An economist with the American Farm Bureau visiting Normal this week said the trade dispute with China has shown how “dangerous” overreliance on one customer can be.
The trade outlook for U.S. agriculture is “muddled” but not all doom and gloom, economist Veronica Nigh told WGLT before her prepared remarks to the Illinois Farm Bureau’s Farm Income and Innovations Conference in Uptown Normal. While there’s no end in sight to the dispute with China, the American Farm Bureau is hopeful that the proposed United States-Mexico-Canada Agreement—the successor to NAFTA—will be ratified by Congress in September or October, she said.
Unresolved trade disputes have put added pressure on Illinois farmers already looking at a less-than-ideal crop because of the wet spring. When asked if all the uncertainty around trade should prompt a larger re-examination of trade-driven U.S. ag policy, Nigh said exports remain vital because productivity far outpaces American consumer demand.
“What the China situation has illuminated is that reliance on one customer can be dangerous. It can be shaky, in terms of making sure you have a fairly reliable customer base,” Nigh said.
Nigh pointed to the USDA’s Agricultural Trade Promotion (ATP) program, a relatively small part of this year’s $16 billion aid package for U.S. agriculture announced by the Trump administration. ATP will help U.S. producers find new markets—beyond China—for their commodities, Nigh said, by funding advertising, public relations, visits to trade fairs, and market research.
“It’s not that they didn’t know those markets had potential in the past. But there are limits to the amount of dollars and efforts you can put toward promoting U.S. ag exports,” Nigh said. “This recent trade situation has reminded us that it’s better to make sure we’re fertilizing multiple markets, rather than relying on one.”
The aid package for those who’ve lost export sales includes $14.5 billion in direct payments to farmers—on top of $12 billion in aid that the Trump administration distributed last year.
NPR reported last week last year’s smaller aid package probably overpaid farmers for their trade-related losses, citing a new analysis from the University of Missouri’s Food and Agricultural Policy Research Institute. According to the new study, Chinese tariffs caused the price of soybeans grown in the U.S. to drop by $.78 per bushel. Last year's aid package, however, paid farmers more than twice that much — $1.65 per bushel of soybeans that each farmer produced.
Nigh said “we’d much rather get our income and sales from the market, rather than a government program. … Certainly we’ll be debating the merits of the (USDA aid program) for quite some time.”
“The level of payment also is fairly clear: We’re not making up for the lost sales that we would have seen,” Nigh said. The government should include both direct and indirect losses; if farmers are taking a big price hit because they’re no longer the supplier of choice, that cost should factor in too, she said.
“The USDA has done yeomen’s work in trying to estimate those payments and do it in a timely manner,” she said. “That’s always something that’s challenging, and we appreciate all the work they’ve done."
You can also listen to the full interview: