Payments to Farmers

The current plans call for some direct purchase of food by the government, as Trump indicated when he first announced the new round of trade aid, but payments to farmers would be the main element of the assistance.

Agriculture Secretary Sonny Perdue said last week that the aid package could go as high as $20 billion, more than the $15 billion Trump announced earlier this month.

Corn growers argued they were short-changed in last year’s $12 billion trade assistance plan and campaigned for better treatment in the new round of aid. The National Corn Growers Association sent out a call to action last week urging farmers to call the White House to seek a higher payment for corn.

While the payments last year were based on farmers’ current production, the basis will be modified, the people familiar with the plan said. The administration is considering basing payments on the acreage farmers plant this year and their historic yield of crops per acre, the people said.

Former Agriculture Department officials and economists have warned that a decision to base payments on current acres planted risks skewing farm production decisions and adding to the rising stockpiles of crops, particularly soybeans. That risks depressing commodity prices even after the current trade dispute is resolved.

The combination of a disparity in payments favoring soybeans over corn and rainy weather in the Midwest could encourage farmers to change plans and decide to plant soybeans rather than corn. Soybeans have a shorter growing season, so they can be planted later.

At the rates the administration is considering, “if payments are made on actual plantings that would really seem to push plantings towards beans, particularly with the wet spring," said Joseph Glauber, former chief economist for the U.S. Agriculture Department.

As of Sunday, farmers nationwide had planted only 49% of the corn they had said they intended to plant, according to the U.S. Department of Agriculture, the slowest progress in data going back to 1980. On average over the past five years, farmers had planted 80% of their intended crop at this point in the year.

Since Congress passed the Freedom to Farm Act in 1996, U.S. farm subsidies had moved away from payments based on current crop production in an effort to avoid distortions in agriculture markets. Instead, subsidy payments are based on an average of how many acres a farmer has planted of an individual crop in previous years and crop yields for the area.