1980s traders skeptical of Trump farm aid

Bloomberg

Traders who lived through the 1980s US farm crisis have a good reason to be skeptical of President Donald Trump’s new plan to help growers.
That’s because they question whether the US would really be able to ship all of the $15 billion in potential federal farm-good purchases as humanitarian aid to poor countries. Instead, they suspect the government will end up stockpiling. Keeping reserves in the country won’t solve the current overhang and, if history is any guide, the pile will just keep on growing.
The US government bought supplies from farmers in the 1980s after Jimmy Carter’s ban on grain exports to the Soviet Union sent prices tumbling. The purchases were through the Commodity Credit Corporation — an entity established in 1933 to stabilise, support and protect farm income as well as prices. Corn and wheat stockpiles wound up climbing to a record in the mid-80s.
“Through executive order, Trump can buy the $15 billion through the Commodity Credit Corporation and then hold it for donation or long-term storage,” said Dan Basse, president of Chicago-based consultants AgResource Co. “I honestly see many pitfalls of all of this as it is a step backwards.”
American farmers are struggling to keep afloat as the tariff spat that started a year ago curbed soybean exports to top buyer China, sending prices tumbling and hurting grower incomes. A gauge of returns from grain futures is trading near its lowest since 1977 and farmer bankruptcies in six Midwest states rose 30 percent in 2018, according to the Federal Reserve Bank
of Minneapolis.
Trump raised tariffs on $200 billion worth of Chinese goods, a move that the Asian nation vowed to retaliate and US farmer groups decried. Seeking to appease his rural voter base, Trump tweeted that the government would use money from the tariffs to buy American agricultural products “in larger amounts than China ever did” and send it to “poor & starving countries” for humanitarian aid.
Traders remained skeptical. In the 1980s, crops expanded just as the export ban caused Soviet Union countries to start buying grain elsewhere. At the time, growers could deliver supplies to the Commodity Credit Corporation below
certain loan rates.
It wasn’t until 1985 that the government cut rate and stoc-kpiles started to fall, said Pat Westhoff, director of the Food and Agricultural Policy Research Institute of the University of Missouri in Columbia.