The recent tariff battles between the United States and other countries like China, Canada, and the European Union are beginning to affect commodity prices. Increased U.S. tariffs on steel and aluminum have caused these countries to enact retaliatory tariffs on other products including commodities, which is proving to be another threat to the already suffering farm commodity prices. While the full impact of these tariffs on the commodity markets will not be known for some time since the first round of U.S. tariffs was implemented on July 6, the Trump administration is already looking for ways to help farmers offset the potential market declines.
One way to do that would be to utilize the Commodity Credit Corporation (CCC). The CCC, which is a division of the USDA, reportedly can borrow up to $30 billion from the Treasury Department and extend that money to various farm sectors. The CCC could offer support through numerous means including loans, commodity purchases, payments or other operations.
Another option for assistance to farmers affected by these price reductions is called Section 32. This section was part of the fiscal year 2018 March omnibus budget which removed earlier restrictions on the CCC’s activities. This change would enable to CCC to better support prices of agricultural goods.
While these scenarios are just beginning to play out, many questions remain. One important question is, when will these funds be made available to farmers and for how long will they last? There are also many concerns in the industry as to whether or not these type of subsidies are good for the farmers or if the subsidies will merely serve to ‘kick the can down the road’ and put farmers in more debt in the long run.
Yeo & Yeo’s Agribusiness Services Group is closely monitoring the tariff battles between the United States and other countries. We are watching the opportunities available for farmers to offset the potential market declines. If you have questions, reach out to your Yeo & Yeo advisor or me.