President Donald Trump’s $28 billion farm bailout may be paying many growers more than the trade war with China has cost them.
The U.S. Department of Agriculture’s calculations overshot the impact of the trade conflict on American soybean prices, according to six academic studies, a conclusion that is likely to add to criticism that the bailout has generated distortions and inequalities in the farm economy.
“It’s clear that the payment rates overstated the damage suffered by soybean growers,” said Joseph Glauber, the USDA’s former chief economist who published a review of the research in late November. “Based on what the studies show, the damages were about half that.”
The academic research has focused on soybeans in part because the crop has been the most visible target of Chinese retaliation and overall received the most trade aid. But the method the department used to calculate trade losses also likely overstates the conflict’s financial impact on most other farm products, though for a few commodities it may understate the true impact, Glauber, now a senior fellow at the International Food Policy Research Institute, said in an interview.
The divergence doesn’t necessarily mean a bonanza for American farmers, who are being financially squeezed on other fronts, including a global commodity glut that is depressing prices and a year of wild weather that is damaging crop yields. Also, the trade conflict risks long-term loss of market share for U.S. producers as overseas customers build relationships with replacement suppliers. Neither the academic nor the USDA estimates take potential future market losses into account.
“You’re ruining a huge export market,” said Yuqing Zheng, an agricultural economist at the University of Kentucky. “Longer term, we don’t know for sure what the impact will be. Even if there is no future tariff, China might import less from the United States.”
Still, a team led by Zheng estimated the trade conflict depressed U.S. soybean prices by only 36 cents per bushel in its first year, a period in which the bailout program paid soybean growers more than four times that: $1.65 per bushel.
The scale of the farm rescue package has now swelled to more than twice the ultimate $12 billion cost of the controversial auto industry bailouts under Presidents George W. Bush and Barack Obama. And it’s increasingly come under under fire.
Senate Democrats issued a report in November arguing the trade aid program favors large producers over smaller ones. An advocacy group, the Environmental Working Group, released a study that asserted big farms so far have been the main beneficiaries of the billions of dollars in aid payments.
The USDA forecast last week net farm income will rise more than 10% this year to $92.5 billion, with additional government aid accounting for all of the increase in profits. Almost 40% of projected U.S. farm profits this year will come from trade aid, disaster assistance, federal subsidies and insurance payments. With the extra aid, farmers will have their highest profits in six years, though still well below the $124 billion they netted in 2013, according to the department.