corn producer near Tyler in southwestern Minnesota who sits on the board of both the American Soybean Association and the Minnesota Soybean Growers Association.

His personal operation is about 1,000 acres. He farms an additional 500 acres with his son-in-law and other relatives. He estimates that the tariffs would cost him $40,000 to $50,000 in lost income and that he would get $16,000 to $20,000 in emergency aid.

Schreurs worries that it will be hard for farmers to get back the buyers they'll lose as a result of the trade wars. "And in the short term we have to find another home for those beans, otherwise they're going to pile up and it will keep prices depressed," he said.

Given the circumstances, it definitely seems like it's time for Mr. Mellencamp to give an update to this one. Heck, Farm Aid was just last weekend - you think it'd have gotten more attention given the times (John comes in around 3:40)