Adams County farms received $2.46 million in aid from USDA

Over 600 farms in Adams County received a combined $2.46 million in federal payments from the U.S. Department of Agriculture in an effort to help farmers recoup losses in 2018 from recent and ongoing trade disputes.

The vast majority--almost $2.25 million--went to farms that grow wheat, according to the data that was obtained by The Associated Press from the USDA. And while the payments have helped mitigate some of the lost sales due to trade disputes between the U.S. and other countries, they're not close to making up for those lost sales.

"We're appreciative of the [Trump] Administration for realizing that there's an issue in farm country, but we--the farmers--would rather have trade than aid," said Michelle Hennings, Executive Director of the Washington Association of Wheat Growers, to The Journal. "We want our trade agreements, we don't want aid from the government."

In July 2018, U.S. Secretary of Agriculture Sonny Perdue announced that the USDA would authorize up to $12 billion in relief programs that were aimed to "assist agricultural producers to meet the costs of disrupted markets" after retaliatory tariffs were put in place by China. One of the programs was designed to direct payments to farmers of soybeans, corn, wheat, sorghum, cotton, dairy and hogs.

Earlier that year the Trump Administration implemented tariffs on $34 billion in Chinese goods, due to a dispute over the Chinese government's high-tech industrial policies. China retaliated in kind, enforcing tariffs on soybeans and pork, which led to the formation of the USDA relief programs.

The average payment from the USDA to farms that grow wheat in Adams County was $3,727, while the median payment was $1,182. In all, farmers in Washington received $50.7 million in payments from the USDA, and about one in five of the roughly 36,000 farms in the state received federal aid.

Less than a month ago on July 25, Secretary Perdue announced a second round of federal aid payments from the USDA to the agriculture industry. This current round of payments from the USDA is part of a $16 billion relief package, up $4 billion from the $12 billion package in 2018.

One of the federal relief programs being offered again by the USDA is the Market Facilitation Program. The MFP offers payments to non-specialty crops-which includes wheat-based on a single county payment rate that is multiplied by a farm's total plantings of MFP-eligible crops in aggregate this year. County payment rates range from $15 to $150 per acre, which the USDA says depends on "the impact of unjustified trade retaliation in that county."

The payment rate is set at the lower end of the spectrum in Adams County, at $22 per acre for a non-specialty crop such as wheat. In eastern and central Washington counties, the payment rate is as low as $15 per acre (Klickitat, Chelan, Okanogan, Ferry, Stevens, Pend Oreille and Benton counties) and as high as $28 per acre (Walla Walla County). The low rates were similar in Oregon and Idaho counties.

The county payment rates in Midwestern states such as Iowa, Kansas, Indiana, Minnesota, Missouri, Nebraska and Ohio is more consistently in the $40-$70 per acre range. The noticeable difference in the payment rates between Pacific Northwest states and Midwestern states has drawn the ire of farmers in the region, according to Hennings.

"That really makes the Pacific Northwest upset," said Hennings. "And a lot has to do if you have other commodities in your county. So if you're a wheat-based county, we didn't get the payments like they would in the Midwest, when they have corn and soybeans. So that was really disappointing for Washington farmers."

For Hennings, who emphasizes the need for trade agreements rather than aid from the government, the payments "target" the agriculture industry from individuals and other organizations and industries who might think that farmers are receiving handouts from the federal government. These people and organizations, Hennings says, don't understand the farming industry and the vital role it plays in society.

"That's not what the farmers want," said Hennings. "They would prefer to have their trade agreements and sell their wheat at a good price rather than the government having to federally fund us."

Examining ongoing disputes

On Aug. 5, after the Trump Administration announced earlier that it would impose tariffs on $300 billion of Chinese exports beginning on Sept. 1, China announced that it would cease purchasing U.S. farm products.

According to data from the Washington Grain Commission, China was the fifth largest export market of U.S. white wheat at 307,000 metric tons in 2017-18, behind just the Philippines, Japan, South Korea and Indonesia. White wheat is mostly grown only in the Pacific Northwest, meaning the white wheat export markets essentially affect just Washington, Oregon and Idaho.

According to a 2008 report from the WGC, soft white wheat accounted for 79% of total wheat production in Washington in 2008 and 46% of all U.S. white wheat came from Washington. Most of that wheat, around 85-90% of it, ends up getting exported each year, usually to countries in Asia.

While the announcement might send ripple effects through other agriculture commodities, the impact on wheat growers since then has largely been minimal. That's due to the fact that China stopped buying U.S. wheat completely in 2018, which was a big blow to wheat growers.

China's halt on purchasing U.S. white wheat not only shut down the crop's No. 5 export market, it also slammed the door on what had been an emerging market for Pacific Northwest wheat growers.

In 2007-08, according to the WGC report, China was nowhere to be seen on the list of the eight largest export markets for white wheat. That's because the Chinese market has only begun to emerge at a rapid pace in just the past five years or so, by Hennings' estimation.

"China was an emerging market for us, so we were starting to develop a market in China," said Hennings. "And then all of a sudden we had the retaliatory tariffs, and then all of a sudden we had zero [tons of white wheat exported to China.] So when you go from about 300,000 metric tons to zero, that does affect us. And we probably would have kept climbing in the China market, so it is emerging."

One of the concerns that wheat organizations in the Pacific Northwest has with China-which is currently on display-was that they are often inconsistent trade partners.

"One problem that I see with China is that they'll say they won't buy and then they'll buy, and then they say they'll buy and then they don't buy," said Hennings. "So they haven't been a consistent trading partner for us, but they are an emerging market and we have been working in that area."

The WAWG and other wheat organizations across the country have also been lobbying for the U.S. Senate and House of Representatives to approve the United States-Mexico-Canada Agreement.

The USMCA is a trilateral agreement that is the result of the renegotiation of NAFTA that took place in 2017-18. U.S. President Donald Trump, Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau signed the USMCA on Nov. 30, 2018, but each country's legislature still needs to ratify the trade agreement. So far, only the Mexican Senate has ratified the USMCA.

In a joint press release on July 31, the WAWG and the WGC explained why they were urging a vote to be held on the USMCA in congress, even though the Pacific Northwest exports just small amounts of grain to Mexico.

"Although the Pacific Northwest exports little grain to Mexico, wheat is traded on the world market and undermining America's No. 1 customer-Mexico-will depress prices further for all wheat farmers," said the WAWG and WGC.

Hennings told The Journal that although Pacific Northwest wheat growers don't have much to gain from the direct impact of the USMCA, the ratification of the agreement would have beneficial ripple effects and instill confidence in large white wheat export markets, such as Japan.

"So what happens is Japan looks at us, the United States, to see if we're able to conduct a trade agreement with our neighbors," said Hennings. "So we really want the USMCA to pass, not only because it's the No. 1 wheat market in Mexico, but also so that our other trading partners see that we can conduct trade agreements and those types of things."

Hennings believes that the ratification of the USMCA will also provide a domino effect with the U.S.'s other trade negotiations, and noted that the U.S. and Japan are currently working on a bilateral trade agreement. The Nikkei, the world's largest financial newspaper, reported on Aug. 4 that Japan and the U.S. agreed to target a broad deal on bilateral trade by next month.

Harvest nears the finish line

So far this year, harvest for wheat growers in Washington state has lagged behind the five-year average, according to the most recent report from the USDA's National Agricultural Statistics Service.

As of Aug. 18, about 69% of winter wheat and 25% of spring wheat has been harvested. Based on the five-year average, 87% of winter wheat and 64% of spring have normally been harvested by this time. Put more simply, harvest in Washington for wheat growers is about 7-10 days behind average, by Hennings' estimation.

In terms of how bountiful this year's harvest has been, there hasn't been a major drought this year and Hennings said yields have been mostly average to above average and have been welcome news.

"It's not a bumper crop by any means, but definitely average to above average, which is good for the farmers," Hennings said

According to an Aug. 12 crop production report from NASS, wheat production in the U.S. is forecast at 1.98 billion bushels, which would be a 5% increase from 2018. Winter wheat growers are expected to produce 1.33 billion bushels of winter wheat, which would represent a 12% increase from last year. Yields are expected to average 51.6 bushels per harvested acre, up 5.3 bushels from 2018.

While those numbers seem solid for wheat growers, Hennings explained that the wheat market is largely affected not by the report's update on wheat, but rather the report's update on another crop-corn.

"Wheat is kind of based off of corn, so when something happens [with corn], and if they either say the wheat's fluctuating up or down it'll cause an immediate price reaction for wheat," Hennings said.

The report's update on corn production showed that corn production for grain is currently forecast at 13.9 billion bushels, which would be down 4% from 2018. Yields are expected to average 169.5 bushels per harvested acre, which would be down 6.9 bushels from 2018. The area harvested for grain is forecast at 82 million acres, which would be a slight increase from 2018 but is down 2% from the July crop production report.

Hennings said she received an influx of emails from farmers who were upset over the report, saying it caused their prices to drop in an already tenuous situation. Some of the emails Hennings received also questioned the accuracy of the USDA's data.

Following the release of the report, there was a combined drop of 36 cents per bushel for hard red winter wheat, 17 cents for white spring wheat and 13 cents for soft white wheat in Portland, where about 90% of Washington wheat is shipped and then exported overseas.

"That makes farmers really nervous when something like that happens, especially with our trade situation," said Hennings. "Any kind of fluctuation in prices makes us a little uneasy."

Data obtained by The Journal from the Ritzville Warehouse Co. on Aug. 14 and Aug. 7 also saw a slight dip for soft white wheat and a substantial drop for hard red wheat. Soft white wheat was priced at $5.15 on Aug. 7 and dropped to $5.10 on Aug. 14. Hard red wheat was priced at $4.78 on Aug. 7 and sank to $4.43 on Aug. 14. As of Aug. 20, soft white wheat is priced at $5.11 and hard red wheat is priced at $4.38.

"That makes farmers really nervous when something like that happens, especially with our trade situation," said Hennings. "Any kind of fluctuation in prices makes us a little uneasy."

Compared to data obtained from the Ritzville Warehouse Co. on Aug. 22 of last year, soft white wheat prices are down 31 cents from a year ago, while hard red wheat prices are down an astonishing $1.31.

Glen Squires, CEO of the WGC, said that farmers in eastern Washington are only scraping by with wheat prices that are less than they were 20 years ago, when adjusted for inflation.

The volatility of the market, Hennings says, has caused a lot of stress for farmers in the state. She's heard reports from other counties that younger farmers have decided to leave the farming industry because of the stress.

"They just said that it wasn't worth it and they wanted to go get a regular job," said Hennings. "If you're not making money, that comes with a lot of stress, especially if you have a family. So we really want to make sure that we can keep the price at an advantage so that we don't lose our younger generation of farmers."