Associate Professor/Crop Marketing Specialist Farm Bill & Tariffs July 12, 2019 Chad Hart Associate Professor/Crop Marketing Specialist chart@iastate.edu 515-294-9911 1 1

2018 Farm Bill Overview 12 Chapters Commodities Conservation Trade Nutrition Credit Rural Development Research, Extension, and Related Matters Forestry Energy Horticulture Crop Insurance Miscellaneous From National Park Service

Farm Bill Budget Projected Outlays, FY2019-2028 $867 Billion Source: Congressional Research Service and Congressional Budget Office

What stays the same? ARC and PLC programs remain Crop Insurance: no means testing; harvest price stays Income limitation: still at $900,000 of average adjusted gross income over the 3 previous taxable years. Conservation programs (minor changes) Work requirements for food stamps program (SNAP) No projected increase in the federal deficit (compared to prior projections) Disaster assistance remains with permanent authority and mandatory funding

PLC pays, ARC does not Neither pay Both pay ARC pays, PLC does not The choice depends on where you expect prices and yields to be over the next 5 years. There are price/yield combinations where PLC pays and ARC does not. There are also price/yield combinations where ARC pays and PLC does not.

Covered Commodities for ARC & PLC ARC & PLC Programs Covered Commodities for ARC & PLC Barley Canola Corn Crambe Flaxseed Garbanzo, Large Garbanzo, Small Grain Sorghum Lentils Mustard Seed Oats Peanuts Peas, Dry Rapeseed Rice, Long Grain Rice, Medium Grain Safflowers Sesame Seed Soybeans Sunflower Seed Wheat 21 Covered Commodities for ARC/PLC program are: New 2018 FB: Seed cotton, rice (temperate japonica)

What’s new? Revised ARC & PLC: switching PLC yield update Higher Loan Rates for MAP & LDP Improved dairy assistance Industrial hemp Expands family member definition for payment limits and eligibility rules to include first cousins, nephews and nieces FAMILY MEMBER.—The term ‘‘family member’’ means a person to whom a member in the farming operation is related as lineal ancestor, lineal descendant, sibling, first cousin, niece, nephew, spouse, or otherwise by marriage

What’s new? Crop Insurance: Changes beginning farmer and rancher definition to 10 years for insurance benefit purposes Cover crops “good practice farming” APH Changes Hemp Insurance Catastrophic Crop Insurance Yield Reporting FAMILY MEMBER.—The term ‘‘family member’’ means a person to whom a member in the farming operation is related as lineal ancestor, lineal descendant, sibling, first cousin, niece, nephew, spouse, or otherwise by marriage

Arable land

Why do U.S. farmers need export markets? That’s where the customers are That’s where the economic growth is That’s where the consumption growth is We produce surpluses We only eat high on the hog Exports are crucial to farm income

Value of Ag Trade Source: USDA-FAS

U.S. Ag Exports Source: USDA-FAS

Top ten US ag export markets, 2018 Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Agricultural trade with Canada NAFTA Two-way trade up 405% since NAFTA Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Agricultural trade with Mexico NAFTA Two-way trade up 602% since NAFTA Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

USMCA Source: USDA-FAS

Tariffs A tax on imports Used to reduce trade and protect domestic industries Has both positive and negative impacts Positive for domestic producers of the product with the tariff Negative for domestic consumers of the product with the tariff If specifically targeted against one country, then impacts are Positive for that country’s consumers Negative for that country’s producers 17 17

Tariff Effects Source: Austin Donisan, CC BY 3.0, https://commons.wikimedia.org/w/index.php?curid=6868997

Example: China’s Soybean Tariff Positive for China’s soybean producers and U.S. soybean consumers Chinese soybean producers capture a higher price U.S. soybean consumers capture a lower price Negative for China’s soybean consumers and U.S. soybean producers Chinese soybean consumers pay a higher price U.S. soybean producers receive a lower price Price effects are due to supply changes Less U.S. soybeans imported by China More U.S. soybeans left on domestic market 19 19

Tariffs are a Policy Tool Can be used to: Reduce trade deficits Raise government funds Protect specific industries Serve as a bargaining chip in trade negotiations They’re not new. We’ve had tariffs on many goods since the U.S. was founded. Major shifts in U.S. tariffs in: 1789, 1790, 1792, 1816, 1824, 1828, 1832, 1833, 1842, 1846, 1857, 1861, 1872, 1875, 1883, 1890, 1894, 1897, 1909, 1913, 1921, 1922, 1930, 1934, 1947, 1962, 1974, 1979, 1984, 1988, 1994, 2002, 2009, 2018 20 20

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Recent Movement in the Top 3 Source: USDA-FAS

Global Shares Source: USDA

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Thank you for your time. Any questions. My web site: http://www2. econ Thank you for your time! Any questions? My web site: http://www2.econ.iastate.edu/faculty/hart/ Iowa Farm Outlook: http://www2.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/