Update on U.S. Domestic Support and Coronavirus Spending to Farmers

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United States Agriculture Sector to Receive Highest Level of Government Support Since 2005

According to the University of Missouri’s Food and Agricultural Policy Research Institute, in 2019 and 2020 the United States’ agriculture sector will have benefitted from the largest government contributions to farm income since 2005.

In 2019, the Trump administration’s special trade assistance and coronavirus payments to farmers pushed the U.S.’s agricultural domestic support to nearly $32.7 billion (all values given are in USD), up from approximately $13.5 billion in 2018. Experts estimate that in 2020, U.S. agricultural subsidies could soar above $40 billion, depending on how much additional coronavirus aid the administration provides to farmers; this would roughly translate to government support accounting for about 40 per cent of total farm income.

$30 billion is already being disbursed to eligible farmers through Phases 1 and 2 of the Coronavirus Food Assistance Program, and $7 to $8 billion in forgivable loans has been made available through the Paycheck Protection Program. At the time of writing, the U.S. Democrats and Republicans were negotiating the possibility of an additional $14 to $20 billion in support being delivered before the end of the year.

This elevated level of support is being criticized for threatening to distort global markets and exceeding the U.S.’s support commitment at the World Trade Organization (WTO), while also being seen as the Trump administration’s attempt to placate American farmers, who widely supported the President during his 2016 campaign and who were seen as key to helping the Republican incumbent secure votes in swing states, such as Wisconsin, Ohio, Iowa, and Minnesota during this year’s presidential race.

Nonetheless, domestic critics have pointed out the payouts have not always gone to the farmers who need them most. Many small farmers have missed out on the bulk of the bailout while large and even foreign-owned farms have received the lion’s share of the funds.

Internationally, the United States is being called out for exceeding its annual WTO bound limit on trade-distorting farm subsidies of US$19.1 billion. Binding limits on agricultural support were established to create a more level playing field for farmers in poorer countries who, without equivalent support from their own governments, are unable to compete with farmers in richer countries.

When U.S. farmers receive billions of dollars in subsidies, they can continue to produce crops and livestock at loss-making prices that would normally see production shrink and producers leave the industry. When this subsidized production is dumped on the global market, it pushes down prices and forces losses on all other farmers competing in that market, regardless of whether they are from a developing nation like Kenya, or a developed one such as Canada.

If the U.S.’s payments are ultimately deemed to be trade-distorting, it could find itself facing challenges at the WTO, much like it did in 2005 when Brazil won a WTO case against U.S. cotton programs. In order to avoid facing retaliatory tariffs, the U.S. had to make direct payments to Brazil and overhaul its farm bill programs.

That being said, the ability to enforce disciplines on domestic support through the WTO has been stymied through the U.S. blocking of appointments to the Dispute Settlement Body. It will be interesting to see how the incoming Biden administration approaches the WTO in particular, and the multilateral trading system in general.

U.S. Federal and State Coronavirus-related Support Programs Rolling Out for Broiler Producers

The U.S. has seen the launch of several federal and state-level direct support payment programs aimed at aiding its broiler sector weather the global pandemic. While the sector was not eligible for the United States Department of Agriculture’s first Coronavirus Food Assistance Program, it was included in the program’s second phase, known as Coronavirus Food Assistance Program 2, or CFAP 2, which was launched on September 21st and will run through until December 11, 2020.

Through this federal program, payments will be equal to 75% of an eligible producer’s 2019 broiler production multiplied by $1.01 per bird. The total CFAP 2 payment that a person or legal entity may receive is $250,000; a legal entity comprised of three individuals may receive up to $750,000.

Not all broiler sector actors are eligible for this federal aid. Despite being affected by market and supply chain disruptions that caused greater layout times and reduced placements, contract poultry growers do not qualify for CFAP 2 support. In recognition of the hardships faced by these growers, some states have stepped in to provide coronavirus-related support programs targeted specifically to them. Throughout October, Delaware, Maryland, Alabama, and Mississippi, each announced the roll out of their own direct payment programs for contract chicken growers.

The Delaware Contract Poultry Grower Grant Assistant Program and the Maryland Farmer COVID-19 Relief Program will directly compensate contract poultry growers $1,000 per poultry house, up to a maximum payment of $5,000 per farm. Additionally, any grower who had to depopulate and compost their birds in-house due to COVID-19-related market disruptions will receive another $1,500 per poultry house depopulated; there is no cap on the number of poultry houses this will cover per farm. Both programs are funded at $10 million, which is derived from the federal Coronavirus Aid, Relief, and Economic Security Act (CARES).

With funding also received through the CARES Act, Alabama and Mississippi established their own Poultry Farmer Stabilization Grant Programs. Alabama’s program had an overall disbursement of $4 million, while Mississippi’s, delivered on a first come first served basis, was $3 million. Both provided direct compensation to broiler growers who experienced downtimes, flock density reductions of at least 10 per cent, or the loss of at least one full flock of production between March and October this year. Both programs aimed to partially offset losses that were not covered by other means, such as insurance or integrator offsets.

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