Due to the trade war between the U.S. and China, the White House used the Market Facilitation Program (MFP) to compensate farmers from the Commodity Credit Corporation (CCC). The compensation was justified based on farmers willing to be “true patriots” for the greater good of America’s decision to call out China on its trading practices.
According to the Congressional Research Service, U.S. producers received US$14.5 billion in 2019 in direct payments, compared to US$10 billion in 2018. Last week, the USDA announced the third instalment of the MFP program had been sent to producers, completing the 2019 program. In 2019 U.S. farm income was estimated to be US$92.4 billion of which US$22.5 billion of that came from government programs, including the MFP.
Canadian soybean and pork producers have not been compensated in any way, unlike their U.S. neighbours. The Government of Canada has been seeking “more data” to support the claim of harm.
According to several Washington agriculture insiders the likelihood of an MFP 3.0, or 2020 version of the program, is growing. There are several factors pushing this narrative in D.C. and in the heartland:
- The Phase One deal will be slow to be implemented even in the best-case scenario based on traditional buying patterns;
- The current coronavirus outbreak is creating concerns regarding the Chinese economy, oil demand, and most importantly the demand of agricultural commodities. Earlier this week, Bloomberg reported that China will seek flexibility in its purchase commitments; and,
- 2020 is an election year and President Trump has not been shy in bragging about how his government has bucked up for farmers to support their support of him.
Although USDA Ag Secretary Sonny Perdue has been publicly outspoken against a 2020 program, Jim Wiesemeyer of Pro Farmer believes that a 2020 version will be need by farmers and ranchers.
Wiesemeyer stated to RealAgriculture, “Trump cannot lose one farm state he won in 2016. Plus, capital drain means payout needed. Unless White House want a rerun of the mid-1980s.”
Many will use Perdue’s words as a base to support the notion an MFP 3.0 won’t happen but some will will remember that he said MFP 2.0 would not happen either.
Here in Canada farmers face the risk of declining exports to China due to the coronavirus but limited probability of a assistance program from the government. In the early days of the coronavirus outbreak, the Canadian dollar has fallen to a two month low which benefits exporters provided that demand is not crushed in parallel.
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