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home : most recent : agriculture February 23, 2019


9/11/2018 11:15:00 AM
Hoosier soybean farmers to see huge payout from federal government because of tariffs

Carson Gerber, Kokomo Tribune

Agricultural economists anticipate the vast majority of farmers in Indiana will apply for their share of the $6 billion in aid money provided by the U.S. Department of Agriculture to offset plummeting crop prices following President Donald Trump's ongoing tariff war.

The biggest payout by far will be for soybean farmers, who will receive more than 90 percent of all the bailout money coming to Indiana, according to estimates from Purdue University.

Farmers began applying for aid on Sept. 4. The USDA announced in July it would authorize up to $12 billion for farmers through its Market Facilitation Program

Last week, the department said initial aid will consist of about $4.7 billion in payments to producers of seven agricultural commodities, and also include purchasing up to $1.2 billion in certain “commodities unfairly targeted by unjustified retaliation.”

The department said the remaining $6 billion authorized for the program would be released during a second payment period “if warranted.”

Kent Chism, who farms in western Howard County and serves on the Howard County Farm Bureau board, said he will likely apply for aid. He said profits at his farm are down about 20 percent this year, and the money will go a long way in helping offset that loss.

“It will definitely help out,” he said. “For some producers, it will be a life saver. For us, it will tide us over.”

The USDA said eligible applicants must have an ownership interest in the commodity they produce, be actively engaged in farming and have an average adjusted gross income of less than $900,000 for tax years 2014 through 2016.

The big payout will be to soybean farmers, who will get $1.65 in aid per bushel for half of their total crop. The USDA estimates that more than $3.6 billion will be paid out for soybeans.

Chris Hurt, an agricultural economist at Purdue University, said the state is set to produce a record soybean crop this year, with average yields of 58 bushels an acre. Farmers also planted in total more than 1 million more acres of soybeans than corn this year, which is substantially higher than most years.

That means an average farm is set to receive nearly $48 in aid for every acre of soybeans. In total, Indiana soybean farmers will likely receive $296 million, Hurt said.

“This is a real significant amount of money,” he said. “It doesn’t compensate for all the potential losses from the trade distribution, but this adds up to a lot of money. For families that are tight on cash flow, this is really valuable.”

But the news isn’t so good for other kinds of farmers. For corn, the program is only paying 1 cent per bushel for half of a farmer’s crop. In Indiana, that means corn farmers will only get an estimated $6 million, Hurt said.

Diary and hog farmers are in the same boat, with small payouts that likely won’t offset the losses. Those losses have been created not only by Trump’s tariff war, but also a saturated U.S. market for both milk and pork, he said.

“For Indiana, there’s really only one commodity that’s going to significantly help with cash flow for family farms, and that’s soybeans,” Hurt said. “And we’ve got lots of soybeans this year.”

As the bailout money makes its way into local farmers’ pockets later this year, the Trump administration continues to battle with America’s largest trading partners to negotiate new deals.

Kathy Parkison, a professor of economics at Indiana University Kokomo, said most economists believe tariffs aren’t the way to achieve those new deals, and could have a devastating, long-term impact on the U.S. economy. 

“As an economist, we are all pretty much unanimous in opposition to trade barriers in general,” she said in an email.

Hurt said if the trade war goes on for too long, there’s real concern China, which is by far the largest buyer of American agriculture products, will simply cut new deals with other countries for its food and blackout the U.S. as a trade partner all together.

“The Trump administration is working on a bigger plan than just agriculture, and they’re trying to get better trade deals with all these countries, but especially China,” he said.

Parkison also worried the $12 billion bailout program to keep farmers afloat in the short term will dig the country into an even deeper fiscal pit.

“Subsidies have a direct impact on the budget – the money has to come from somewhere,” she said. “If folks are worried about the budget, these subsidies will blow a huge hole in it, which means more borrowing.”

But for Howard County farmer Chism, the risk is worth the potential reward. He said he still holds out hope that Trump will negotiate better trade deals for the U.S. that will lead to new markets for farmers and fairer trade around the world.

“It may take a little more time,” he said. “It may take another six months or ever a year, but I think in the long term it will benefit the United Sates. We’ve been in a trade deficit for so long, so it’s time to get things realigned.”

But, Chism said, he hopes those new deals come sooner rather than later. He said in the end, he’d rather make his money through selling his crops in a fair economy than getting it in the mail from Uncle Sam.

“I would be happier with market revenue rather than government money,” Chism said. “ … And if we get overall trade deals that are good for the U.S., that’s going to help.”

Related Stories:
• Trade wars, following prices cause Ag Economy Barometer to biggest ever monthly fall
• Farmers anticipate record-setting harvest while prices hit record lows
• Are Hoosier farmers facing 2018 harvesting losses?
• Grain storage space feeling the squeeze because of high yields, tariffs
• Former U.S. Sen. Richard Lugar: Trumps needs to seek strategic trade policy
• Tariffs hitting home in Steuben County, says some local businesses

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