Just as American farmers thought Donald Trump had rescued them from the economic consequences of his trade war with China, along came the government shutdown.
The National Farmers Union said the closure of agriculture department offices could not have come at a worse time for members awaiting emergency federal aid principally to compensate for a sharp drop in soybean prices after sales to China plunged as a result of trade sanctions on Beijing.
The shutdown has also created a new wave of uncertainty in planning for the planting season because crucial end of year agricultural data will now not be released on schedule.
“This is a bigger than normal challenge because agriculture has been in a five year profit decline,” said Roger Johnson, the president of the National Farmers Union representing about 200,000 family farmers and ranchers.
“Net farm income is half of what it was five years ago. Financial conditions are very difficult for a lot of farmers. There’s a lot of stress out there. It’s been exacerbated by what’s gone on in the trade arena as market prices have gone down. And now we have the shutdown.”
The most immediate impact is on farmers waiting for payments as part of a $12bn government package to help offset the impact of the trade dispute with China. US soybean sales into the world’s largest market have plummeted since Beijing increased the tariff on American imports by 25% in July as part of the trade dispute with Trump. That hit American farmers hard because many of them have increasingly relied on soybeans as relatively profitable after years of decline in the price of most other crops.
“Soybeans were holding their own until the summer,” said Aaron Heley Lehman, a fifth generation Iowa crop farmer. “When the trade situation went into the ditch, prices dropped 20%. So one thing that farmers were actually holding their own and making a little money on started disappearing. The entire situation is as serious as it’s been in many many years for famers. The collapse of the soybean trade and the government shutdown couldn’t have come at a worse time.”
The Farm Service Agency office, which pays out the assistance from the Market Facilitation Program, is now closed. Johnson said that many of those farmers who have already registered for payments have yet to receive them even though the first tranche of money went out in November. In addition, the deadline for farmers to sign up for the aid is 15 January. Those that have not already done so are uncertain whether they will be able to if the government shutdown continues.
“These payments in many cases are very much depended on in order for folks to get through the year and pay loans and so forth,” said Johnson.
Lehman, who is president of the Iowa Farmers Union, said the timing of the shutdown creates an additional burden because it comes just as farmers are planning this year’s crop.
“This is the time of year farmers work with their bankers or other lenders and they work with their suppliers. It’s very frustrating when farmers are under extreme financial stress. All decisions are being made under the situation where things are just on hold until USDA offices open again,” he said.
If the shutdown drags on it may also threaten implementation of parts of the 2018 farm bill designed to help smaller dairy farms which have been battered by a sharp downturn in the dairy industry.
The closure of agriculture department offices has put on hold the release of statistics and crop reports on which farmers and traders depend for planning and setting prices. Key among them is the world agricultural supply and demand estimates which was scheduled to be released this Friday. The report is a big driver of futures prices as traders look to it for crop forecasts not only in the US but other major producers such as the European Union, Russia and Brazil.
Johnson said that will only add to the uncertainty already driven by the trade disputes and probably drive crop prices down further if the closure continues.