Following a month of speculation, USDA finally released details in late-August on the Trump Administration’s promised $12 billion trade relief package through USDA. Farmers will be assisted most directly by the “Market Facilitation Program,” (MFP) designed to provide financial relief to farmers battered by ongoing trade disputes and tariff threats with China, Mexico and Canada.
According to Michigan Farm Bureau Livestock specialist Ernie Birchmeier, the initial 50 percent payments are expected to provide $4.7 billion in assistance across affected commodities nationwide, with just over $100 million projected for Michigan farmers.
“MFP is intended to aid producers who have been impacted by retaliatory tariffs enacted by trading partners,” Birchmeier said. “There’s been a great deal of scrutiny of USDA in how they arrived at their final figures, but isolating the impact on these commodities during a summer of volatile prices was far from enviable.”
Michigan projections by commodity, according to American Farm Bureau Federation (AFBF) calculations:
- Soybeans $83.38 million
- Hogs $ 4.74 million
- Dairy $ 6.52 million
- Wheat $ 2.48 million
- Corn $ 1.92 million
According to AFBF Economist Veronica Nigh, each commodity on the list has faced tariffs of various severity in different and sometimes multiple markets, which has resulted in a wide range of trade and price disruption.
U.S. pork products, for example, face additional tariffs of 20 percent in Mexico (our #2 market for U.S. pork) and additional duties of 50 percent in China (our #4 market for U.S. pork). Combined, these two markets accounted for 36 percent of U.S. pork exports in 2017, according to Nigh.
“While soybeans are only on one retaliation list - China’s - the additional 25 percent duty has led to a significant disruption given the large share of U.S. soybean exports destined for that market,” Nigh said in a recent Market Intel report. “In 2017, 57 percent of U.S. soybean exports went to China. U.S. corn, another product on the list, is now subject to additional tariffs in both the European Union and China, but those markets combined for a mere 3 percent of U.S. corn exports in 2017.
Producers of commodities covered under the MFP were eligible to submit applications for support on Sept. 4, or after harvest is 100 percent complete and they can report their total 2018 production, whichever comes first.
Payments will be made in two parts, with the first payment guaranteed to occur. USDA will have the discretion to determine if a second payment period is warranted by trade conditions. The initial MFP payment will be calculated by multiplying 50 percent of the producer’s total 2018 actual production by the applicable MFP rate.
If the Commodity Credit Corporation (CCC) announces a second MFP payment period, the remaining 50 percent of the producer’s total 2018 actual production will be subject to the second MFP payment rate.
USDA estimates that CCC will distribute nearly $4.7 billion in MFP trade assistance in the first round, based on 50 percent of production.
If 2018 production is exactly the same as 2017 and the market disruption that has been experienced through August continues at the same level through the end of harvest, USDA MFP assistance would total $9.392 billion.
When combined with the targeted spending of $1.413 billion via Food Purchase and Distribution Program and an estimated spending of $200 million via the Agricultural Trade Promotion Program, the trade aid total will come to slightly more than $11 billion.
“We estimated the impact to each state based on USDA’s August 2018 Crop Production report using state-level production estimates for corn, cotton, grain sorghum, soybeans and wheat,” Nigh said. “Dairy payments are based on January-June 2018 state-by-state production reports.”
According to Nigh, the estimated payments for hogs are based up a June 1, 2018 pig inventory, since the Aug. 1 inventory is not yet available. In all cases, the state-level payment is the product of the state’s share of U.S. production and the MFP payment rate.
“We followed USDA’s methodology, assuming no payment limitations based on the payment cap or AGI limit,” Nigh said. “We acknowledge that some producers will likely be impacted by these limitations and as a result, these numbers should be viewed as an upper limit.”