Federal funding has helped lift the fortunes of many farmers in Washington state and across the nation who have been hit hard by President Donald Trump’s ongoing trade wars.
About 8,200 Washington state agricultural producers have received $114 million in aid so far this year under a special federal program, a 54 percent increase from the amount disbursed in all of last year, said Dwaine Schettler, a program specialist at the state’s U.S. Farm Service Agency in Spokane.
The money, much of which has gone to producers of three of the state’s biggest agricultural exports — wheat, cherries and dairy — has offset some of the financial pain that they have suffered as the Trump administration wages a trade war with China, India, Mexico and other importers of U.S. goods.
Washington’s bailout is part of a national plan called the Market Facilitation Program, or MFP. It has helped confound earlier predictions that the trade war, coupled with bad weather across much of the farm belt, would devastate the U.S. farm sector. Instead, according to the U.S. Agriculture Department, 2019 was farmers’ most profitable in five years.
Without government assistance, U.S. farm income would have fallen about $5 billion from its already-low 2018 level. So the $14.5 billion in bailout funding announced so far represents a substantial reversal of fortune. About three-quarters of the funding already has been distributed.
The bailout funds have helped offset sharp decreases in exports of agricultural products.
For the 12 months ending in August, state wheat exports dropped by $40.4 million, or 94 percent, from the same period a year earlier, according to the state Department of Commerce. Fruit exports fell $49.7 million, or 16.2%. Dairy exports fell $11.3 million, or 75 percent.
The drop in exports has come amid a host of other challenges.
In Washington state, many cherry farmers were hammered by heavy rains, said Frank Davis, a cherry farmer and vice president of business development at the Yakima office of New York-based United Apple Sales.
Many Washington apple growers have been hit hard by larger-than-usual crops, which pushed down market prices, along with rising costs of labor and other business expenses. The result, Davis said, are “really reduced margins. The orchards aren’t making a lot of money.”
Midwestern corn and soybean farmers have seen low prices and poor yields due to flooding and other extreme weather.
In other words, the federal farm bailout couldn’t have come at a better time. “If you look at the prices, the weather and the trade imbalances, you’d expect the farm sector to be in a terrible spot,” Montana State University economist Eric Belasco said. “It’s not.”
Still, the benefits of the federal farm bailout haven’t been evenly distributed. Although most farmers benefited from the bailout, Belasco said, because bailout money is distributed based on acreage and not farmer’s need, about half of the money (47 percent) went to the largest 10 percent of operations across the country. The numbers come from an analysis by Belasco and his colleague, Vincent Smith. (Both men are also affiliated with the right-leaning American Enterprise Institute.)
The disparity runs too deep to be solved by a government bailout, Belasco said. According to 2018 data, more than 70 percent of farm households had a high level of financial risk in 2018. But of those that qualify as very large (median income $756,000), only 25 percent fit into that same category.
Indeed, the past two years have been marked by a sharp rise in bankruptcies in the nation’s deepest farm country. A quarter of the nation’s farms sit in super agriculture-dependent areas — places where more than one in seven people live on farms. Among them, the rate of farm-specific bankruptcies (Chapter 12) has more than tripled since 2015.
In Washington state, by contrast, U.S. bankruptcy court data show that the number of farm bankruptcies for the 12 months ending in September actually fell 16 percent, to a total of five, compared with the same period a year earlier, according to a report by the American Farm Bureau.
But farms’ stress doesn’t just show up in family-farm bankruptcies. Some farmers don’t meet the requirements for Chapter 12, and many others in farm country depend on farms for their livelihood even if they don’t grow much themselves. Across the board — whether it’s the liquidation of Chapter 7 or the restructuring of Chapters 11 and 13 — bankruptcies in these farming-dependent areas are rising faster than in the rest of the nation.
“Farmers as a whole keep expecting their farm income to be better than what it turns out to be,” said Robert Dinterman, an agricultural economist at Ohio State University who constructed the farm-bankruptcy database analyzed in this story. So, he added, “each year farmers are digging themselves in a larger and larger hole — they’re accumulating more debt than they’re able to pay off.”
“I don’t think there’s any reason to think there’s going to be any relief in the future,” Dinterman said. Only a dramatic new round of government payments or an emphatic resolution to Trump’s ongoing trade wars could change in industry’s trajectory, he said.
Overall, the growth in farm debts has outstripped farmers’ stagnant equity stakes, leaving them at higher risk of insolvency than they have seen at any point since the end of the Great Recession. It’s compounded by an unwelcome mix of lackluster prices for a host of farm products.
According to University of Illinois economist Scott Irwin, the bailout payments have “fully compensated” farmers for the damage from the trade war with China. But it’s possible that the trade war dynamics may soon reverse for farmers.
Under a new deal reached earlier this month, chief U.S. trade negotiator Robert E. Lighthizer expects China to purchase $40 billion to $50 billion in agricultural products. That goal seems “difficult to achieve,” according to Peterson Institute for International Economics senior fellow Chad Bown. It would far exceed the $24 billion baseline set in 2017, and it’s not clear which agricultural products the U.S. would sell to make up the difference.
“If the trade deal is signed and it’s real, I think we’re going to be looking at a China-driven mini-boom in the ag sector,” Irwin said. He then clarified that if the United States somehow really did sell as much as $50 billion in agricultural commodities to China, that mini-boom would upgrade to a “full-scale boom.”
“I don’t even know how we’d get to that number,” Irwin said.
According to OSU’s Katchova, who recently chaired a panel that reviewed the USDA’s income forecasts and estimates in extraordinary detail, the USDA’s estimates are typically accurate this late in the year.
“An individual farmer may experience a harder year with lower farm income, but on average, across all farmers, farm income is expected to increase for this year,” she said.
“These are not great times,” Katchova said, “but they’re now becoming average times.”
Seattle Times business reporter Paul Roberts contributed to this Washington Post report.