Expert: Soybean bailout doesn't make up for loss of demand for Minnesota farmers

NINA MOINI: Our top story-- as soon as today, the Trump administration is expected to announce a significant bailout package to help soybean producers and other farmers. President Donald Trump's trade policies have had an outsized impact on farmers. China, the biggest buyer of US soybean exports, isn't buying any beans, and it's leaving Minnesota soybean farmers in a lurch. Here is corn and soybean farmer Paul Freeman from Polk County, in West Central Minnesota, talking about what a bailout would do for him.

PAUL FREEMAN: It helps me today when I get the check if it comes. But long term, it doesn't help me.

NINA MOINI: And joining me now to explain the possible impact of federal aid is Ed Usset, a Grain Market Economist for the University of Minnesota Extension. Thanks so much for your time this afternoon, Ed.

EDWARD USSET: Thanks for having me.

NINA MOINI: I don't know if you caught what Paul Freeman said just before I began talking with you. He said, it helps me today when I get a check if it comes. But long term, it doesn't help me. I know that this wouldn't be an end all fix all for folks, but would you start by explaining just how we got to this point as a nation where soybean farmers need some government assistance?

EDWARD USSET: Well, let's start with a little perspective. Over the last decade, and let's take 2018 and '19 out of the picture, because that was our first trade war. But over the last decade, China has accounted for-- our exports to China, US exports to China-- have represented basically 25% of the total demand for soybeans produced by the United States. And we've cut that off.

Typically in the US, our heaviest export period is around harvest right now, September through the end of the calendar year. We would do most of our exporting to China. And so far this year, we have sold nothing to them.

NINA MOINI: How concerning is that to you?

EDWARD USSET: Well, very concerning. And it's showing in the price. We're looking at cash soybean prices in Southwestern Minnesota, Southern Minnesota, somewhere around $9.20 to $9.40 a bushel. That's a good $3 to $4 less than what was two to four years ago.

NINA MOINI: Let's talk, if you would, about what a bailout package looks like, what getting that extra assistance in a time like this looks like. I know you mentioned 2018, 2019, some other assistance that's been given during other times where there was a trade war. How much money could farmers get? How does it work?

EDWARD USSET: I can't talk about the mechanics of how it would work. I can take you back to the market facilitation program that was put in place in 2018 and '19. And at that time, that program distributed something like $23 billion in payments to farmers.

Now, not just soybean growers, but corn producers and a whole slew of commodities received a lot of money. I saw a figure of $15 billion floated out there this morning. I don't know how attached that is the reality.

NINA MOINI: We'll have to see. Yeah. We don't know the details yet of what this bailout package would look like. I just wonder how farmers use that. Does it get to them right away? And then what do they do to start making up for this lost time?

EDWARD USSET: Well, there's short term and long term effects. And I'm glad you listened to Paul Freeman. I know Paul. I've visited with him in the past.

Short term, these payouts are big, because at $9, $9.30 a bushel, wherever that price is today, I'd say that's a good $2 below the cost of producing those soybeans, even though Minnesota is about to produce a record crop in terms of bushels per acre, not only corn, but soybeans. We've got big crops coming.

NINA MOINI: Right.

EDWARD USSET: So the cash is going to cover the shortfall because we're not making money at these levels. But long term, I have real concerns. China is taking their needs, which are tremendous. They're taking them all to South America, primarily Brazil, a lot out of Argentina also. And I'm concerned that they're learning how to get it all from one source.

NINA MOINI: What do you say to farmers when they're talking to you, like Paul or whoever? Are they telling you that it's looking like they might have to shut down operations? Or what happens if this assistant weren't to come? And then next year, who knows?

EDWARD USSET: I don't think they shut down. If they get the short term assistance, the vast majority will carry on. They'll plant another crop next year. It will be interesting to see the crop mix next year.

I think they will lean more into corn and less into soybeans if these problems are not resolved. But that shift is limited. There are rotational issues, equipment issues. And they just can't run away from soybeans 100%.

NINA MOINI: OK. And then, Ed, would you also explain how a bailout impacts, say, a smaller farm versus a larger farm? I understand larger farms tend to benefit more.

EDWARD USSET: Well, they're larger farms, more acres, they're going to get a bigger payout. Oftentimes, the payouts are based on how much you're farming. Larger farmers will get more. But I think the issue is, do they get enough, small or large, to cover the deficits that are out there this year?

NINA MOINI: What are you going to be watching for then in the coming months. From your perspective, what can be done other than waiting to see what's done at the policy level, at the federal government level? Are there other solutions, maybe, at the state level or just other solutions that you look for or research about in times like this?

EDWARD USSET: Short term, the solutions are few beyond the bailout. We are, in fact, growing the domestic market fairly quickly thanks to renewable diesel and some mandates and tax credits at both the federal and state level. That market is growing.

We've had many new soybean crushing plants built throughout the country in the last two years, roughly a dozen by my count. That all sounds good, but it doesn't make up for a loss of 25% of your demand, which is what China represented the last few years.

NINA MOINI: And just lastly, we talked about 2018, the trade war, the assistance there. What was it like, I guess, when that assistance was applied and folks were coming out of that? Were they back to where they were beforehand, or did they take a hit that never really goes away?

EDWARD USSET: Actually, there was a study out of the General Accounting Office, the GAO, sort of a postmortem on that whole market facilitation program. And they calculated that we actually paid farmers a couple billion dollars more than the damages done to them. So maybe farmers can hope for the same generosity this time around.

NINA MOINI: All right, Ed, we'll leave it there for now. Thank you so much for providing all of this context for us. Really appreciate your time.

EDWARD USSET: Thank you.

NINA MOINI: Ed Usset is a grain market economist for the University of Minnesota Extension.