Obviously this is not going to make farmers whole.
That’s from U.S. Agriculture Secretary Sonny Perdue, who spoke to Reuters on Saturday about the government bailout plan for U.S. farmers. Perdue is attending the G20 meeting of agriculture ministers in Buenos Aires, Argentina.
The plan to provide emergency assistance to the American agricultural community was announced last week to jeers from the peanut gallery, which in this case includes lawmakers on both sides of the aisle and, amusingly, U.S. farmers themselves.
“America’s farmers don’t want to be paid to lose — they want to win by feeding the world”, Senator Ben Sasse said, in a scathing rebuke of the plan, adding that “this administration’s tariffs and bailout aren’t going to make America great again, they’re just going to make it 1929 again.”
That ringing “endorsement” was echoed by pretty much everyone and to be sure, the criticism is merited. Trump is effectively bailing out taxpayers with their own money after instituting unnecessary policies in a feckless pursuit of lost “greatness”, the definition of which was never defined by candidate Trump and seems to be a moving target under President Trump, opening the door to a never-ending quest in search of an amorphous concept.
Opposition to the tariffs had been mounting for weeks in the agricultural community. Soybean farmers were especially concerned for obvious reasons. “Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports, so the math is simple”, ASA President and Iowa farmer John Heisdorffer said, adding that when “you tax soybean exports at 25-percent, and you have serious damage to U.S. farmers.”
Soybean futures rose on Thursday after Trump and European Commission President Jean-Claude Juncker hinted that the U.S. and the European Union had reached some manner of tentative deal, part of which involves the E.U. purchasing more soybeans from the U.S. Still, in the grand scheme of things the rally was small comfort.
A recent analysis by Goldman Sachs showed that when it comes to Trump’s trade-related tweets, only one asset tends to suffer, and that’s soybeans. “Exhibit 3 shows the results of regressing daily soybean returns on our index of tweets while controlling for the Economic Policy Uncertainty Index and the US Dollar”, the bank wrote earlier this month, describing the following table.
But it’s not just the soybean farmers. It’s apple growers, dairy farmers, juice producers and pork farmers too. “We’ve been asked to be good patriots and we have been, but I don’t want to be the patriot who dies at the end of the war”, Ken Maschhoff, chairman of Maschhoff Family Foods and co-owner of the nation’s largest family-owned pork producer, told CNBC recently, adding that if he “goes out of business, it’s tough to look at my kids and the 550 farm families that look us into the eye and our 1,400 employees.”
Yes Ken, it sure is. Which is presumably why nonprofit group Farmers for Free Trade is now running an all-out media blitz aimed at raising awareness about just how bad these policies really are for U.S. agriculture. The group is supported by the American Farm Bureau Federation and has the backing of other commodity groups including the National Pork Producers Council.
The four-month campaign is going to cost a cool $2.5 million, but I guess farmers feel like “what’s another $2.5 million when we’re already set to lose $11 billion from the trade war, right?”
The campaign centers around a video that’s either going to run or is already running on CNBC, Fox, CNBC and, perhaps more to the point, on local television and radio in the farm belt. The video takes special aim at Mr. “Death by China” Peter Navarro.
Navarro has taken on an increasingly influential role in U.S. trade policy, which isn’t surprising because after all, he’s the “brains” (and I use that term very, very loosely) behind the protectionist push.
In the academic community, Navarro is something of an outlier and his political career is a history of failure. Peter famously clashed with Steve Mnuchin back in May when the pair were in Beijing for trade negotiations, an episode that landed Navarro in time out, but he managed to wrest control of the trade narrative back from Mnuchin just a week later and before you knew it, the trade war was back and Peter was on CNBC calling Trump a “courageous visionary” for his efforts.
In the same interview (with CNBC’s Joe Kernen, who at this point should probably just drop his implicit support of this administration before everyone loses their sense of humor about it), Navarro said this about the possible near-term pain for some American industries:
We got two economies that add up to around $30 trillion in annual GDP. The amount of trade we’re affecting with the tariffs is a rounding error compared to that.
My point is that it’s much less disruptive than these headlines would suggest, and it’s much more constructive as we see the adjustments made in terms of where investment is going to go and where we’re going to build.
That may well have been Peter’s “point”, but it came across as Navarro calling farmers a “rounding error”, which the above-mentioned Farmers for Free Trade did not appreciate. In fact, they literally named their ad campaign for Navarro’s comment.
That’s not great from a PR perspective and as far as the bailout is concerned, Brian Kuehl, executive director of Farmers for Free Trade, told Politico this:
I think ultimately it’s a political play. [Trump] understands he is hurting middle America, and he is throwing money at the problem.
Right. But not enough money. Because as the quote from Sonny Perdue excerpted here at the outset makes clear, the administration is fully aware that the bailout is “obviously not going to make farmers whole.”
So what is it going to do? Well, it’s going to give them some cash relief and it comes with a completely meaningless promise to “develop new markets” for their products. I suppose the deal with Juncker is an example of Trump attempting to find new markets for U.S. crops, but it looks like that’s already being walked back.
"Boy jeans. The President clearly said the E.U. is going to be buying more 'boy jeans'". pic.twitter.com/yNmibifAa1
— Heisenberg Report (@heisenbergrpt) July 27, 2018
Ultimately, I’m not sure that “Make Farmer Welfare Necessary Again” is going to be a slogan that plays particularly well in the midterms, so the administration is going to have to come up with something else between now and then.
As Brian Kuehl told Politico in the same article cited above, “agriculture is a giant, and it takes awhile to wake it up, but when it wakes up you better watch out.”