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DAVID KRUSE

Farmers want trade, not Trump aid

September 7, 2018
Farm News

Hey! USDA is going to give soybean growers 82.5 cents per bushel of soybeans produced, a half cent/bushel for corn, 43 cents/bushel for sorghum, 7 cents/bushel for wheat applied to all bushels produced and 3 cents/lb for cotton and $4 a hog to help compensate them for market losses from tariffs prompted by Trump's trade war. That doesn't sound like enough so let's juice it up and say soybean growers get $1.65-bushel, corn producers a whole penny, sorghum 86 cents, cotton 6 cents lb and hogs $8 head. Doesn't that sound better? Then tell them they only get the payment on just half of their production (Feedstuffs) and we are back at the same dollars where USDA is really going to subsidize these commodities.

It is all about optics with this administration. If there is a better way to spin it, they do it. $1.65 bushel sounds a whole lot better than 82.5 cents. The larger number was being tossed around by the trade, oversold ahead of the report as applying to all bushels produced instead of just 50%. Heck! Why didn't they make the payment $3.30 bushel on 25 percent of soybean production and make the payment sound even larger? Or do they think that this trade war will be bad enough long enough to need to make a second payment on the other half not covered with this payment the way they have allocated it?

I have had corn growers tell me they can keep the 1/2 cent bushel...oh that's right, a whole penny on 50 percent of production. The NCGA says the loss to corn growers has been 44 cents/bushel. It will cost the FSA more office expense and farmers more bookwork running to the FSA office to get that 1/2 cent than it is worth. It will cost money to give that 1/2 cent away. It is a bad joke. Payments will be made after production is verified on 2018 fall harvested crops.

Ag Secretary Sonny Perdue said it would not be fair and it isn't. Farmers with drowned or droughted out crops this year get reduced payments or nothing adding insult to injury, while farmers with the bumper crops will get paid significantly more like a bonus. This is inherently unfair and easily corrected. They are reportedly making a 12 cent/cwt payment to dairy farmers made on historical production. They should likewise use historical production history for the other payments. All crop farms have their Actual Production History (APH) for crop insurance purposes (10-year yield average). They should be using farmers APH's to base these payments on. That would be fairer, dramatically cut down on record keeping and paperwork and payments could be made much sooner. This is another government program being administered in a way that doesn't make sense other than to buy votes with taxpayers' money. Republicans always take shots at how Democrats administer programs. I think Republicans beat them all for the dumb ass award for how they plan to do this one.

They are spending $3.6 bln on the payments to soybean farmers. Had they used the money to buy soybeans, basis the Monday spot futures close, they could have purchased 421 mln bushel of soybeans reducing the projected carryover of 785 mln bushel by about half. I don't know if soybean prices would have gotten back to $10 bushel but it may have come close. Farmers would have gotten paid by the market then instead of by taxpayers. China and other countries would not have been able to steal our soybeans at such low prices. That would have been a good message to send them instead of using taxpayer funds to essentially subsidize foreign and Chinese buyers. That is what it is doing.

Trump says that he is going to make a deal with China someday. When that happened the CCC-owned soybeans would be part of the deal. There will be some storage cost but someone is going to have to store the carryover anyway. Some have surmised that instead of costing taxpayer's money this plan as I have outlined may have ultimately cost them nothing.. . but they didn't ask for my help.

When corn farmers woke up to the fact that the cent per bushel in the tariff relief payment program is only eligible on half of their bushels, their exultation exhausted pretty fast. When they found out what they will have to do to get a half-cent per bushel on their corn you would have to be a big farmer to be able to afford to waste your time on it. The $1.65 soybean payment is really only 82.5 cents bushel and the market has taken away over 20 cents of that so far this week. Basis erosion is taking away another chunk of it. This is a debacle and Trump's tariff payments are just peeing on the fire. The soybean farmer in MO who harvests a drought crop with a 30 bpa soybean yield is going to get a $24.75-acre payment while the farmer in IL that harvests an 80 bpa yield will get $66-acre payment. . . so the farmer in MO gets the short end of the stick twice this year. This is an unnecessarily stupid program implementation.

An APH based disbursement would have been much less bureaucratic and much fairer. The market loss is conservatively $2/bushel so for the IL farmer with the big yield, that is $160 minus the $66 government aid payment means the tariff still cost him $94 acre not including basis loss of 40 cents bushel on the river due to the collapse of export demand. That is another $32-acre loss. Of course, the market loss is still growing until a bottom is found.

The Trump plan is to borrow billions from the US Treasury adding to US debt to give farmers taxpayer money with the hope they will sell their vote for $1.65 bushel on half of their soybean production. That doesn't cover the market loss on that half. Had they announced it as 82.5 cents on all their production the topline number would be less impressive.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

 
 

 

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