What’s New on the Policy Front? Trade, Tariffs and the Farm Relief Package

As we continue to keep a pulse on United States tariff and trade policies, it seems like new headlines sweep across the news cycle daily. In fact, I’m almost certain that more significant developments will arise between now and the day this article is published! The latest announcements indicated the U.S. has implemented its new tariff on Chinese products, and China responded almost immediately by imposing additional tariffs on U.S. goods. On a different note, the U.S. and South Korea recently signed an updated trade deal to which the American beef market is reacting positively.   

Renegotiating the North American Free Trade Agreement (NAFTA) 
President Trump also delivered on a campaign promise related to trade: NAFTA has been renegotiated. An agreement was reached on October 1, right before the deadline expired. If the new agreement — titled the United States–Mexico–Canada Agreement (USMCA) — is ratified as it currently stands, it will eliminate Canada’s “Class 7” dairy pricing system. This is welcome news to American dairy farmers, as it will allow them to sell more of their product to Canada. If the Republican Party retains the majority of Congress in the upcoming midterm election, the USMCA will likely pass without modification. The agreement will not go to a Congressional vote until after the election.  

In a recent statement to the U.S. Department of Agriculture (USDA), Secretary of Agriculture Sonny Perdue said that President Trump’s approach to trade is to “stand strong for America’s interests and strike better deals.” [1]  If the president continues to pursue this approach, then farmers most likely will see more developments in the trade arena moving forward. It’s important to note that as the administration implements new deals or tariffs, the commodity markets will respond in various ways — some negative and some positive. The continued development of international agriculture products is also impacting markets — in fact, for 2018, Russia clocks in as the world’s largest exporter of wheat. [2]  

Unveiling the USDA’s Market Facilitation Program
Many industry groups have issued statements indicating their position on trade, whether it’s their support of or opposition to the policies the administration has proposed and implemented. One thing is certain: When it comes to the best course of action for our country and its agricultural producers, opinions vary across the board. In the meantime, the USDA has initiated and implemented a trade mitigation package in an attempt to soften the blows suffered by many of our producers. 

The 2018 Market Facilitation Program will offer producers an advance payment on 50% of their proven 2018 production, with a potential second payment of up to another 50% of 2018 production. The possibility of a second payment will be determined by the USDA this December. Here are the established payment rates:

Note that these payment rates don’t vary based on variety or quality. There is an annual limit of $125,000 per eligible producer, which is applied separately from the other payment limitation for price loss coverage (PLC), agricultural risk coverage (ARC), etc. You can learn more about the Market Facilitation Program on the USDA’s website. 

With so many developments coming down the pike, you may be wondering how your ag business and products may be affected. If you have questions or want to discuss your unique situation, contact me at cbarnekoff@wipfli.com or 406.265.3201.