Farmers Say Aid Won’t Cover Tariff Damage (#GotBitcoin?)
USDA has begun making payments to farmers affected by trade conflicts. Farmers Say Aid Won’t Cover Tariff Damage
The Trump administration has started compensating U.S. farmers for damage tariffs are doing to their business.
Many farmers say the payments won’t make up for lost sales to China and other foreign markets they were counting on to buy the huge amounts of crops and meat being produced across the Farm Belt.
Bumper corn and soybean harvests and record pork production have pushed down prices for agricultural commodities. U.S. farm income is expected to drop 13% this year to $66 billion, according to the Department of Agriculture, extending a yearslong slump in the agricultural economy.
The USDA in August said it would pay farmers nearly $5 billion to offset losses from global trade disputes. Major U.S. trade partners including China, Canada and Mexico have applied tariffs to billions of dollars’ worth of U.S. agricultural exports in retaliation for tariffs imposed by Washington. The U.S. and China vowed last week to put more tariffs on each other’s goods.
The USDA said it has paid $35 million to farmers so far, especially in Iowa, Kansas, Illinois, Indiana and Wisconsin. Nearly 49,000 farmers have applied for the aid.
Mike Paustian, an Iowa pork producer who sells some 30,000 pigs annually, expects to receive about $40,000. Depending on the size of his crops, Mr. Paustian said he could receive another $20,000 for his 1,400 acres of corn and soybeans. In recent years, a farm of that size could make some $4 million in annual sales on the livestock alone.
Mr. Paustian said he appreciates what he sees as a goodwill gesture from the Trump administration. But he said he worries the trade fights will close doors to American pork and other farm goods while the world’s appetite for meat is growing.
“This payment isn’t going to save anybody’s life,” Mr. Paustian said. “It’ll soften the blow a little bit.”
Prices for lean hogs have fallen 19% since the end of May.
Mike Haag, an Illinois hog farmer who raises roughly 17,000 pigs each year, estimates he is eligible for roughly $32,000 in aid, enough to pay for a few weeks of animal feed, he says. An additional $20,000 he expects to get for his corn and soybeans will cover a tractor payment.
“I think most farmers are trying to support the president and what he’s doing but it is painful,” said Mr. Haag. “There’s a lot of extra pork out there.”
Trade-related losses to the U.S. pork industry are expected to total more than $2 billion this year, said Iowa State University economist Dermot Hayes.
The Trump administration is making payments to U.S. farmers to help soften the blow of damaging tariffs.
The USDA has pledged direct payments of $290 million to pork producers to offset those losses. The agency has also promised to purchase $559 million worth of pork under a related program that farmers and economists say could boost prices in the pork market. USDA officials have said a second wave of payments to farmers could be announced in December if trade disruptions persist.
During a Senate hearing on trade earlier this month, U.S. lawmakers criticized the aid package and pushed the Trump administration to make progress on trade agreements.
“It’s nothing more than a Band-Aid,” said Sen. John Thune (R., S.D.). “We need to open up markets.”
Gregg Doud, chief agricultural negotiator for the Office of the United States Trade Representative, said during the hearing the administration is working hard to renegotiate the North American Free Trade Agreement, seeking to improve bilateral trade with Japan and exploring potential partnerships in Southeast Asia and Africa.
The White House referred a request for comment to USDA, which has said the aid isn’t intended to make farmers whole, but rather to provide short-term relief while the Trump administration works to secure long-term trade deals that benefit the entire economy, including agriculture.
Adding to concerns is the likelihood that Congress will miss a Sunday deadline to pass a new five-year farm bill, which funds agriculture and nutrition programs. Without new legislation, major programs governing food stamps and crop insurance remain intact, but funding will lapse for dozens of smaller programs, including those that promote U.S. farm goods overseas.
Farmers applying for federal relief payments must certify the size of the crops they raised this season, their hog herds this summer, or annual milk production for a recent year. Local USDA offices will audit some of those claims, USDA Under Secretary Bill Northey said in an interview.
“We tried to make this easy and straightforward,” said Mr. Northey, adding that many farmers won’t be able to apply for the aid until the fall harvest is finished.
Trouble is particularly acute in the dairy industry. U.S. dairy farmers will see their incomes slide $1.5 billion this year due to tariffs from China and Mexico, according to a forecast by agribusiness-consulting firm Informa Economics.
Milk prices are lower than production costs for many farmers, said Jim Briggs, who milks 60 Jersey cows in Wisconsin. Mr. Briggs said the $700 check he is expecting from the USDA will pay one month’s electricity bill for his dairy barn. He is struggling to keep up with bills for feed and veterinary services.
Tom Giessel, a Kansas wheat farmer, said he fears the downturn will push older farmers to retire, continuing a trend toward consolidation in U.S. agriculture that has left fewer, bigger farms.
Mr. Giessel, 65, who farms 3,000 acres of wheat, corn and sorghum, said he should receive about $5,000 for his wheat—10% of the cost to fertilize the next crop he is planting this fall. He will get just $10 for his 41 acres of corn—less than a tank of gas.
“I could put that in my pickup and go a little ways, but it won’t get me very far,” he said.
Struggling U.S. Farmers Worry About a Resurgent Russia
Russian wheat exports are booming despite a crushing price slump, as the country’s farmers finally emerge from decades of neglect.
OTRADNAYA, Russia—Vladimir Mishurov transformed the remnants of the “Lenin’s Path” collective farm in this village into a profitable business. He also helped make Russia the world’s largest wheat exporter for the first time since the last years of the czars.
Over the past decade or so, Mr. Mishurov replaced his aging Russian equipment with a dozen high-tech machines from John Deere and other makers, and started using powerful new fertilizers and seeds. He bought and rented more acres from neighbors and family, eventually reaching about 3,600, taking advantage of Russia’s overall low prices for land.
And as many farmers do in the U.S., he often worked days on end with little sleep, especially during the harvest.
The major difference between Mr. Mishurov and a farmer on America’s Great Plains: The Russian’s costs are lower, and mostly in rubles, making his overseas sales—priced in dollars—immensely more valuable.
Amid a multiyear, brutal slump in grain prices, Russian agriculture is thriving. The country exported more than 40 million tons of wheat in the year ending June, around 50% more than the previous year, and the highest level for any country in the past quarter-century. Russia overtook the U.S. as the world’s biggest exporter of wheat in 2016, and again beat the U.S. in 2018.
The growing Russian competition is one more pressure point threatening American farming, which is facing the biggest wave of farm closures in the U.S. since the 1980s. A global oversupply of grain has pushed prices down to around half the level in 2012, when prices peaked, making it difficult to turn a profit in dollars.
New Farm Power
Russia has overtaken the U.S. as the world’s largest exporter of wheat, as the overall global grain market has expanded.
U.S. trade disputes with China and other countries could make Russian wheat even more attractive, if big buyers apply retaliatory tariffs to U.S. grains. China has added a 25% tariff on U.S. wheat, but Chinese restrictions on imports from Russia have prevented Moscow from taking advantage yet, according to Swithun Still, director at Switzerland-based Solaris Commodities SA, which trades Russian grain.
For now, “it’s not the trade war, it’s economics” that is helping Russian wheat compete, even in places close to the U.S. such as Mexico, Mr. Still said. Russian “quality got better, and it’s cheaper.”
Russian farmers come out ahead when export earnings are converted into rubles. Since the Russian currency has depreciated, a dollar now converts to twice as many rubles as it did in 2014. Russia has a similar advantage against the euro and other currencies. Russian farmers can cover their costs at home to keep planting, and also undercut Western competitors on price.
Russia’s surge of agriculture exports, including grains, fish and meat, is part of an effort to diversify the economy away from crude oil. Oil and natural gas were once the source of half of federal budget revenues. With oil prices still down 25% from their high in 2014—recovering from a swoon of more than 60%—exports now account for around 40% of budget revenues.
“Given the fall in prices for oil, grain has come to the fore. Grain is our oil,” then-Agriculture Minister Aleksandr Tkachev said in 2016.
Less-expensive Russian wheat is pushing U.S. and European grain out of import-dependent countries in the Mideast and North Africa, where the Kremlin has made a military and diplomatic push for influence in recent years.
Agriculture exports, at $20.7 billion in 2017, have overtaken the arms industry as Russia’s No. 2 earner. Wheat makes up about a quarter of the total.
Russia harvested an area of wheat almost twice as large as the U.S. in the year ended in June, according to the U.S. Department of Agriculture. American farmers, seeing little opportunity to profit, planted the smallest area of wheat since records began a century ago. U.S. wheat production shrank 25% in the year.
Mr. Mishurov’s farm is on the fertile steppe of southern Russia. The area is the country’s biggest grain producer—a bread basket known for its mineral-rich black earth and mild climate.
Now 46 years old, he spent his late teens and early 20s driving a bone-rattling tractor that needed its motor refurbished every year and left his hands callused. A lack of cash meant workers were paid in sacks of flour, wheat or sugar, and drunkenness was pervasive.
At the start of the 20th century, Russia had been the world’s largest exporter of wheat. The Soviets killed and imprisoned millions, including many of the most-successful farmers, as part of an effort to install a system of collective farming that proved inefficient. By the 1970s, the Soviet Union had to import grain.
Collective farms stumbled on after the Soviet Union collapsed in 1991, often still managed by the same bosses without business smarts or cash to invest.
“No one was in charge,” said Mr. Mishurov. “They couldn’t adapt to the market economy. They were accustomed to unthinkingly following instructions.”
Farmhands worked “to pass the time of day until they could go home,” said Andrei Burdin, a farmer from a nearby village who works land that was once part of the “Dawn of Communism” collective farm. “Farming was at a dead end.”
Russia opened the land market at the end of the 1990s, but new investors and their managers tended to be far from the land and averse to risks, farmers said.
Mr. Mishurov, who worked as chief agronomist at a large farming conglomerate, recalled telling an executive in the early 2000s that using pesticide could increase the barley crop by around a quarter.
“ ‘No, Vova, it’s enough already,’ ” he said the executive replied, using a nickname. “Why should I persuade someone to earn more money?” Mr. Mishurov said.
He struck out on his own in the mid-2000s. At first, he pooled land with relatives and used whatever equipment he could lay his hands on. Today, he grows wheat, barley, beets, corn, sunflowers, peas and other crops.
Gains in Output
Russian wheat farmers have modernized techniques and added higher-quality machinery to improve yields, coming close to those on U.S. farms. With vastly more acres under cultivation, overall Russian production beats U.S. output.
Mr. Burdin, 43, started farming around 250 acres in 2005 with a dilapidated tractor and planter. He invested early profits into more-efficient vehicles and better fertilizer, and expanded territory by renting from neighbors.
“When we made the first money, I didn’t buy a Mercedes or an apartment,” he said. “I put it into the next season.”
At first, he bought Russian equipment, but later upgraded to John Deere tractors and combines, which the Russians call zelyonaya tekhnika, or “green machines.” Mr. Burdin said he tested a John Deere combine against a Russian one and found it produced about one-third more grain from the same area.
He also added a planter from Sweden’s Vaderstad AB that shoots seeds into the ground at the optimal depth and intervals, improving yields. He now farms about 3,700 acres.
In April, while loading the planter with seed, Mr. Burdin joked with farmhands about equipment in the old days. He recalled working with a pesticide sprayer that would soak him with chemicals. He said he could only work for about four hours at a time before giving up, out of fear for his health. Now, his sprayer can measure how much pesticide to spray and where, keeping costs down.
The price of land in the region where Messrs. Mishurov and Burdin live is significantly lower than for many foreign rivals. On average, farmland in Romania, a European Union member on the Black Sea, is nearly three times the price, while farmland in Iowa and Kansas is more than five times the price, according to a 2017 survey by Moscow-based SovEcon, which provides consulting services, analysis and forecasts on Russian agriculture.
Mr. Burdin said Russian seeds and fertilizers still cost less than Western brands, even though they have improved significantly in recent years. He buys wheat seeds from a state-run agricultural institute, and can plant the seeds produced from those plants the next season. Many American farmers use expensive, high-yield, patented seeds from companies such as Bayer AG or DowDuPont Inc., which don’t allow the produced seeds to be planted, requiring farmers to buy fresh seeds annually.
Transport costs are also low for the region. It is close to Black Sea ports, and gasoline costs are much lower than in Western Europe. Mr. Burdin and Mr. Mishurov run their own fleets of trucks that move grain to the Novorossiysk port some 200 miles away by road.
Private and state-owned companies have modernized grain terminals in recent years and increased their capacities. Farmers can use an app on a smartphone to book a slot for their trucks to deliver grain, rather than the old system of having trucks wait in line for days.
Bumper harvests are stretching infrastructure. Windows for unloading grain are snapped up quickly, and farmers are often assigned slots several days after a requested time, Mr. Burdin said.
Exports “could be even higher if they could figure out how to load more,” he said.
Russia has made it a priority. President Vladimir Putin ordered officials to tackle infrastructure bottlenecks that are holding back exports. In inland areas, large distances and a lack of train cars and storage silos hamper grain from reaching external markets.
One of Russia’s largest terminals in Novorossiysk is completing a three-year modernization this year that will nearly double its capacity. Other companies have announced plans to build or expand terminals on the Black Sea, the Baltic Sea in the north and in the Far East. Officials said expansions at ports could increase export capacity of grains by 50% to 7.5 million tons a month by 2020.
Government officials tout the importance of state subsidies, including inexpensive loans to help farmers replace old equipment. Analysts and farmers say the state’s efforts to support agriculture have been hit and miss. Subsidies often make their way to well-connected companies, investment in infrastructure has been slow and bureaucrats and other officials often expect bribes.
“Farmers received the freedom to do business in the way they thought most efficient,” said Andrei Sizov Jr., managing director of SovEcon. “The role of the state was quite muted in the last 10 years, and that was good for the industry.”
Giant agroholdings, conglomerates often created by wealthy tycoons or people close to top federal and regional government officials, have built up spreads that dwarf Western farms. Individual farms larger than 250,000 acres, or nearly 400 square miles, account for around 13% of all land farmed in Russia, according to Mr. Sizov.
Mr. Mishurov can now afford to collect and restore a half-dozen vintage Soviet cars and vacation in the Maldives and Thailand, although he said he prefers staying home.
The poor villages here depend on the generosity of wealthier farmers. Mr. Mishurov funded renovations to his village’s statue of Lenin and a monument to locals who died in World War II, while Mr. Burdin paid to fix up his village’s kindergarten.
Mr. Mishurov employs 10 farmhands, three guards and a cook who prepares meals for the workers. “It’s a lot for our acreage, but we try to preserve jobs in the village,” he said. One recent morning, a man dropped by Mr. Mishurov’s farmyard office to cadge a bucket of corn for his hens. It was a former collective farm boss.