US increases federal aid for farmers hit by China trade war

US increases federal aid for farmers hit by China trade war

The Trump administration has increased federal aid to US farmers hurt by its trade dispute with China, buying time with an important rural constituency as negotiations with Beijing drag on.

The second round of bailout payments since 2018 will cost $16bn, including $14.5bn in direct payments to producers of crops and meats including soyabeans, pork and almonds. The value was based on the maximum amount China and other trading partners could have imported over the past 10 years, officials said.

The administration last year authorised $12bn in assistance to farmers as China, Canada, Mexico and other countries imposed retaliatory tariffs. Sonny Perdue, US agriculture secretary, previously said he did not expect another programme this year.

That changed in May, after the US and China clashed over how Beijing would codify any commitments into domestic law, as well as other issues, such as the scale of Chinese purchases of US goods, and measures to rein in Chinese industrial subsidies, forced technology transfers and intellectual property theft.

“When President Trump saw that the China talks had not progressed to the point of doing a deal, he called me immediately and said it looks like we’re going to have to support our farmers again,” Mr Perdue said on Thursday.

The direct payments under the government’s Market Facilitation Programme would be made in three tranches this summer, autumn and winter, said Robert Johansson, chief economist at the US Department of Agriculture. Unlike the first round of payments, which favoured producers of soyabeans and pork, the new programme will pay crop farmers $15 to $150 an acre based on the estimated impacts of tariffs across their county.

When the administration disclosed broad outlines of the new package in May, farmers were struggling to sow corn and soyabeans in fields waterlogged by pounding rain. The availability of government-backed crop insurance and a separate bill to aid farmers hit by adverse weather affected what they decided to plant, or whether to plant at all.

Mr Johansson said this year’s programme was designed to not incentivise overproduction of certain crops and to be compliant with World Trade Organization rules. Farmers can start signing up on Monday.

“We wanted to make sure to avoid distorting any planting decisions,” Mr Johansson said.

The first round of federal payments has shored up farm finances as a grain surplus weighs on prices. US stocks of soyabeans in June stood at 48.7m tonnes, 47 per cent higher than a year before. Despite scattered purchases, US soyabean export commitments to China have halved from a year ago to 14.3m tonnes in the marketing year that ends August 31. Grain futures are near the lowest level in decades.

“While we are grateful for the continuing support for American agriculture from President Trump and Secretary Perdue, America’s farmers ultimately want trade more than aid. It is critically important to restore agricultural markets and mutually beneficial relationships with our trading partners around the world,” said Zippy Duvall, president of the American Farm Bureau Federation.

The first round of direct payments was limited to $125,000 per farm operation, a cap the administration doubled to $250,000 in the new programme. Farms with adjusted gross income of more than $900,000, disqualified under the first programme, will be eligible this year if at least 75 per cent of their income derives from farming.

Some farm operations have structured their businesses to receive payments well in excess of the payment limits, the Financial Times has reported.

In addition to the direct farm payments, the agriculture department plans to spend $1.4bn to purchase foodstuffs for donation to charities, expanding last year’s programme, and to provide funds to organisations that promote exports of US agricultural goods.

Mr Perdue said he did not expect to repeat the programme next year: “There are no plans for 2020.”

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