Dive Brief:
- Payments to farmers designed to make up for the for the loss of revenue stemming from retaliatory tariffs imposed on U.S. agricultural products by China are in jeopardy as long as the government is shut down, according to the Associated Press.
- The U.S. government will be shut down until the President and Congress reach a deal to reopen it, but the deadline for farmers to apply for the second round of payments remains Jan. 15. The shutdown affects the USDA's Farm Service Agencies (FSA), local offices that administer USDA farm programs.
- Growers of soybeans, corn, wheat and sorghum, among other commodities, were offered a subsidy in August, and a second round was announced in December. President Trump reported that Chinese President Xi Jinping committed to purchasing more U.S. agricultural products at the leaders' last meeting.
Dive Insight:
With FSAs shut down, U.S. farmers have lost their main method of interaction with the federal government. FSA offices were open until Dec. 28, after which they remain closed until a new deal to end the shutdown is reached.
With harvests finished now, farmers must decide whether to sell their wares at a historically low prices or store their produce to wait for a more favorable market, assuming that is financially realistic.
On top of uncertainty in the promised payouts, the USDA's year-round programs are also suspended including farm lending programs. Plus, many storage facilities and silos are also already full.
For procurement professionals looking to purchase U.S.-grown commodity crops, prices remain low. Corn and soy futures were looking slightly up around the Christmas holiday, and the USDA reported exporters sold 1.119 million metric tons of grain to China for delivery by Aug. 31.
But in light of the shutdown, this optimism may not last, since the shutdown also affects the release of data regarding how much U.S. agricultural products China is purchasing going forward, further adding to the uncertain atmosphere. Without further confirmation that China is once again buying, uncertainty will likely win out in the fields.
