LDN - Business

Trump's payments to farmers hit all-time high ahead of election

[October 19, 2020] By Mark Weinraub

CHICAGO (Reuters) - U.S. President Donald Trump is assuring a bumper year for farmers as the Nov. 3 election approaches, with record government subsidies projected to make up more than a third of farm income in 2020.

The aid programs could be key to Trump's chances of success in swing states such as Wisconsin, Ohio, Iowa and Minnesota. Such states are hotly contested because their population can swing either to Republicans or Democrats and play a decisive role in presidential elections. Farmers favored the Republican president by a wide margin in the 2016 election.

Trump has banked on that support to endure through trade wars that his administration fought with key U.S. commercial partners since he took office. Reprisals from China and other trade partners to Trump's tariffs on imports led to the loss of billions of dollars in U.S. agricultural exports.

Government payments, ranging from longstanding crop insurance payments to new programs compensating farmers for lost sales during the U.S.-China trade war, have risen every year of Trump's presidency.

Farmers also say they have suffered from Trump's policy of exempting some oil refiners from requirements to blend ethanol into their fuel, which has reduced demand for corn used to make the biofuel.

Democratic challenger Joe Biden and his running mate, U.S. Senator Kamala Harris, have seized on the biofuel issue and pledged a more multilateral approach to international trade, but for many farmers the subsidies are reason enough to vote for Trump again.

"I feel that we have got the ear of the folks that are making policy decision on the farm side," said Roger Hadley, who farms about 1,000 acres of corn and soybeans in northeastern Indiana. "I'm very much concerned that if Biden-Harris gets elected ... I do not have the confidence that we will be taken care of as well, at least short-term."

Farmers initially pleaded to Trump for "trade not aid" in 2018 but have since received repeated bailouts even as COVID-19 stimulus for millions of other Americans stalls in Congress.

The aid money compensated farmers for lower prices caused by trade wars and large global supplies of crops. It also eased the impact of a fresh blow to an already-weak ethanol market when Americans drove less during the coronavirus pandemic.

With the latest $14 billion farm aid package announced in Wisconsin on Sept. 17, federal payments to farmers are expected to reach a record $51.2 billion this year. The government's share of farmers' net cash income will also rise to 39.7%, the biggest in 20 years.

Net cash income is a closely watched indicator of farm health that calculates the amount of money a farmer gets to keep after expenses. The Agriculture Department forecast net farm income would rise 4% in 2020 from last year even before the most recent aid announcement.

'VOTE BUYING'?

The latest COVID-19 aid package came at a time the farm economy was improving.

The Environmental Working Group, a health and environmental advocacy group, called the program "old-fashioned vote buying," saying it did not send money to groups truly at risk. But USDA Secretary Sonny Perdue said the government talked to farmers and ranchers to design a plan that met the needs of those impacted by the pandemic.

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Farmer Roger Hadley harvests corn from his fields in his John Deere combine in this aerial photograph taken over Woodburn, Indiana, U.S., October 16, 2020. Picture taken with a drone October 16, 2020. REUTERS/Bing Guan

Though China's purchases of U.S. agricultural goods remain below the $36.5 billion promised this year in a Phase 1 trade deal, its increased purchases of corn and soybeans in recent months have benefited farmers and helped push up commodity prices.

Prices of corn, soybeans and wheat were also supported by U.S. weather concerns in August and have been rising since then. Soy and wheat are now at multiyear highs, and corn is at a one-year peak, boosting farmer income from sales of the top U.S. cash crops.

The Purdue University/CME Group Ag Economy Barometer, a monthly measure of farmer economic sentiment, jumped 22% in August, before the latest aid announcement, to its highest level since February. The barometer, which is based on surveys of 400 farmers, rose another 8% in September.

The government payments, combined with the rising crop prices, will allow growers to stabilize their balance sheets, pay down debt and get access to loans that will allow them to buy seed and equipment for 2021.

"If you went by yard signs around where I live, Trump has got it by a landslide," said farmer Jim Hefner, who grows corn and soybeans in Lima, Ohio.

'GOOD STRIDES'

The September aid plan simplified the application process for specialty fruit and vegetable farmers who complained the initial $19 billion COVID-19 farm aid package announced in April did not benefit them enough.

The plan also allotted up to $3.5 billion for corn, $1.4 billion for soybeans and $725 million for wheat, giving farmers who are booking sales of those crops at current elevated prices additional income.

That is because the most recent package was calculated based on prices between mid-January and July, just before the August rally in commodity prices due to concerns a wind storm and drought in the Midwest would damage U.S. crops. Those crops likely would not have been included in the package at current prices.

"We had no way of knowing that we were going to get the derecho and the drought in Iowa ... when we put the program together and sent it over to the Office of Management and Budget as part of the rule-making process," USDA Chief Economist Rob Johansson told Reuters in an interview. "As much as we would like to be refined about changing things up to the very last minute, it is just impossible to do that."

Farmers say the aid was still needed to make up for the last three or four years of low commodity prices, high debt and economic struggles.

"I think we are finally on the uptick for getting agriculture where we need it to be," said Dave Nelson, a fifth-generation farmer from Belmond, Iowa, who grows corn and soybeans and raises hogs. "We have made really good strides and if we change the administration we will go backwards fairly quickly."

(Reporting by Mark Weinraub in Chicago; Editing by Caroline Stauffer and Matthew Lewis)

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