What Trump's Latest Aid Package Means For Farmers : Planet Money President Trump announced an aid package for farmers yesterday worth $16 billion. It's meant to offset losses from the trade war with China. We spoke to one U.S. farmer about how helpful it will be.
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What Trump's Latest Aid Package Means For Farmers

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What Trump's Latest Aid Package Means For Farmers

What Trump's Latest Aid Package Means For Farmers

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STACEY VANEK SMITH, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

CARDIFF GARCIA, HOST:

And I'm Cardiff Garcia. Today's indicator is 16 billion, as in $16 billion. Yesterday, President Donald Trump announced a huge aid package for farmers affected by the trade war with China.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: So we will ensure that our farmers get the relief they need and very, very quickly. It's a good time to be a farmer. We're going to make sure of that. So today, I'm announcing that I have directed Secretary Perdue to provide $16 billion in assistance to America's farmers and ranchers.

VANEK SMITH: This is the second aid package for farmers that the Trump administration has put together since the trade war with China began. Last July, the White House rolled out a $12 billion emergency aid package.

GARCIA: The aid is intended to make up for the losses that farmers are going to have because of the trade war. Today on the show, we talk with a farmer - he's actually a soybean and a pig farmer - about what the last year has been like for him, how the last round of aid affected his business and what he thinks of the president's announcement yesterday.

(SOUNDBITE OF MUSIC)

VANEK SMITH: Brian Watkins is a sixth-generation farmer in northwest Ohio. He raises corn, soybeans, wheat and pigs.

What's the country like up there? Like, what does it look like?

BRIAN WATKINS: It's pretty flat. And, I mean, we have good soils. They're not as good maybe as, you know, Iowa - but they're decent.

VANEK SMITH: So, Brian, when the trade war with China went into effect, what happened? Like, what did that mean for you?

WATKINS: We saw, you know, immediate market reaction and lowered prices. And, you know, they have not really recovered since.

VANEK SMITH: What did that do to your business? Like, what changes did you see - prices for soybeans and pork?

WATKINS: So on the hog side, I would say you're looking at probably a 5% to 10% obvious market reaction. On the soybean side, it was more like 20%.

VANEK SMITH: Whoa.

WATKINS: The price of soybeans has tanked. I mean, it went down a buck and - a dollar and a half a bushel on what was at the time around a $10 a bushel price.

VANEK SMITH: Was that just because China buys so many U.S. soybeans?

WATKINS: Yes. Yes.

VANEK SMITH: What did that mean for your business? I know that farming typically doesn't have giant profit margins.

WATKINS: No. We don't have a 20% profit margin. I mean, if the price goes down 20%, that's the difference between profit and loss. The administration brought out their first aid package last fall. Most of that money went to soybean farmers.

VANEK SMITH: Did you get - did you see any of it?

WATKINS: We did see a payment on our farm. My farm got a payment. They took a per-bushel number, and it was direct to the farms. It was $1.65.

VANEK SMITH: Whoa.

WATKINS: Yes. They paid $1.65 bushel for every bushel of soybeans you grew in 2018.

VANEK SMITH: Said your - you lost money because of the tariffs and the effect that they had. I mean, did this make up for it entirely or...

WATKINS: For soybeans, for most of it, it did, yes. Quite frankly, it did. So this is where we get into the interesting thing. So now - what? - two weeks ago they broke off the talks with China.

VANEK SMITH: Yeah.

WATKINS: And it looks like both sides are entrenching...

VANEK SMITH: I know.

WATKINS: ...And talking about changing supply chains and all this stuff. So now we're in a mode of China as a market is gone. Well, from a farmer standpoint, that's, you know, that's really not good because they've been such a big market for us. And so I think because of that, the administration has - they're scrambling, right? And those farmers are a very important constituency to them.

So this latest package has been put together very quickly. But we're also in the middle of one of the wettest springs in history in North America. The crop being planted is as late as it's ever been across, you know, the heart of the corn and soybean belt. And so we're - well, I mean, on my farm, I'm here in northwest Ohio. We've only planted about 10% of our acres.

VANEK SMITH: Oh, really - just 'cause the ground's too wet to get the machines in?

WATKINS: Yes. But here's the rub, Stacey. Farmers are making decisions right now as to what they're going to plant. As you get later in planting, sometimes you switch acreage. The corn will not mature in time if it's planted too late.

VANEK SMITH: Oh, so you pick like a faster crop because your growing season's shorter.

WATKINS: Right. So we're right in this timeframe when farmers are trying to decide, do I still plant my corn late? Do I switch to soybeans? Many - most of us also have crop insurance, which has a - it's not a great protection, but if you - it's called prevented planting, and it'll basically cover your land cost. It doesn't cover anything else. But you can choose that. And this is for me as it is for every farmer.

I've got to decide, OK, am I going to plant corn? Am I going to plant soybeans? Am I going to plant nothing and take the insurance payment? And, of course, that changes - as every day of the calendar goes on, when it's wet, that calculus comes in.

Well, this subsidy package, if they say, well, we're going to pay whatever - let's say they're going to pay another $1.65 for soybeans. That suddenly becomes this big incentive for me to try to plant soybeans to get more of the payment.

VANEK SMITH: Because it's per bushel.

WATKINS: Well, and this is what's confusing. So they're trying to avoid this issue. So they're trying to structure this program as, well, it's not going to be per bushel. They're going to calculate it at a county level. They don't want to have some big influential thing that affects planting decisions. They want those to be market based, economic based, you know. But yet they're coming - they also want farmers to know that they're going to have some money for them because of this China disaster. And so it's very unclear.

VANEK SMITH: So, I mean, how do you feel about all this? Are you - how do you feel about the farm aid?

WATKINS: (Laughter) Well, I'm not really sure what I think. It's just a - I don't totally blame the administration. I mean, I - and I think many farmers understand that there are legitimate issues in the - this trade battle between the U.S. and China. But in the long run, I don't want subsidies to be a part of my income. I want to have a market, and I want to be able to react to it. I would like for them to work out, you know, to the point where we could still sell things to China. So yeah.

VANEK SMITH: If China goes away as a market for at least, let's say, the foreseeable future, how big of a deal is that?

WATKINS: It's a big, big deal. It shrinks our business. I mean, it means that prices will be lower. Something like 40% of our soybeans were going to China. And it would be a blow. It would be a blow to the farm economy. It would be a blow to the rural economy. I don't know if you get HBO or if you - the show on HBO right now that I've been watching is "Chernobyl."

VANEK SMITH: Yeah. I haven't seen it, but I've heard it's great.

WATKINS: Yeah. And the interesting thing about Chernobyl - so I was a young farmer in 1986. And I remember very well because when that first happened, and at first, all of the commodity markets panicked because they thought there was going to be a really massive area that was radioactive and couldn't produce food. And I remember - we woke up one morning and our prices are jumping. And they did that for about a two-week period because of Chernobyl.

VANEK SMITH: Wow.

WATKINS: Right. And my point in that is there's so many things that...

VANEK SMITH: Yeah.

WATKINS: ...You know, things go along and everything seems kind of settled down and then something happens you weren't expecting. And you just got to roll with it.

VANEK SMITH: Does this feel - I mean, you've been farming for a long time, obviously been through a lot of things, a lot of global events. Does this feel like business as usual, like sort of one of the cycles of things that happens or does this feel different?

WATKINS: This is not just business as usual. This is more like the Chernobyl event. You know, I mean, the loss of China, that's a big deal. That's a big, big deal. You know, maybe three or four months from now, they'll - both sides will realize that this is sort of mutual assured destruction.

VANEK SMITH: Yeah.

WATKINS: All of these things get translated into price, right? Every day, I can look and see what the price is. And it's my indicator of where it all stands. And then as far as my day-to-day, I'm still more preoccupied with the weather than I am anything else.

VANEK SMITH: And what is the - what are you hoping for?

WATKINS: I am hoping for sunshine and a nice, strong breeze - several days of that (laughter).

(SOUNDBITE OF MUSIC)

VANEK SMITH: This episode of THE INDICATOR was produced by Darius Rafieyan, edited by Paddy Hirsch. Our intern and fact-checker is Willa Rubin. And THE INDICATOR is a production of NPR.

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