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Farm and Food File

By Staff | Jan 20, 2020

Before the year loses its fresh, youthful promise, let’s look at some recent research to, hopefully, address a nagging problem carried over from 2019.

For months last year, U.S. Secretary of Agriculture Sonny Perdue defended three proposed rule changes to the Supplemental Nutrition Assistance Program (SNAP) that will remove an estimated 3.7 million recipients from the program.

The proposed changes were-and still are-strongly opposed by House and Senate Ag Committee Democrats who rejected SNAP changes during the 2018 Farm Bill debate. Perdue persisted, though, and is now poised to implement most by administrative fiat.

One will go into effect April 1. This change, according to SNAP’s administrators at the U.S. Department of Agriculture (USDA), will limit states’ ability to issue waivers for “single, able-bodied adults” to receive SNAP benefits. By itself, the new rule will remove an estimated 755,000 people from SNAP.

Secretary Perdue claims the change is needed because “What we want to do is increase employment” While he didn’t wink when offering that explanation-the rule’s clear intent is to cut costs, not put people to work-there’s a bigger problem with his “want.”

In May 2019, the Economic Research Service (ERS) published a SNAP analysis that completely undermines the Secretary’s claim while confirming what SNAP research has proven for years: SNAP is an economic engine in every community where its dollars flow; cutting it drains its horsepower.

The latter makes sense for two reasons. First, anytime the federal governments sends $58.3 billion, SNAP’s estimated costs in 2019, it’s going to make a big splash-especially in poor communities.

Also, food assistance recipients, literally, spend every SNAP penny they get. In turn, says the ERS, the spending creates one job for every $10,000 in SNAP spent in their community.

That means that if Secretary Perdue knew what his department already knows he would not be advocating budget cuts to an important job generator in poor and rural communities.

And in tough times or in tougher places, SNAP’s economic impact is far bigger, ERS explains.

“During the Great Recession [2008 to 2011] the impacts of SNAP redemptions per dollar spent were larger than impacts per dollar spent on other Federal or State government transfer payments combined-including Social Security, Medicare, Medicaid, unemployment insurance compensation, veterans’ benefits and other government transfer payments”

That’s right. The SNAP program not only creates jobs, in the past it has-dollar-for-dollar-had a larger economic impact than all other major “Federal or State” government transfer payments “combined.”

As such, the planned cuts to SNAP will, according to USDA’s own analysis, limit economic growth and kill more local jobs than Perdue’s cuts will ever create or fill with “able-bodied adults.”

But, to be fair, critics point out, program spending for all USDA food assistance ballooned from $37.6 billion in 2008 to, at the Great Recession’s peak, $79.9 billion in 2013.

It ballooned for two obvious reasons. First, that’s exactly what you should expect in times of widespread economic calamity; all assistance spending climbs during tough times. Also, SNAP participation rates rose from below 70 percent in many states to near 90 percent when eligible recipients simply showed up to claim benefits they qualified for.

Today, however, SNAP’s estimated 2019 cost is 27 percent lower than in 2013 even though the national participation rate remains a historically high 85 percent. (The participation rate for USDA’s federal crop insurance program was 86 percent in 2016.)

So, SNAP costs continue to fall; SNAP is an enormously important economic generator in every community, oftentimes more important than all other government programs combined; and every $10,000 in SNAP money spent creates one job.

With that pedigree, why is USDA, the People’s Department, defying its own research to enact new, restrictive rules that will harm both SNAP recipients and the communities where they live?

The answer defies common sense but at its heart you’ll find more cultural engineering than ag engineering.

The Farm and Food File is published weekly through the U.S. and Canada. Past columns, events and contact information are posted at www.farmandfoodfile.com.

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Farm and Food File

By Staff | Jan 20, 2020

The best way to begin a new year without feeling overwhelmed by what we don’t know is to start with what we do know.

For example, we know the U.S. Department of Agriculture’s (USDA) December World Agriculture Supply and Demand Estimate shows that about 14 percent, or one in seven bushels (bu.), of the 2019 U.S. corn and soybean crops will be “carried over”-remain unsold-when the 2020 harvest begins next fall.

While neither amount is historically large, each is large enough-barring some unpredictable man-made or natural event-to keep the lid on both markets through then, guesses USDA. It estimates the average 2019/20 season price for corn at a rock bottom $3.85 per bu. and, likewise, pegs soybeans’ season average price at an equally low $8.85 per bu.

We also know that last year’s awful spring planting weather dropped soybean plantings from 91 million acres in 2018 to 76.5 million acres in 2019. Given low U.S. prices and forecasted record Brazilian soy production, will U.S. farmers hold 2020 soybean acreage to less than 91 million or will they plant back to 2018’s level?

No one knows.

We do know, however, that today’s revenue (we misname it crop) insurance program will be the key deciding factor. In fact, the big looming market question now is “Which crop, corn or soybeans, will deliver the best revenue insurance payout in 2020 given the bleak price outlook?”

And, ironically, we also know that some major unknowns could make 2020 a better year than it currently appears. Either of two prominent unknowns-another round of unforeseen government payments like 2019’s trade mitigation payments or a return to trade normalcy-could do the trick.

Together, though, the combined impact would be a huge game changer. In 2019, for example, the massive trade mitigation payments alone added 24 percent, or $22.5 billion, figures USDA, to the year’s forecasted net farm income of $92.4 billion.

Secretary of Agriculture Sonny Perdue has already noted, however, that he “hopes” no trade payments will be needed in 2020. For that to happen, though, he knows China needs to buy pre-Trump levels of U.S. ag exports and the new U.S.-Mexico-Canada trade agreement, USMCA, needs to deliver more U.S. ag sales than most trade analysts predict.

Right now, both hopes look forlorn.

First, while China and the U.S. have a “Phase One” deal in principle, neither has yet to reveal, let alone sign, a detailed written deal to end their bitter, 18-month-old tariff war. That troubling fact only adds to current speculation that the amount of purchases the White House claims China will make in each of the next two years-$50 billion, or nearly two times China’s previous record buy-are, indeed, unbelievable.

Second, almost every analysis of USMCA shows that any gain in U.S. ag exports to both Canada and Mexico will be so modest that it likely will be unnoticeable. A 2019 International Trade Commission (ITC) report claims USMCA, when fully implemented a decade from now, will deliver $435 million, or just one percent, more in U.S. ag exports than NAFTA.

Worse, that tiny increase shrinks even more when you subtract the expected boost of $80 million in U.S. ag imports under USMCA. After that, the net increase, $335 million, becomes less than rounding error.

The ITC also forecasts USMCA will generate only 1,700 “new jobs in (U.S.) agriculture.” Interestingly, that’s almost the exact number of Wisconsin dairy farms, 1,654, that went out of business in the last three years, according to that state’s ag department.

And that’s the good USMCA news. Here’s the bad: In November, USDA predicted Canada’s 2020 per capita Gross Domestic Product (GDP) will increase a paltry 0.4 percent while Mexico’s GDP likely will be flat after shrinking 0.8 percent in 2019.

The USMCA upshot is that neither neighbor will be a bigger buyer next year or in the next decade.

Oh, and we know one more thing: 2020 is a presidential election year. That means, given today’s erratic, parochial politics, everything we know today could be absolutely meaningless by tomorrow morning.

And that means that 2019’s challenges were just a warm-up act for what appears to be an even more challenging 2020.

The Farm and Food File is published weekly through the U.S. and Canada. Past columns, events and contact information are posted at www.farmandfoodfile.com.

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