For Farmers, Stimulus Bill Means Subsidies Continue to Flow

For Farmers, Stimulus Bill Means Subsidies Continue to FlowThe bill allots as much as $23.5 billion in assistance to farmers, a key constituency of President Trump’s, in the middle of an election year.

Agriculture, Budget & Tax, In The News,  | Quick Take
Mar 27, 2020  | 11 min read | Print Article

This article by Eric Lipton, Sharon LaFraniere first appeared in New York Times on March 27, 2020

After providing nearly $26 billion in aid to farmers over the past few years to offset losses from President Trump’s trade war with China, the administration now has another giant new pot of money to pass out to them with little or no oversight, courtesy of the $2 trillion coronavirus stimulus package.

The legislation, given final passage by the House on Friday and quickly signed into law by Mr. Trump, allocates as much as $23.5 billion in assistance for farmers and gives broad leeway to Agriculture Secretary Sonny Perdue to direct it where he sees fit.

The money was inserted into the bill by senators from farm states after an intense lobbying push by major corporate farming groups. Parts of the industry are suffering immediate hits from the coronavirus outbreak, such as corn growers who have seen prices for ethanol plummet and mom-and-pop suppliers of farm markets that have closed in many cities.

But unlike industries such as airlines, hotels and automakers, which have largely or completely shut down, most farms are still operating. And sales of some products in the industry have surged as worried consumers stock up, generating shortages of meat, chicken, eggs and flour.

The law provides Mr. Perdue with $9.5 billion to support farmers, including livestock producers, suppliers of farm markets and producers of specialty crops, and $14 billion in borrowing authority to replenish the fund he used to make trade-related payments to farmers in the past two years. The department’s entire discretionary budget request for next year is about $23 billion.

The Agriculture Department will also receive an additional $25.1 billion for food aid programs for poor families from the stimulus bill.

“We are effectively subsiding every other sector of the economy” in the $2 trillion stimulus package, said Joshua Sewell, a farming industry analyst at Taxpayers for Common Sense, which advocates less government spending. “So I guess the argument goes that agriculture wants its piece of the pie, too.”

The administration’s use of the money will become a major political factor in rural America in the middle of an election year in which Midwestern states could be pivotal, said Lawrence R. Jacobs, the director of the Center for the Study of Politics and Governance at University of Minnesota. He predicted that Mr. Trump would soon be trumpeting it as part of his re-election campaign.

“This is just an extraordinary and unprecedented opportunity in the modern era for a president to dole out cash,” he said. “In urban areas, they call this walking around money, which a politician hands out to secure support.”

A small army of groups mounted the fast-moving campaign for aid, including the politically powerful American Farm Bureau Federation and the National Cattlemen’s Beef Association. Joining them were other smaller players representing producers of goods like turkey, pork and potatoes or sunflowers, sorghum, peanuts and eggs.

Among their targets were farm-state lawmakers like Senators John Hoeven of North Dakota, who pressed for $50 billion in aid for agriculture. Others included Senators Pat Roberts of Kansas, John Thune of South Dakota and Mitch McConnell of Kentucky, the majority leader. All are Republicans who serve on the Senate agriculture committee or the appropriations subcommittee that oversees farm aid.

Senator Debbie Stabenow of Michigan, the ranking Democrat on the agriculture committee, was also lobbied.

“We want to make sure that farmers, ranchers and rural Americans are also recognized as needing assistance,” said Dale Moore, the executive vice president of the American Farm Bureau and a former chief of staff at the Agriculture Department.

Farmers in Midwestern states like Iowa, Illinois and Minnesota — as well as in Texas and Kansas — reaped much of the $26 billion spent in the past two years to blunt the economic effect of the administration’s trade policies, according to Joseph W. Glauber of the International Food Policy Research Institute.

Without those payments, net farm income last year would have dropped about 5 percent, he estimated. Instead, it rose nearly 12 percent.

Seth Meyer, an agricultural economist with the University of Missouri, said the economic blow to agriculture from the virus could be harder to offset than the lost sales from trade policy.

“If you are producing flowers and there is no wedding this summer, if you were a fruit and vegetable grower selling through a restaurant wholesaler, what do you do now?” he asked. “What if you are a milk producer selling your product to a processor who has trouble organizing transportation and labor?”

The bottom line, he said, could be a bigger effect on farmers than that created by the trade friction with China — “much bigger, potentially.”

Still, some parts of the industry are seeing benefits from the pandemic. Some big meat producers, including Tyson Foods, announced special bonuses this week for farmers to reward them for the increase in work to keep supermarket shelves stocked.

In general, farmers have weathered recessions better than other economic groups, because while consumers cut purchases of goods like clothing and change their eating habits to save money, they always need food. This downturn is fundamentally different from others in many ways, but Wall Street analysts are issuing bullish predictions for parts of the agriculture industry based on the surge in demand for products like beef and chicken.

“Meat is flying off the shelves” wrote Ken Goldman, an analyst at JPMorgan, who upgraded the stocks of Tyson and Sanderson Farms, two major chicken and meat producers. “We now believe that outstanding retail demand for meat is more than offsetting soft demand at food service.”

Prices being paid to farmers raising cattle and other animals have dropped in recent weeks, reflecting declines in financial markets worldwide and disruptions in supply chains, although these prices recovered somewhat this week.

Major meatpackers are drawing scrutiny as demand rises, amid some suspicion that they are gaming the system to push up their own profits at the expense of farmers and consumers.

“If packers are illegally manipulating markets during crisis we need USDA & DOJ & CFTC to investigate + help farmers,” Senator Charles E. Grassley, Republican of Iowa, wrote on Twitter on Friday, referring to the Department of Justice and the Commodities Futures Trading Commission, the federal agency that regulates markets where these goods are bought and sold.

Congress imposed almost no limit on how Mr. Perdue spends the money, suggesting only that the $9.5 billion chunk be used to support a wide range of agricultural producers. The legislation set aside $750,000 for the agency’s inspector general for “conducting audits and investigations of projects and activities carried out with funds.”

Similarly, with the $14 billion for the Commodity Credit Corporation, there is very little guidance on how that money can be spent other than it be used for an “emergency requirement.”

With the streets empty, cars parked and demand for fuel depressed, corn growers are among the most likely recipients. Mr. Meyer of the University of Missouri said about 40 percent of corn production goes into the ethanol industry, where “you are starting to hear of people shutting down.”

Historically, the Commodity Credit Corporation only made payments to wheat, corn, soybean and livestock farmers during unexpected drops in crop prices because of surpluses or declines in output related to weather or disease.

But the administration has used this program to reimburse farmers for billions in dollars in losses after China stopped buying soybeans and other crops to punish the United States for tariffs Mr. Trump imposed on Chinese products.

Mr. Perdue has repeatedly warned farmers not to count on continuing to receive payments from that federal program. But every time funding has been about to run out, Mr. Trump has clamored to spend more.

In late February, after the administration reached a new trade agreement with China, for instance, Mr. Perdue said, “I am not advising any farmer to expect any market program at this point, as the market should adjust for the current trade expectations.”

The very next day, Mr. Trump tweeted that if farmers needed more aid while waiting for the terms of new trade deals to kick in, “that aid will be provided by the federal government.”

Although the Agriculture Department is not obligated to use its new spending authority, industry analysts fully expect it will, especially with Election Day a little over seven months away.

Brent Gloy, a corn, wheat and soybean farmer and agricultural economist from Nebraska, said, “Those checks are going to go out.”