GAO: USDA Overpaid in Trade War for Certain Commodities and Regions of the Country

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The Market Facilitation Program created by USDA to offset the impacts of the trade war ended up paying out about $23 billion over 2018 and 2019 to commodity producers. A government report released Monday shows USDA’s payment methodology favored certain crops and regions of the country. (DTN file photo)

The Trump administration’s payments to farmers to offset the effects of the trade war with China — the Market Facilitation Program — ended up overpaying for certain commodities and undervaluing others, according to the Government Accountability Office.

The GAO, the investigative arm of Congress, released a report on Monday on the MFP in 2018 and 2019 examining how $23 billion was paid out in the program. The GAO showed payments by USDA significantly overestimated the actual trade damages suffered by producers of certain commodities.

Because USDA “decoupled” an individual commodity crops trade damage and its payment rate, the payments ended up not really reflecting trade damages. In 2019, corn producers received $3 billion in more in payments than USDA’s estimated trade damages to corn while payments for soybeans, sorghum and cotton producers were lower than the estimated trade damages, the GAO stated.

Commodity crops — corn, cotton, soybeans, sorghum and wheat — received 94.5% of MFP payments while specialty crops received about 1.5% of payments. Dairy and hog operations received about 4% of payments.

USDA also adjusted how it calculated payments between 2018 and 2019, changing the formula for how trade losses were calculated. For 2018, USDA used export totals from 2017 to estimate impacts on trade totals. In 2019, USDA shifted to select the highest total export value from the past decade for commodities to calculate losses. That boosted payments for commodities such as corn and wheat.

USDA’s county-based payment methodology in 2019 translated into higher payments in the South based on the county’s crop mix. A corn farmer in a southern county received higher payments than a corn farmer in a northern county because of other crops planted in that county such as cotton, sorghum and soybeans. The GAO noted, though corn yields are higher in the Midwest and West, corn producers received an estimated $69 an acre in the South; $61 an acre in the Midwest; $34 an acre in the Northeast; and $29 in the West.