Farmer angst grows over foreign actions | Michigan Farm News

Farmer angst grows over foreign actions

Category: Opinion

by Farm Policy Facts

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Foreign governments like India have been busy passing new subsidy schemes designed to give their inefficient producers a leg up.

When the Senate overwhelmingly passed its farm bill – just days after the House did the same – applause from the agricultural community was swift and loud. The bill, once reconciled in conference, will provide some economic certainty and help mitigate farm risk.

But the applause was also short-lived, as reality of the current situation in farm country set in and the euphoria of a major legislative win was met with a host of sobering headlines. Moments following the Senate vote:

  • China slapped a 25 percent tariff on $34 billion worth of U.S. goods, including cotton;
  • Soybean futures hit a nine-year low over fears of Chinese tariffs;
  • Mexican tariffs on U.S. dairy products rose to as high as 25 percent;
  • Turkey imposed tariffs worth $267 million on key agricultural exports like rice; and
  • Russia scored big wheat sales at the expense of U.S. growers, as Mexican millers anticipate new tariffs on American imports.

And that’s just a small sampling of the export-driven U.S. commodities feeling pain from retaliatory tariffs. Most products leaving rural America – from corn, cotton and chicken legs to sorghum, sirloins and specialty crops – have been hit hard in recent weeks.

And that’s just the trade barriers being erected. Other foreign governments, like India, have been busy passing new subsidy schemes designed to give their inefficient producers a leg up. For example, the subsidy situation on the world sugar market is so bad right now that prices don’t even cover half of the cost of producing the crop.

Creighton University in Omaha, Neb., releases a monthly snapshot about banker confidence in the rural economy, and trade topped this month’s report.

“More than three of five, or 78 percent, of bank CEOs reported that current trade skirmishes and rising tariffs have had a negative impact on their local economy,” Creighton found. Three-quarters of bank executives also reported that grain farmers in their area were being harmed by the current trade situation.

It’s little wonder the report also found weakened confidence in the overall rural economy, including poor farm equipment sales.

Then there are the reports from the U.S. government. Less than a week after the Senate’s farm bill vote, the USDA released a report about the farm sector’s financial health. It found:

Following a steep decline in agricultural commodity prices, the past several years have seen a weaker market for farmland and an uptick in interest rates. At the same time, farm sector income has declined and farm interest expenses have increased. Lower commodity prices in the near future could likely further reduce farm receipts, making it more difficult for some farmers to meet their loan obligations and pay for production expenses. Higher interest rates could compound this problem by increasing loan service obligations for farmers with variable interest rate loans. Farmers who made substantial investments in machinery or land when commodity prices and farm incomes were high could face a drop in liquidity and elevated risks of financial insolvency.

In other words, the news is bad. So what can be done to fix the situation?

The White House took a positive first step last week in announcing a relief package designed to help offset the losses farmers and ranchers have faced as a result of unwarranted foreign actions.

But this action is a temporary fix to a years-long economic problem that threatens to deteriorate as current trade skirmishes persist.

Larry Combest, a former chairman of the House Agriculture Committee and architect of the 2002 farm bill, believes current farm bill conferees can help, too.

“The key will be to act swiftly in a bipartisan manner and conclude work on the current farm bill as soon as possible,” he told Farm Policy Facts. “The farm policies in the bill are strong, but conferees should be open to strengthening them even more if it can help farmers weather this current storm.”

Combest said lawmakers and administration officials must also remain vigilant during this time to press for free and fair trade abroad by tearing down barriers and using all tools available to fight illegal foreign subsidies and government policies.

“There are far too many cases of our trading partners cheating the system and looking to disadvantage rural America,” he concluded. “Standing up and fighting for America’s farmers and ranchers is a winning issue for elected officials, and it’s the right thing to do.”