Following a request from Michigan Sen. Debbie Stabenow, the U.S. Government Accountability Office will investigate the integrity of the U.S. Department of Agriculture aid to farmers affected by the U.S. trade war with China.
Sen. Stabenow, who is ranking member of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, made the request to GAO in January after a Senate review found “deep inequities” in the distribution of the funds.
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The move comes as farmers and agribusinesses have expressed concerns with a lack of scrutiny into how the funds were divvied up.
“At a time when virtually everyone in agriculture is under pressure, both from the macro factors facing the economy and also the trade wars, there is certainly a lot of focus on how USDA is dispersing payments, how it’s doing its math and determining what it believes to be fair and equitable,” Chuck Lippstreu, president of the Michigan Agri-Business Association, told MiBiz.
According to the Senate report, billions of dollars in mitigation payments to help farmers has been distributed unevenly across the country, benefitting some regions more than others.
“It’s clear that the Trump Administration’s trade assistance payments pick winners and losers rather than help the farmers who have been hit the hardest by this President’s trade policies,” Stabenow said in a statement. “This investigation will shed more light on what has been happening, and bring accountability and fairness to a program that has spent billions of taxpayer dollars.”
The investigation will determine whether the model the USDA used to distribute payments has accurately reflected trade damages felt by farmers, how higher payment limits have increased distributions to large complex farm operations, and whether the USDA is effectively preventing fraud, waste and abuse in the program.
“This is a picture-perfect example of the importance of congressional oversight,” Lippstreu said. “This is a great example of why it’s important to have leaders in Congress who are focused on agriculture and why it’s important for us to have Senator Stabenow on the Senate ag committee.”
Questions remain
Farmers who have been hit by the U.S. trade war with China have been issued about $28 billion in aid funding from the federal government since 2018. The most recent aid has come in the form of Market Facilitation Program (MFP) payments, which were distributed to farmers earning less than $900,000 a year who produced one of the agricultural products that faced retaliation from Chinese tariffs.
The vast majority of the top MFP payment rates — about 95 percent — went to southern farmers, who have been harmed less than other regions, according to the Senate report. Moreover, the data found that farms owned by billionaires as well as foreign-owned companies also received a disproportionate amount of aid, including $90 million awarded in purchase contracts to a Brazilian company.
The MFP payments, which went directly into farmers’ bank accounts, were distributed in three phases. The first round of payments began in August 2019 and was comprised of the higher of either 50 percent of a producer’s calculated payment or $15 per acre. For producers who received payments in the first round, their second-round payments were 25 percent of their calculated payments and were issued in November 2019. The third and final round of payments was announced on Feb. 3, 2020.
As of Feb. 24, Michigan farmers had received about $260 million of the $14.34 billion in MFP payments distributed to farmers so far, according to the latest report from the USDA. The vast majority of that funding — about $240 million — has gone to people who grow non-specialty crops such as wheat and soybeans. About $19 million has been distributed to growers of specialty crops like cherries and grapes. Dairy farmers and others who own livestock received approximately $872,000.
By comparison, farmers in California, a state that produces about 5.25 times more food by value than Michigan, received a total of $300 million. Farmers in Texas, which grows less than half of the value of food as California, have received more than $1 billion.
“All it takes is a look at the map to at least have legitimate questions about how the payment rates are laid out,” Lippstreu said.
In addition to Texas, the states that have received the most funding from the MSP program are the midwestern states of Iowa, Illinois, Minnesota and Kansas.
Uncertainty lingers
Part of the problem with the MFP program was the speed at which it was rolled out, according to Lippstreu.
Because the MFP program was launched quickly to temporarily avert a crisis for many farmers, it was unique from other USDA programs that are administered with more robust oversight in place, he said.
“There was some uncertainty in the beginning and I think you’ve seen some continuing uncertainty overall in the industry,” Lippstreu said. “How USDA is calculating the payments that are made to the farmers and different industries over time have raised concerns that a program like this, if it’s not done in an equitable manner, runs the risk of picking winners and losers among different commodities and crops and different segments of the country. Geographically, that’s been a concern since the beginning.”
The disparities in payments can also be found among commodity lines. For example, corn and dairy farmers were given “very small payments” relative to the economic damage they suffered from the trade war, according to Lippstreu.
Since the aid payments have already been distributed to farmers, it remains unclear what consequences the USDA or farmers could face when the investigation concludes. The Trump administration has announced that aid payments to farmers will end after the February round in lieu of a trade deal negotiated with China that will secure $40 billion to $50 billion in agricultural exports to China over the next two years.
“The era of economic surrender to China is over,” Vice President Mike Pence said at a Michigan Farm Bureau meeting last week. Still, he added, the administration has “a ways to go” to alleviate the damage of the last three years.
“There’s a lot of work that still needs to happen and there is a lot of uncertainty with current events in China,” Lippstreu said. “Farmers and everyone in agriculture would prefer to be able to trade and export, we would prefer to not be having this discussion about the Market Facilitation Program. We’d rather be talking about expanding trade and exports around the country, but because we have the MFP program, which has been important, let’s be sure that it’s being done in a fair and equitable way.”
