Are Regional United States Farmers Made Whole by Trade Aid?

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AAEA members release research in AEPP

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The US government provided payments to farmers of $10 billion in 2018 and $14.5 billion in 2019 to compensate for market losses due to retaliatory tariffs imposed on US agricultural exports as part of a larger trade war. These Market Facilitation Program (MFP) payments were authorized through the Commodity Credit Corporation (CCC) Charter Act. Congress allocated another $14 billion in March to the CCC to offset market losses to farmers due to COVID-19. There has been substantial debate about the magnitude and distribution of farm payments provided through the CCC.

In the new Applied Economic Perspectives & Policy (AEPP) article β€œAre Farmers Made Whole by Trade Aid?” AAEA members Joseph Janzen and Nathan Hendricks from Kansas State University provide new insights on the size and distribution of trade aid payments in 2018 and 2019. Their paper compares MFP payment rates to estimated market price declines that approximate farmer losses caused by the trade war.

Janzen says, β€œOne unique aspect of this research is the comparisons we make across commodities. Most previous analyses have focused on soybeans because the impact of the trade war on agricultural exports have been largest for that crop. However, we show that the difference between MFP payment rates and estimated price declines due to the trade war are larger for other crops like cotton, sorghum, and wheat than for soybeans. This led to substantial variation in payment receipts across regions and individual farms.

Another unique aspect of our work is that we provide maps of payments relative to rental rates and payments for average-sized farms. Previous analysis has only shown maps of total payments or payments per acre. By mapping the payment relative to the rental rate, we can adjust the payments for differences in land productivity across space. For example, we find that per-acre MFP payments in Iowa were about one-third of land rental rates in 2019, but in Alabama, MFP payments were more than double land rental rates.”

If you are interested in setting up an interview, please contact Allison Scheetz in the AAEA Business Office.

ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 60 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes two journals, the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices and the online open access publication series Applied Economics Teaching Resources. To learn more, visit http://www.aaea.org.

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Allison Scheetz
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