Shutdown Ruining Trump’s Farmer Bailout
Farmers affected by the U.S.-China trade war tariffs thought relief was on the way after the Trump administration extended the deadline for financial aid.
But the government shutdown means these farmers are not receiving their payments. On top of that, farmers can’t even apply for loans for next season.
The U.S. Department of Agriculture (USDA)’s farmer bailout program involved two installments. The first round of payments, approximately $4.7 billion, were distributed in September 2018; the second round of $9.57 billion began in December.
The deadline to apply for this aid was initially Jan. 15, 2019, though this was extended due to the government shutdown. (The program is based on the impact to an agricultural industry’s export sales.) But applications can’t be received if the USDA is closed.
“In order for a [crop] producer to apply for the program, they have to go to their local USDA office, where those people are furloughed,” Andrew Novakovic, a professor of agricultural economics at Cornell University, told Yahoo Finance. “Until those people are back on the job, there’s no one to give the application to.”
The Washington Post reported that about $5.2 billion of the relief money has been sent out to farmers, including about 360,000 payments since the federal shutdown began on Dec 22. Farmers also can’t receive their Farm Service Agency (FSA) loans, which are approved based on crop production and not historical data. With government offices closed, no one can certify production.
“Everybody is impacted,” Andrew Jerome, a spokesman for the National Farmers Union, told Yahoo Finance.
‘Period of confusion and uncertainty’ hitting farmer bailout
Southern areas are being particularly affected by the shutdown because they are preparing to plant their crops and can’t get their FSA loans at this time.
“Right now, it’s this period of confusion and uncertainty, which isn’t a good thing,” Novakovic said.
Additionally, as a result of the shutdown, no USDA economic data is coming out, which is usually “a market driver” and used to project market trends.
“It’s in some ways even larger than market prices,” Novakovic said. “These USDA reports are considered the most authoritative reports in terms of market information. It’s important to farmers and to the cooperatives that sell products on behalf of farmers and the buyers of these products.” For example, he said, “if you’re a cheese company, you buy milk from farmers” and use the reports to plan business accordingly.
Not having these reports is “absolutely tied to market uncertainty,” Novakovic said. Although the USDA reports are not the only source of information, it “provides the benchmark. It’s the gold standard of market information and everybody else sort of trues up their estimate based on what comes out of USDA. There’s a market information ecosystem built around the reports. For agriculture, it’s very important.
‘Definitely a cost here’
Because of this market uncertainty, farmers can’t yet start financing for their 2019 crops.
“The delay causes uncertainty and has an effect on prices,” Jerome said. While it’s hard to put a timetable on how long it will take until farmers feel the full ramifications of the shutdown, “the longer it lasts, the more effects there are.”
Other effects on rural America include futures market contracts and delays in transportation systems.
“It’s definitely have impacts on commerce in the U.S. because of lack of reports and a delay in getting things done,” Novakovic said. “We’re not coming to a standstill, but there’s definitely a cost here.”