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PAT W E S T H O F F ( W E S T H O F F P @ M I S S O U R I . E D U )
N AT I O N A L P R E S S F O U N D AT I O N , S T. LO U I S
SEPTEMBER 18, 2019
Agenda
• A brief history of farm programs and some context
• The farm bill
• What’s in the 2018 legislation?
• Implementation, producer choices and future issues
• Trade disputes
• Effects on trade and U.S. agriculture
• Administration’s trade mitigation packages
Policy response: 1933 Agricultural Adjustment Act and other New Deal
legislation
◦ Set policy goal of what became known as parity pricing: prices of 1909-14, adjusted for
inflation
◦ Means included voluntary acreage reduction and government purchases
◦ Targeted 7 “basic commodities”: wheat, corn, cotton, tobacco, rice, hogs and milk
◦ Vestiges of this legislation still exist today, such as 9-month commodity loan program
100000000
Source:
80000000 USDA
National
Million acres
Agricultural
60000000 Statistics
Service
40000000
20000000
0
66 72 78 84 90 96 02 08 14 20 26 32 38 44 50 56 62 68 74 80 86 92 98 04 10 16
18 18 18 18 18 18 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20
Soybeans 39
0 10 20 30 40 50 60 70 80 90
FOOD AND AGRICULTURAL POLICY RESEARCH INSTITUTE, UNIVERSITY OF MISSOURI 9
U.S. net farm income and
government payments
140
120
100
Billion dollars
80
60
40
20
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Column1 Government payments
Sources: History through 2018 from USDA ERS, Feb. 2019; projections by FAPRI-MU, April 2019.
FOOD AND AGRICULTURAL POLICY RESEARCH INSTITUTE, UNIVERSITY OF MISSOURI 10
U.S. net farm income and
government payments: with
new USDA estimates
140
The new USDA projections reflect much
120 lower estimates of 2018 production costs,
100 plus higher 2019 payments due to MFP
Billion dollars
80
60
40
20
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Column1 Government payments
NFI: New USDA Paym'ts: New USDA
Sources: History through 2018 from USDA ERS, Feb. and Aug. 2019; projections by FAPRI-MU, Apr. 2019.
FOOD AND AGRICULTURAL POLICY RESEARCH INSTITUTE, UNIVERSITY OF MISSOURI 11
It’s not the 1980s, but…
During the 1980s farm financial crisis, the farm U.S. farm debt/asset ratio
debt/asset ratio peaked at 22% 25%
It declined to half that level in 2012, but has 20%
been increasing since then
15%
Besides lower levels of debts relative to assets,
interest rates are far lower now than in the 10%
1980s
5%
But it is concerning that the debt/asset ratio
continues to increase 0%
9 8 0 98 3 986 98 9 99 2 995 998 001 00 4 007 010 013 01 6 019 022
1 1 1 1 1 1 1 2 2 2 2 2 2 2 2
Debt/asset ratio
Sources: USDA and FAPRI-MU, April 2019
200 99 18
0
Nutrition 664
Discretionary spending
Commodity programs 61 authorized by the farm bill (not
shown here) requires annual
appropriations.
All other 4
33.5
100 96
Dollars
30 26.3 28.2 80
60
20
40
10
20
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
12000 http://www.rma.usda
.gov/data/sob.html
10000 ) data as of 9/9/19.
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
11
17
23
13
15
19
21
20
20
20
20
20
20
20
◦ We expect a big increase in PLC enrollment
FAPRI MYA price
Reference
Source: FAPRI-MU stochastic projections from April 2019. The projected participation rates
assume that expected payment rates have a strong effect on participation decisions.
FOOD AND AGRICULTURAL POLICY RESEARCH INSTITUTE, UNIVERSITY OF MISSOURI 26
Other commodity programs
Dairy: insurance-like program that makes payments when the margin between
milk and feed prices is small
Sugar: Price supports, import restrictions (U.S. price is above world market)
Note that except for dairy, commodity programs are for major field crops—no
basic commodity program for cattle, hogs, chickens, nor for fruits and vegetables
Those “other commodities” do qualify for some other farm bill programs
◦ Crop insurance covers many (not all) fruits and vegetables
◦ Disaster programs are available for livestock producers
◦ Marketing support and research programs available for many commodities
Source: FAPRI-MU estimates, August 2019. Figures for 2013-2017 are based on
USDA data; 2018 is a FAPRI-MU estimate and is not final.
*Totals are less than the sum of the parts, because the program amounts are before payment
reductions because of “sequestration” (around 7% on affected programs). Source: Congressional
Budget Office, January 2019. Projections for FY 2022 incorporate provisions of the 2018 farm bill.
1000
0 Mkt. loan
ACRE & ARC
CCP & PLC
Direct payment
5000 MFP
0 Crop ins. net ind.
Mkt. loan
ACRE & ARC
CCP & PLC
Direct payment
5000
MFP
0 Crop ins. net ind.
Mkt. loan
ACRE & ARC
CCP & PLC
Direct payment
This material is based upon work supported by the U.S. FAPRI-MU team:
Department of Agriculture, Office of the Chief Economist,
under Agreement #58-0111-18-024, and the USDA National
• Julian Binfield
Institute of Food and Agriculture, Hatch project number MO- • Sera Chiuchiarelli
HASS0024. Any opinion, findings, conclusions, or • Scott Gerlt
recommendations expressed in this publication are those of • Hoa Hoang
the authors and do not necessarily reflect the view of the U.S.
Department of Agriculture nor the University of Missouri. • Lauren Jackson
• Seth Meyer
• Wyatt Thompson 39
Some extra slides…
Things to note
◦ Reference price and loan rate are set by law
◦ National season average price is based on sales between Sep. 1 and Aug. 31 for corn and soybeans
◦ Base acreage and PLC yield were fixed for 2014-2018 crops (2018 bill allows partial yield update for some
producers, but base acreage remains fixed)
11
17
23
13
15
19
21
20
20
20
20
20
20
20
◦ We expect some increase in PLC enrollment
FAPRI MYA price
Reference
11
17
23
13
15
19
21
20
20
20
20
20
20
20
◦ We expect a big increase in PLC enrollment
FAPRI MYA price
Reference
Sources: FAPRI-MU stochastic projections from March 2015 and April 2019. The 2015 projections were discussed in a 2015 Choices article by Westhoff &
Glauber, available at http://www.choicesmagazine.org/choices-magazine/submitted-articles/farm-program-elections-budget-costs-and-the-wto
Sources: FAPRI-MU stochastic projections from March 2015 and April 2019. The 2015 projections were discussed in a 2015 Choices article by Westhoff &
Glauber, available at http://www.choicesmagazine.org/choices-magazine/submitted-articles/farm-program-elections-budget-costs-and-the-wto
Sources: FAPRI-MU stochastic projections from March 2015 and April 2019. The 2015 projections were discussed in a 2015 Choices article by Westhoff &
Glauber, available at http://www.choicesmagazine.org/choices-magazine/submitted-articles/farm-program-elections-budget-costs-and-the-wto
Billion dollars
15
• $12.6 billion of U.S. soybeans (58% of total)
10
• $3.2 billion of U.S. cotton, sorghum, corn, wheat,
rice, and other program crops (15%) 5
0
• $5.8 billon of other U.S. agricultural products 2010 2011 2012 2013 2014 2015 2016 2017 2018
Soybeans Other program crops
China’s ag. imports from the U.S. fell to $9.2 billion All other
in calendar year 2018 Source: USDA FAS GATS, accessed March 17, 2019
Thus, much of the effect will be to rearrange global soybean trade patterns
FOOD AND AGRICULTURAL POLICY RESEARCH INSTITUTE, UNIVERSITY OF MISSOURI 48
U.S. soybean trade before and after China
imposed tarifs on U.S. imports (mil. tons)
2016/17 Sep.-Aug. 2017/18 Sep.-Aug. 2017/18 Sep.-Jun. 2018/19 Sep.-Jun.
Exports to China 36.1 28.2 27.9 8.7
All other exports 22.8 29.9 23.4 30.3
Total exports 59.0 58.1 51.3 39.0
Sources: USDA FAS GATS; USDA NASS (September-June prices for 2017/18 and 2018/19 are simple averages
of monthly prices).