FORT COLLINS, Colo. (Reuters) - U.S. farmers will likely see a familiar face at the helm of the Department of Agriculture come January, but the lofty government assistance programs they have gotten used to could be a thing of the past under a Joe Biden-led administration.
The Democratic president-elect is expected to nominate Tom Vilsack as agriculture secretary, a move seen as safe but welcoming for most Midwestern farmers. Vilsack served as USDA secretary for eight years in the Obama administration, so his likely nomination may present fewer unknowns.
But U.S. agriculture has changed a lot in the last four years, particularly when it comes to government aid for farmers, which shattered records in 2020. Most of that was from coronavirus assistance programs, though Trump-era payments also sought to ease the strain of the U.S.-China trade war on farmers.
Direct government payments are projected to account for a whopping 39% of U.S. net farm income in 2020, the highest share since 2001. It is uncertain what Biden’s plans may be for these payments, but many industry insiders believe they will be substantially lower, especially given the one-off nature of this year’s sum.
However, farmers probably did not need those payments in 2020 as much as in the previous year or two, and higher commodity prices should promote some optimism for 2021 even in lieu of extra assistance.
POLICY SHIFT?
Biden has hinted at disapproval of the recent farmer aid packages. During the October debate between Biden and President Donald Trump, the latter said: “I just gave $28 billion to our farmers,” claiming the money came from China. Biden interrupted, “taxpayers’ money.”
One of Biden’s rumored finalists for the secretary position, former U.S. Senator Heidi Heitkamp of North Dakota, has been very critical of Trump’s trade policies, suggesting a Biden administration could change direction on trade with China.
That was somewhat reinforced on Wednesday, as Biden selected Katherine Tai, the House Ways and Means Committee’s chief trade lawyer, to serve as U.S. trade representative. Tai in August called for a different approach to China, saying the United States needed a better offense than tariffs.
But Biden told the New York Times last week he planned to keep the Phase 1 trade deal, at least at first, along with tariffs on Chinese goods. He said his policies would target China’s “abusive practices” such as stealing intellectual property.
While Biden may not be a proponent of handing out payments to farmers in the same manner as Trump, part of his plan is to create additional revenue sources for farmers. That is largely based on incentivizing farmers to increase environmentally friendly practices, such as carbon sequestration.
However, some of these ideas could face headwinds with Vilsack as agriculture secretary. Critics of the former Iowa governor argue that he is cozy with corporate agribusiness and top lobbying groups. Vilsack is known for his moderate politics and longstanding relationships with large-scale farmers.
HUGE PAYOUTS
Last week, USDA’s Economic Research Service projected 2020 net farm income at $119.6 billion, up 43% on the year and easily the highest since 2013. That was up from September’s forecast of $102.7 billion.
Direct government payments in 2020 are forecast at a record $46.5 billion, some 70% of that coming from ad-hoc and emergency program payments. That total does not include crop insurance indemnity payments or USDA loans.
Net farm income without the government payments totaled $73.1 billion in 2020. That would be a six-year high, up 19% on the year and 17% above the recent five-year average when making the same calculation throughout the dataset.
Most of the 2020 federal payments were based on the Coronavirus Food Assistance Programs, which are forecast to pay out $11 billion for CFAP1 and $13.3 billion for CFAP2. The awkward mid-September timing of CFAP2’s announcement prompted some groups to suggest it was the Trump administration’s shameless ploy to buy farmer votes.
CFAP2 was introduced against the backdrop of a historic fall in prices, which had been true for commodities like corn earlier in the year. But by Sept. 18, both corn and soybean futures had rallied 16% since Aug. 1, and soybeans were trading at a seven-year high for the time of year.
Those unprecedented rallies peaked last month, as futures rose another 15% from Sept. 18. As of October, USDA had projected that prices received by farmers for their 2021 corn and soybean harvests would be better than in 2020.
Farm income in 2020 was supported by an increase in crop cash receipts to over $200 billion, a six-year high, and that number could rise again next year as farmers look to boost grain and oilseed production.
The opinions expressed here are those of the author, a market analyst for Reuters.
Editing by Matthew Lewis
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December 10, 2020 at 05:03PM
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