A university agricultural economist is calling for pre-planting guidelines from the USDA that would allow farmers to understand their protection from trade-related losses.
Roman Keeney, associate professor of agricultural economics at Purdue University, said in a 2020 outlook that the continued uncertainty around the negotiations and the level of needed trade adjustments required argued strongly for such guidelines.
That would include not only the parameters that determine county-level assistance but also an outline of national indicators that trigger differing levels of gross assistance, he said.
Historically, farm sector stressors have been met with additional payments to producers, and the current trade disputes have been no exception, Keeney said.
A LITTLE HISTORY
Beginning in 2018, increased tariffs and reduced demand for export agriculture exacerbated financial conditions for farmers and ranchers and prompted a series of payments to farms based on expected damage from the trade war, Keeney said. These were continued in 2019 at $16 billion, with the first half being distributed in the summer and an additional 25% given in late November and early December.
A third and final set of payments (25%) are forthcoming this month, if deemed necessary, he said.
The importance of that aid to the farm economy becomes apparent when comparisons reveal that all farm payments, including trade-damage assistance, amounted to 40% of national net farm income ($33 billion of $88 billion), Keeney said.
The increasing role of government payments to farm income is consistent with other concerns for farm financial health, he said. These include a 24% increase in farm bankruptcies and real farm national debt approaching inflation-adjusted levels of the early 1980s ahead of the last major farm crisis.
The second year of trade damage assistance to farmers featured a considerable expansion, Keeney said. More crops and livestock products qualified for assistance, and program payments were calculated as a single county-level rate. All planted acres, not exceeding 2018 plantings, by a farm for commodities that were covered in the program received the stated rate as calculated by USDA.
LOOKING TO 2020
For 2020, most policy proposals and debate will be filtered through the national election for president and congress, Keeney said. Passage of the North American trade pact is the nearest term agenda item, with Congress looking to gain commitments for environmental and labor standards before signing off on the new trade rules.
De-escalation of the dispute with China should provide some additional demand certainty would be critical for reorienting farm fortunes to markets and the competitive advantages of US farm production, he said.
The $16 billion in potential transfers to farms from trade assistance is on par with the combined payments for commodities and crop insurance anticipated at the passage of the 2018 farm bill, Keeney said. This effective doubling of support may help stave off short-term financial stress but does little to promote the kind of sustained growth that might flow from productivity and investment responding to market signals.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at $124 to $125 per cwt on a live basis, up $2 to $3 from the previous week. Dressed-basis trade happened at $198 to $200 per cwt, up $3 to $4.
The USDA choice cutout Friday was up $0.24 per cwt at $208.49, while select was up $2.76 at $205.39. The choice/select spread narrowed to $3.10 from $5.62 with 106 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Thursday was $144.87 per cwt, up $1.27 from the previous day. This compares with Friday’s Jan contract settlement of $143.35, down $1.30.