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Trump administration announces relief strategy for farmers hit by trade-war

June 6, 2019

2 mins read

A $16 billion relief package has been unveiled by the Trump administration to be given to US farmers impacted by the trade war with China. US agricultural producers have had their exports to China curtailed by retaliatory tariffs on US commodities and the relief strategy is to be disseminated in a series of programs to assist producers.

A significant proportion of the farm aid plan, $14.5 billion, will be given in direct payments to agricultural producers in the form of the Market Facilitation Program (MFP). The payments to crop farmers will be based on a county rate and a farm’s total plantings, rather than being dependent on which crops are planted so therefore not to distort planting decisions. As for producers of dairy, meat, tree nuts and berries, payments will be based on production levels and inventories.

These payments are to help absorb the additional costs of managing disrupted markets while also giving producers the ability to develop new markets at home and abroad, according to the official USDA release.

The remaining budget of the farm aid is to be spent on the Food Purchase and Distribution Program (FPDP) and the Agricultural Trade Promotion (ATP). The FPDP will spend $1.4 billion on purchasing surplus commodities and distribute to food banks, schools and outlets for low-income individuals and $100 million will be used to develop new export markets for producers via the ATP. The first payment will be made in late July/early August.

The subsidies have been met with a mixed response from US agricultural producers. Some have welcomed the payments while the schemes have also been met with scepticism. Arguably, the payments are likely to stimulate production which will only contribute further to the build-up of some commodities in US inventories. In the case of soybean, for example, China are the top importer of US soybean and without this market to sell to, US soybean inventories are likely to swell, depressing the market.

The general sentiment is that there is no ideal substitute for a resumption of traditional trade relations with China and producers have thus urged the US administration to continue pursuing a resolution to the trade-war. President Trump is at risk of losing the support of farmers, with the rural-voter a crucial part of Trump’s support base, ahead of the 2020 presidential elections. The extent to which the $16 billion relief package appeases this sector may well shape Trump’s popularity in rural America.

wheat market outlook food commodity prices

George Duke
George Duke

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