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U.S. Farm Aid May Create Distortions It Was Supposed to Avoid

Michael Hirtzer
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U.S. Farm Aid May Create Distortions It Was Supposed to Avoid

(Bloomberg) -- The Trump administration’s latest round of farm aid may fail in its aim to avoid influencing U.S. planting decisions.

The $16 billion package -- offered to help producers struggling in the wake of the U.S.-China trade war -- will include direct payments to farmers. To get them, growers must plant crops such as soybeans, corn and wheat.

That seems simple enough, except that after heavy rains and flooding in the American heartland this spring farmers were expected to discontinue their planting plans. Speculation was mounting that growers would instead opt to make claims for so-called prevented plant insurance. As of Sunday, corn sowing was at the slowest pace on record for this time of year.

The USDA just “effectively extended” the spring planting season, according to Sam Hudson, an agriculture marketing consultant at Cornbelt Marketing in Brimfield, Illinois.

If the aid prompts farmers to go for plantings instead of the insurance payments, it could end up hurting crop markets in the long run since that would mean more production at a time when prices have been weighed down for years by ample supplies. The glut was made worse in the past season as China’s retaliatory tariffs on U.S. crops sapped demand from a vital customer.

Even if fields are too wet to allow for proper fieldwork, some farmers could choose to plant soybeans from an airplane to qualify for the government aid, Hudson said by telephone. He estimated that the aid could mean farmer payments of $50 to $100 per acre.

“We had a natural-born situation where you could blame Mother Nature,” and abandon additional plantings, he said. “Here we are subsidizing farmers to continue to produce what we already have too much of.”

To contact the reporter on this story: Michael Hirtzer in Chicago at mhirtzer@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi, Pratish Narayanan

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