Economist Says Soybean Tariff Aid Will Be Paid on Per Bushel Basis

06:33PM Aug 14, 2018
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As the trade battle continues to plague shipments of some ag goods, new export numbers from the Department of Labor reveal prices for U.S. farm exports fell 5.3% in July; the most in more than six years. Soybean prices plummeted 14.1%, as China currently has a 25% tariff on U.S. soybeans.

In July, the Trump Administration tried to ease some of farmers’ financial fears by announcing a $12 billion emergency aid package. It’s money that will go to farmers caught in the escalating trade battle.

However, it’s details about the U.S. Department of Agriculture's plan that are still vacant, with some farmers searching for more clarity as harvest nears. University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI) is analyzing the little details already out, trying to assess what payments could be. Pat Westhoff, director of FAPRI-MU says while he has no idea what payments will actually be, he anticipates soybean payments to range from 25 cents per bushel to no more than $1 per bushel.

“I've seen quotations where the Secretary expects the total cost of this program for the payments to producers to be between $7 billion and $8 billion dollars,” Westhoff says. “If you think that soybeans will be significant share of that, you can do the math and figure out that it's unlikely the payment rates will be too high, because above a certain level it would be more than the amount allocated to all crops. We looked at a possible range of payments anywhere from a low side of 25 cents a bushel to high of $1 a bushel, figuring we'd probably be somewhere in that range. Where in that range we might be, we really have no idea.”

It’s a guessing game for economists and farmers as to how much money an individual producer will receive, however, Westhoff does think it will be factored on an individual’s personal production, not a county average yield.

“My understanding is that the current discussions suggest a certain payment rate per bushel, that everybody would get it - everybody that produced soybeans this year,” he said.

That could bring up a pain point for farmers currently sitting in drought-stricken areas. If the lack of rain hinders overall production for a farmer, then that also means the payment they receive for tariff aid could be small.

“The biggest concern we've heard that Missouri has been that we have a lot of producers in northwest Missouri who were hit hard by drought this year, who won’t have much of a crop to sell,” he says. “And because they won’t have much to sell, they won't qualify for many payments.”

It’s also details on timing of payments that are unknown today. Westhoff thinks that information is not being rolled out yet because the administration is still trying to finalize the aid package. He said it’s missing approvals that could be handcuffing the Trump Administration.

“I think it [the timing of payments] all depends on when the administration's able to finally come to a firm decision about what they want to do,” Westhoff says. “Last I heard, they still hadn't received all the approvals needed to receive in the administration to become final, so until that happens, we won't know for sure.”

Westhoff thinks there is a strong incentive by the administration to release the payments quickly, with talk of those payments occurring in two to three months.

“Making an announcement of what the payments rate will be, I think will make everybody a lot more at ease,” Westhoff says.

What if the trade dispute between the U.S. and China gets resolved in the next couple weeks? Will producers still receive aid payments? Westhoff says unless something happens quickly, he thinks the payments will be made.

“It seems unlikely to me that we're going to resolve all of these issues - at least with China - any time soon, especially in the case of soybeans,” he says. “The China tariff is far and away the largest part of the picture here. I would be very happy to be wrong about that and be very happy to receive a satisfactory conclusion very quickly, but that doesn't seem to be in the cards right now.”

As agriculture searches for more clarity on the tariff aid package, Westhoff reminds producers to be patient. He thinks farmers are likely to get a payment this fall, if they have a crop to sell. It’s just the amount and timing of the payments that are still in limbo.