USDA has released the methodology it used to set payment levels for the trade mitigation package the department announced Sept. 4.
“Our farmers and ranchers work hard to feed the United States and the world, and they need to know that USDA was thorough, methodical, and as accurate as possible in making these estimates,” Agriculture Secretary Sonny Perdue said in a news release accompanying the calculations.
First, USDA took the trade value of a commodity's exports in 2017, before retaliatory tariffs were imposed, and subtracted from that the value of what USDA estimates will be exported after retaliatory tariffs. Then, “USDA divided that estimated trade damage level by 2017 crop year production to calculate a per unit rate,” according to the paper that was released.
Those rates includes: 86 cents/bushel for sorghum, 1 cent/bu. for corn, 14 cents/bu. for wheat, and $1.65/bu. for soybeans. The full list is here.
The explanation from the office of Chief Economist Rob Johansson noted that the “gross trade damage only reflects direct export losses due to the retaliatory tariff imposed on the U.S. commodity. Indirect or secondary effects from the tariff, such as cross-commodity effects, are not reflected in the gross trade damage estimate.”
Johansson explained the calculations personally today in a Senate Agriculture Committee hearing, where some lawmakers expressed deep disappointment or offered requests to reconsider some aspects of the program.
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Sen. Joni Ernst, R-Iowa, was especially critical of the meager 1 cent that corn farmers are getting per bushel. Johansson explained that it was only that low because the U.S. doesn’t export much corn to China – unlike soybeans – and that volume is the only thing that the aid calculations were based on.
Ernst countered that China sharply raised its tariffs on ethanol and that was a major blow to corn farmers.
Johansson agreed that China’s ethanol tariffs were hurting corn farmers here, but he said that some of those tariffs were put in place before the trade war erupted this year and he also noted that “the programs were intended to address only farmers and ranchers that were producing the primary commodities and not (ethanol).”
Sens. Amy Klobuchar, D-Minn., and John Hoeven, R-N.D., both argued that their soybean farmers should get higher payments because they are used to getting higher prices to compensate for higher transportation costs.
Johansson said regional factors were not taken into consideration, but said that could change when USDA releases its second tranche of payments in December.
As of Thursday afternoon, USDA had received 23,184 applications for assistance and approved $8.9 million in payments. The leading states in order of applications are Iowa, Kansas, Illinois, Indiana, Wisconsin and Minnesota, and the top three commodities covered are wheat, dairy and hogs.
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