$12 Billion Aid Package to Help Farmers Keep Farming

In December the Trump administration announced an aid package for farmers in the amount of $12 billion.  Aid is intended to offset profit losses directly tied to tariffs. The amount was calculated based on “typical” row crop sales to China, who has purchased less from the U.S. this year.  Money for one-time payments to row crop farmers will be generated through tariffs. 

December and January are seed buying months and Agricultural Secretary, Brooke Rollins, says aid will be in motion by the end of February. Though farmers may have to secure capital before aid checks arrive, the $12 billion dollar commitment should reduce lending risks for banks.

Aid Package Aims to Reduce Risks

For farmers who have kept operations running despite multi-year losses, the aid package is a welcome buffer and could be the only way to continue farming for another year.  Farming is an industry that operates on credit, and the hope is that these one-time payments will get small family farms out of the red and back to even.

Unlike stimulus payments that are intended to generate economic momentum by assisting farmers with large or very specific types of purchases, this aid package is called a bridge payment.  Its design means farmers will remain in good standing with lenders and able to secure new loans. However, farmers question where the bridge is heading.

Assistance is on its way, but it may not be enough to build confidence in ag communities that trade will increase.  Farmers could maintain this pattern of borrowing money, losing profit to high input costs and lack of market access and receiving aid year upon year but an industry that hopes for help every year to break even isn’t a thriving one. Farmers would still rather sell to global markets than receive aid checks every year.

A string of tight years isn’t atypical in agriculture. However, another aid package coupled with an expired Farm Bill sets the stage for one more year of uncertainty.  The dynamic is compounded by trade talks with China. Although the current administration maintains that deals were struck between the two countries, China has yet to make major grain purchases and will likely not take delivery of any purchases they might make until well into 2026.

Can We Increase Trade and Decrease Aid?

The mantra, 'more trade - less aid' is a popular one among farmers who wonder if the latest aid package is a necessary component of a broader strategy to support American agriculture.  While tariffs have led to a trade war with China, they have also been a catalyst for new market access elsewhere. At the moment there is no other choice but to aid farmers until the U.S. can effectively market commodities and win bids in new locations to offset trade losses from China.

Reasons trade could expand include extreme weather or drought in other agriculture regions which would drive up demand for U.S. commodities and the removal of tariffs on agricultural inputs which would bring the cost of farming down in America. New uses for commodities could also increase demand for U.S. goods and farmers are watching biofuel market development. 

What we are seeing is an effort to build programs that promote trade like the Emerging Markets Program, the Technical Assistance for Specialty Crops program and most recently, the America First Trade Promotion Program. These programs are designed to help farmers understand global markets and expand export activity. We are also seeing regulatory shifts. Regulations can be costly, but they can also be vital to accessing specific markets. The U.S. has begun deregulating in sectors that are crippled by extra fees and ensuring that American commodities are competitively priced.

In theory, the pressurized and aid dependent season American farmers are experiencing could cycle into a season of expanded trade. Current variables are likely causing farmers to play it as safe as possible by purchasing resilient seed varieties and sticking to insured crop types.  Essentially, their choices are limited. But, as promotional programs grow and new markets become available, American farms could have more choice in what they grow and who they sell it to.

Originally Published on Stratagerm's Blog