$33 Million And Counting: Trade Payments Buy Patience From McLean County Farmers

2 hours ago
Originally published on September 3, 2019 2:30 pm

This is the first in a four-part series about how the USDA’s trade relief payments are playing out in Central Illinois. It was produced by WGLT and WCBU.

Wes Kingdon remembers when farming was fun, back in the 1970s, when he had enough cash to build his home and stockpiled three years of soybeans simply because he didn’t need the money.

Now, the 73-year-old from Gridley is worried, in large part because there’s no end in sight for the China trade dispute that’s decimated a key market for U.S. beans.

“Some nights, you don’t sleep,” Kingdon said. “You lay up there in bed and think about how you’re gonna make things work.”

There’s been some relief. The USDA has already sent $1.1 billion in trade relief payments to Illinois farmers, with billions more on the way. It’s going to farmers like Kingdon, who feels the Trump administration has clobbered farmers like him. He said they’re being picked on.

“It’s hurting a lot of people in this country,” Kingdon said. “The administration says, ‘Let’s make America great again.’ I don’t think this is making America great. I really don’t.”

McLean County farmers have already received $33 million in the first round of trade relief payments, formally called the Market Facilitation Program (MFP), according to a WGLT and WCBU analysis of USDA data. That’s the most for any county in the U.S., according to the Environmental Working Group, which has tracked the payments. And changes to the USDA’s formula mean second-round payments in 2019 could be even bigger.

Central Illinois farmers say the payments haven’t made them rich, but they have helped. Most of all, the payments have bought their patience as President Donald Trump tries to reach a long-term trade deal with China as he seeks re-election in 2020.

But even that patience is starting to strain. Kingdon said he doesn’t know why the Trump administration is not working harder at the negotiating table.

“Our country can’t afford to pay us that money. We’re so much in debt (as a country). We’re more in debt now than we’ve ever been,” Kingdon said. “So why are we giving farmers money? Let’s get things settled.”

Over 76,000 farmers, farm partnerships, and other businesses in Illinois split the $1.1 billion in payments between September 2018 and May 2019. In McLean County, that $33 million went to around 2,100 recipients, USDA data show.

McLean County’s big haul is not necessarily surprising; it has some of the most productive farmland in the country, and a lot of it. McLean County farmers produce more than $457 million in grain and livestock each year, or $322,784 per farm on average. That’s the most of any county in Illinois, according to the 2017 Census of Agriculture.

In McLean County, all but one of the Top 10 recipients of USDA payments were farm businesses, often family partnerships, not individual farmers. The biggest recipient was Special K Hog Farm, based in Chenoa, owned by the Kuntz family. It received $426,415. The Kuntz family did not respond to requests for comment.

Several McLean County farmers told WGLT they were generally pleased with the amounts they received. Specifically, the soybean payments for 2018 were “pretty sizeable,” said McLean County Farm Bureau President Mark Hines, who farms corn and beans just southeast of Bloomington and west of Hudson.

Instead of setting a price by commodity, the 2019 payments will be based on a flat dollar amount for each county. McLean County’s rate of $82 per acre is among the highest in the state. The average size of a McLean County farm is 438 acres, which would lead to a payment of over $35,900. And that’s just commodities like corn and beans; hog farmers would get $11 per head too.

“People were surprised at the size of it. It was a little bit bigger than what was expected,” Hines said.

Who’s Getting The Money?

Critics say too much money is going to the biggest, richest farmers.

The top 10% of recipients got over half of the first $8.4 billion distributed, said Anne Weir Schechinger, senior economic analyst at the Environmental Working Group, a Washington, D.C., nonprofit that’s been critical of past farm subsidies and now the Market Facilitation Program.

“So the smaller farms that are really struggling in the wake of Trump’s tariffs are not the ones getting the most of these payments. The majority of these payments are going to these big farms,” she said.

The Environmental Working Group would rather see taxpayer dollars spent on conservation efforts, such as cover crops and the popular but underfunded federal conservation easement program. 

“This money that’s going to farm subsidies could really do a lot of good work for the environment, if we were channeling it into these different conservation programs,” Schechinger said.

The government has set aside $14.5 billion in USDA payments for this round. 

“To the average person, that strikes them as a lot of money, and it is,” said Scott Irwin, an agricultural economist at the University of Illinois. “But it’s not making farmers wealthy right now."

One reason, Wes Kingdon said, is that his expenses always go up. Kingdon’s combine caught fire two years ago and he had to replace it. Those cost hundreds of thousands of dollars.

“Yes, there are large payments to some farm operations,” Irwin added. “And it may help some make some money. But with the level of prices we’ve had in recent years, particularly for soybeans, it’s really on average helping farmers keep their heads above water and that’s about it.”

Payments from 2018 were capped at $125,000 per person – that’s rising to $250,000 this year – but someone both growing corn and beans and producing hogs could get double that.

That’s what Chad Leman did. The third-generation farmer was among the Top 5 largest recipients of payments in Woodford County, where he runs a hog production farm and also grows corn and beans.

With a wet planting season and the African swine fever stressing out hog farmers, Leman said the payments have been very helpful. But like other farmers Leman said he’d much rather see a long-term trade deal reached with China and the payments go away.

“It hasn’t made us whole. And frankly, I don’t expect them to make us whole. I would rather them continue to aggressively pursue this deal that could benefit us greater in the long term,” Leman said. “And I’m willing to not be made whole in the meantime, as long as we’ve got that fruit dangling out there.”

Brett Haas farms corn and beans with his dad Brian and grandfather Dick in southern McLean and northern DeWitt counties. They got the maximum payment from the 2018 program.

Haas just applied for his 2019 payments last week and said the process was very smooth.

“As farmers, we’re not ones for handouts or welfare, if you want to call it that,” Haas said. “That being said, there are a lot of things that are out of our control. So it’s definitely helped.”

Finding The Right Amount

So what is the right amount for a central Illinois farmer to receive? There is no easy answer. 

Last year’s aid package probably overpaid farmers for their trade-related losses, according to a recent analysis from the University of Missouri. Chinese tariffs caused the price of soybeans grown in the U.S. to drop by 78 cents per bushel. Last year’s aid package, however, paid farmers more than twice that much — $1.65 per bushel of soybeans that each farmer produced. 

The counterargument: Even if the USDA overpaid on soybeans, it underpaid on corn (which earned farmers just a penny per bushel). 

“Folks who had a larger share of corn on their operation, they really felt like they got burned by the program where you had such a low payment—a penny a bushel for corn,” said Matt Perdue, government relations director at the National Farmers Union, the country’s second-largest farm organization. 

Irwin, the ag economist, said it’s not easy to find the right number.

“What the (University of Missouri) analysis accounts for is, OK, after those initial price drops, what changes or reshuffling in world trade patterns occurred that mitigated some of the initial price drop,” said Irwin. “So it’s a question of what’s the right measure of the damage from the tariffs, the initial price drop, or the price drop after everybody has readjusted. And there’s good arguments on both ways. So I don’t think that there is a truly simple answer to, are farmers being overpaid for the trade losses with China right now.”

Regardless, the USDA’s formula for 2019’s payments is completely different—moving to countywide rates of between $15 and $150 per acre. (Again, McLean County’s rate is $82.)

It’s hard to tell if those countywide rates are fair because the USDA has released very little information about the math behind them.

“We don’t have any idea how these individual county rates were determined, and so it’s really hard to evaluate the rationale behind it,” said Perdue.

Spending The Money

Farmers say they’re putting the money to good use. Haas, who farms with his dad and grandfather, said they’re using it to pay down debt and build up their working capital.

Ditto for Dennis Wentworth, whose operation has farmed corn and beans in McLean County for 45 years. They’re also using the money for operating expenses.

“That money is being spent in the local community,” Wentworth said. “The money we received, it’s gonna be spent on fertilizer, chemicals, hiring people, and then the employees are gonna use that money to buy food, clothing, and shelter in the community. That’s one thing you can count on: If the farmers receive income and receive that payment, they’re going to spend it.”

But Wentworth is not building the money into his farm’s budget. If he gets it again in 2019, great.

“Until I see that money in the bank, I’m not counting on it,” Wentworth said.

Leman, the hog producer from Woodford County, said what the money has really bought is patience from U.S. farmers as the Trump administration works on long-term trade deals.

Indeed, a recent Purdue University survey of 400 farmers found that 78% still believe the trade dispute with China will ultimately be resolved in a way that benefits U.S. agriculture.

“These are complicated deals,” said Leman, an Illinois Pork Producers board member who has a Trump 2020 hat in his office just outside Eureka. “And there’s more than ag at the table. It’s been a good-faith effort by the administration to buy some time in working through these.”

But do the trade relief payments also lessen the urgency to solve the China trade dispute?

Leman doesn’t think so.

“I would be very surprised if they don’t feel a sense of urgency in completing this. If you look at the politics of this, and what states carried the (Trump’s 2016) election, and the next one not too far around the bend, you’re gonna need the Iowas and Missouris and Wisconsins again,” Leman said.

“We’re always at the mercy of the markets. Right now, we’re at the mercy of the negotiators,” he added. “We’re sort of used to being at the mercy of somebody else.”

You can listen to part one in this series below:


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