Inside the Tariff Relief Numbers for Pork

August 28, 2018 03:46 PM
 
While grain farmers questioned USDA’s relief pricing, the $8/head payment was determined by USDA economic models. About 6% of the overall expenditures in the market building programs will go to the pork industry.

Details of the $12 billion trade mitigation package were announced by USDA Monday, offering $8 per head of 50% of a producer’s inventory as of Aug. 1.  View the full details, including payment limits, here.

Dustin Backer, deputy director, economics & domestic production issues for the National Pork Producers Council says the amount is helpful, but long-term, the solution is ending trade disputes.

While some grain farmers questioned USDA’s relief pricing, Baker says the $8 figure for pig farmers was determined by several USDA economic models. Furthermore, about 6% of the overall expenditures in the market building programs under tariff relief will go to the pork industry.

“More than 40% of our pork exports are facing retaliatory tariffs today. The export markets are incredibly important to the bottom line of all producers in the U.S.,” Baker says. “In 2017, we exported over a quarter of production and that added about $53 to every head that was marketed in the U.S. So, the export markets are critically important to our industry and to the future of our industry.”

 “USDA announced their trade mitigation programs yesterday—it's really a three-pronged approach to help alleviate the pain that America's farmers are facing and in the face of retaliatory terrorists,” Baker says.

Specifically:

  1. Direct payment to producers based on actual production: $8 per hog based on 50% of the number of animals owned as of Aug. 1, 2018.
  2. USDA will purchase $559 million of pork products for federal nutrition assistance and child nutrition programs.
  3. USDA will spend $200 million for developing foreign markets for the agricultural trade promotion program.

To show eligibility, producers will have to show they have ownership interest in hog production and they had an adjusted gross income average over the past three years of less than $900,000. This means large contract pig owners (Smithfield, Tyson, etc) would likely not be eligible for the program. There is a payment cap of $125,000 per person or entity.

“By no means does this payment make our producers whole, but it does certainly provide some short-term relief in the face of the retaliatory tariffs,” Baker says. “Perhaps just as importantly, as part of the food purchase and Distribution Program, USDA is committed to purchasing $559 million worth of pork products to put into food assistance programs, which is about 45% of their total expenditures for that overall program. So that's definitely some positive news for us.”

That purchase should help keep cold storage numbers low moving into the seasonal uptick.

Pork cold storage
Source: USDA

Producers can work with their local Farm Service Agency beginning Sept. 4, to sign up for these programs. Grain payments and associated limits are separate from livestock payments. Visit www.farmers.gov/MSP for more details.

Looking ahead at the U.S.-Mexican trade agreement, Baker says it’s still too early in the process to know how that will affect the current tariff situation with that country.

“When we look at the Mexican market, they take an incredible amount of our hams and shoulders [cuts} that we produce,” Baker says. Mexico is our No. 1 market for U.S. pork by volume, and a 20% tariff is  significant pressure for producers.

“Our No. 1 priority at NPPC for America's pork producers, is to continue to push for a quick and swift resolution to the trade disputes in order to continue to be able to export our product across the world,” he adds.

 

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