Indiana farmer offloads fresh harvest of soybeans from his combine in Brownsburg, Ind., Sept. 21, 2018.
Michael Conroy | AP
U.S. trade aid mainly benefited large farms in its latest round, undermining a key pledge by the Trump administration and leaving family producers at risk of collapse as the economy entered a recession.
President Donald Trump said the bailout program he rolled out in 2018 would help family farms weather his trade war with China, mostly through direct payments from the government. But roughly two-thirds of those payments went to the top 10% of recipients at the beginning of the year, according to an analysis of U.S. Department of Agriculture records obtained by CNBC through the Freedom of Information Act.
The top half of recipients collected 95% of total payments in the $28 billion Market Facilitation Program, which came after retaliatory actions against the Trump administration led to steep drops in demand for U.S. agriculture. The average payment for the top tenth of recipients was $164,813, a stark contrast from the average payment of $2,469.49 for the bottom half of recipients. The data included payments made throughout February and March, when the most recent tranche began to hit bank accounts.
Wisconsin farmer Michael Slattery said the trade program has fallen short for small producers, putting them at a further disadvantage against agricultural giants that have come to dominate the industry. On his 240-acre farm in Manitowoc County, the last round of subsidy payments made up for roughly half of the income he lost from tariffs on soybeans and other major crops.
“It doesn’t cover your losses,” said Slattery, who is also an economist at the Wisconsin Farmers Union. “We have greater and greater concentration of industry.”
The Trump administration has separately announced it would expand farm assistance by tens of billions of dollars in response to the coronavirus pandemic, which caused the economy to contract at the fastest pace ever in the second quarter. That would bring overall government payments to farmers to a record $33 billion this year, according to the Food and Agriculture Research Center at the University of Missouri, though net income would still fall.
Bankruptcy on the rise
Despite the sweeping programs, family farms have grown increasingly fearful of financial ruin. Bankruptcy filings for small- and medium-sized farms rose by 20% in 2019, a rate that has slowed but remained elevated. With many restaurants and schools closed because of the pandemic, nearly one third of self-proclaimed small farms said in a May survey that they could go bankrupt by December.
The deepening crisis for small farms has fueled scrutiny of trade aid, which sent millions to agricultural corporations including a Brazilian-owned meat processor in its initial phases. While the USDA raised the limit for individual payments to $250,000 in 2019 from $125,000 a year earlier, corporations have continued to surpass the even larger limit with ease. The top 1% of beneficiaries in the program collected 17% of total trade relief over the two-month span, CNBC found in its analysis, with an average payment of roughly $455,600.
I would say the biggest effect the pandemic has had on my farm has been as a distraction from the trade war. We’re still severely impacted by it.
North Dakota soybean farmer
The Assemi Group, known for its real estate and farming empire based in Fresno, California, received at least $1.1 million through nearly two dozen payments to its subsidiaries, according to the USDA records.
“Our company participated in the Market Facilitation Program and complied fully with all federal requirements,” Danielle Filipponi of Maricopa Orchards, an Assemi company, said in a statement. “We are grateful for the assistance, which helps preserve jobs, but what we and all farmers want is fair and open trade.”
Another farming operation in the state, Primex International Trading, received eight checks amounting to more than $650,000 at its office in Los Angeles. Primex didn’t respond to requests for comment.
The USDA overhauled parts of the program after it was first implemented, changing the payment system in 2019 in what it said was an effort to avoid planting distortions. The new formulas assigned payment rates for each county, depending on internal estimates of trade damage there.
For North Dakota soybean farmer Tyler Stafslien, whose crops intersect three counties, that meant several different payment rates on a farm with the same operating costs across the board. At between $15 and $25 per acre, he said the rates were not high enough to recover more than a third of the income he lost to tariffs.
“We don’t feel that it was proportionate here,” Stafslien said. “We felt like we got the short end of the deal, even though we were probably hurt the worst.”
In other regions of the U.S., some counties brought in as much as $150 per acre. Missouri farmer Chad Fullerton said the triple-digit payment rate assigned to his county was necessary for profitability with the crops he grows, including cotton, corn and soybeans.
“I feel like last year’s rules were fair,” Fullerton said.
Winners and losers
Trump critics have escalated backlash against trade aid in recent months, alleging mismanagement and bias by the Trump administration. The president has repeatedly boasted about the billions of dollars the program has provided to farmers, a key constituency for the Trump campaign ahead of the November election.
Democrats asserted in a Senate report last year that wealthy farmers and those in southern states have been overcompensated through the subsidy payments. Even though the Midwest and Northern Plains have been hard hit by tariffs, the report said, farms in those regions were assigned smaller payments per acre. In February, the U.S. Government Accountability Office launched an investigation into the program after a request from Senator Debbie Stabenow of Michigan.
“From day one, I’ve been concerned that the Trump administration’s trade assistance program has picked winners and losers and left smaller farms behind,” Stabenow, the ranking Democrat on the Agriculture Committee, said in an interview. “USDA needs to stop playing favorites.”
Concerns about the program have also been raised on the other side of the aisle, underscoring the challenges with administration and oversight that the White House and Congress could face as farm programs swell. Republican Senator Chuck Grassley, the Finance Committee chairman, said a loophole has allowed farms to surpass limits through payments to extended family members and others not directly involved with it.
“If people aren’t actively engaged in the day-to-day operations of a farm, they shouldn’t be receiving any government aid,” Grassley, who has himself sought trade aid for a farm in Iowa, said in an email. “It’s not fair to the real family farmers out there that we are seeing folks take advantage of the system.”
The White House referred CNBC requests for comment to the USDA, which defended the farm bailout program and said it was designed to offer aid to the farms that need it the most. A spokesperson pointed to the designated range for payment rates and an income ceiling of $900,000 for eligible participants, but acknowledged that the “impact of these limits varies depending upon a farm’s organizational structure.”
New tensions have flared between the U.S. and China in recent weeks, raising questions about a partial trade accord the two sides reached in January. Trade officials reaffirmed their commitment to the terms of that agreement last month, but most punitive tariffs have remained in place between the largest economies. China has also lagged on import increases it pledged as part of that deal, adding to pain farmers have felt from the economic downturn caused by the coronavirus.
“I would say the biggest effect the pandemic has had on my farm has been as a distraction from the trade war,” said Stafslien. “We’re still severely impacted by it. Most of us are hoping there will be another MFP round. If there’s not, there will be more bankruptcies and losses of family farms.”
—Data visualizations by CNBC’s Nate Rattner.