WASHINGTON — Trade waters roiled over the past year by tariffs on steel, attempts to protect intellectual property and ongoing efforts to enact an agreement with North American neighbors Canada and Mexico, have had undeniable effects on American farmers and ranchers. Three undersecretaries with the U.S. Department of Agriculture tasked with mitigating those trade losses outlined their progress during a recent panel discussion in Washington.
The Trump administration understands the agriculture sector has been “at the tip of the spear of retaliation,” said Stephen Censky, U.S. Deputy Secretary of Agriculture, in his introduction of the Feb. 22 breakfast panel during the U.S.D.A.’s 95th annual Agricultural Outlook Forum at Crystal Gateway Marriott Hotel in Arlington, Va.
“Secretary Perdue and all of us put together a trade mitigation package that tried to assist farmers and ranchers disproportionately affected by tariff retaliation,” Mr. Censky said. “It really is comprised of three components. One is market facilitation payments. The second is commodity purchase and distribution program. And then the third is the agriculture trade program to try to work with farmers and ranchers and their organizations to develop and expand outside traditional markets.”
Acknowledging that farmers and ranchers would rather trade commodities than receive payments or have crops or products purchased by government, Mr. Censky said, while the U.S.D.A. has facilitated these programs to mitigate the impacts as they work to achieve more successful outcomes.
Iowa corn and soybean farmer Bill Northey, the U.S.D.A. undersecretary for farm production and conservation, said his team’s tariff impact evaluation focused not on speculating on how true markets would have behaved, but rather how much of the market was lost compared with export volumes, a process “similar to what a World Trade Organization analysis would be.” Thus, the program couldn’t allot market facilitation payments for some commodities that acted in sympathy to lost markets, Mr. Northey said.
“Ideally, you’re able to replace those lost trades and get that off the market,” he said. “That’s the best way to compensate, but you can’t do that with all crops. You certainly can’t do that with corn. There’s only so much corn that food banks will take, or meat, or even dairy or pork.
“These are not market-loss payments, these are market facilitation payments, ideally to be able to have a producer maybe afford storage, provide some flexibility for that producer to be able to market their crops. In some cases, you saw crops that were in such heavy oversupply that a little bit of market loss could have more of an impact. You saw some places in the country that had more of an impact than others.”
Examining those differences quickly became complicated, Mr. Northey said. His team explored numerous routes to determine payments, including what inventories remained on hand, but ultimately they examined crop production for 2018 that was exposed to tariff impacts and compensated accordingly. For the lengthy pork production supply chain, the team examined the inventory of pigs. For dairy, the team looked at pre-existing margin protection program inventories.
Producers were generally supportive of the process, some spending only a short time in local Farm Service Agency offices and receiving checks within a week. Those payments totaled $7.7 billion so far, with more likely to be disbursed, since producers still have until May 1 to bring production information to local F.S.A. offices.
Sumner, Neb., farmer and rancher Greg Ibach, the U.S.D.A. undersecretary of agriculture for marketing and regulatory programs, said tariff retaliation also touched specialty crops, fruits and vegetables, sometimes disproportionately within those categories, such as apples from Washington and Oregon that were more likely to be exported to China than those from Michigan.
“And yet if those commodities backed up in the markets in the areas they were grown in, they were going to cause pressure in other parts of the United States because it was going to disrupt the whole supply-demand scenario,” he said.
Mr. Ibach said the situation presented a special challenge for the Agricultural Marketing Service now tasked with buying premium U.S. food products after a long history of value buying.
The service worked closely with food banks because “you don’t just buy S1.2 billion worth of food, put it all on a shelf at once and expect that some of it won’t spoil or be wasted,” he said. “Food banks were eager to get this food but were also apprehensive about ‘Do we have enough cold storage? Can we phase this so we get some food over a longer period of time?’”
Four phases were devised to balance cold storage needs and spread out the variety of products over time, and match perishable purchases with their marketing window when possible.
“We’re into phase two of purchases,” he said. “We’ve shipped 10,127 loads of food to food banks across the U.S.” and effectively avoided backups and disruptions in other states’ marketing chains. For a dairy industry suffering from trade woes, overproduction and oversupply, the U.S.D.A. used section 32 funds to buy fluid milk for the first time.
Tipton, Ind., agribusinessman Ted McKinney, the U.S.D.A.’s first undersecretary of agriculture for trade and foreign agricultural affairs, was tasked with the third component of the $12 billion trade mitigation, the Agricultural Trade Promotion program he called a “first or second cousin” to the Market Access Program also administered by the Foreign Agricultural Service. The promotion, operating with $200 million secured by Agriculture Secretary Sonny Perdue, “had three points of encouragement” but did not dictate how a co-operator would apply.
His group advised applicants that “some of their ask may be allocated to countries where we’ve already been doing business, such as Mexico and Canada, where there has been some disruption and there may need to be some goodwill reestablished and markets reoriented.”
“This was their time to get creative,” Mr. McKinney said. “We looked for things to do to offer greater return for a shorter time.
“By far the most important point was to look for markets where you wanted to spend time and investments, but you just haven’t had the money either from you own coffers or that which comes through the foreign ag service.”
Those instructions drew $630 million in applications, for the allotted $200 million, which were sent to F.A.S. outposts at 93 embassies with U.S. leadership for review and determination of which organizations had reputations for deliverability in new markets. Those accepted have a three-year investment window, Mr. McKinney said.
“Notice I didn’t say spend, I said invest,” he said. “Because we’re looking for a return, and they are too. They had to put either sweat equity or money of their own, or both into the program.
“If you look at the M.A.P. metrics as an example, most people don’t know that for every dollar provided through U.S.D.A. or F.A.S., they have to put in a great deal more,” he said. “The return is 30-to-one, usually. So, when you look at taxpayer dollars, it’s really about 40c on the dollar, because the other 60c is what is put in by the cooperating organization.
“That’s a pretty doggone good return on investment.”
He said adding funds allocated to M.A.P. and A.T.P. are dwarfed by similar programs in many countries in Europe and, “as best we can calculate — they’re not as transparent — like-programs in China. I think there was every reason politically, economically and out of fairness, for those monies to be invested.”
While commodities get the bulk of attention, there’s also an adequate fund for small- to mid-sized companies to export their branded products through the lesser-known 202-year-old The National Association of State Departments of Agriculture cooperative, he said.
Mr. McKinney was most pleased that all allotted funds met World Trade Organization guidelines as “You don’t want to cross that nasty boundary … so that you don’t find counterpunches signed on unfair trade practices.”