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USDA Details How It Calculated Damage From Trade Disruptions

US Secretary of Agriculture Sonny Perdue on Thursday released a detailed accounting of how the US Department of Agriculture (USDA) calculated estimated damage to US agricultural producers from trade disruptions.

USDA’s Office of the Chief Economist developed an estimate of gross trade damages for commodities, including milk, with assessed retaliatory tariffs by Mexico, China, Canada, the European Union (EU), and Turkey to set commodity payment rates and purchase levels in the trade mitigation package announced by USDA last week (for more details, please see USDA Officially Launches Three Trade Mitigation Programs, on page 1 of last week’s issue).

USDA’s Farm Service Agency (FSA), on behalf of the Commodity Credit Corporation (CCC), is implementing a Market Facilitation Program (MFP) that will provide financial assistance to current producers of commodities that the agency has identified as having lost market demand and been adversely impacted by disruptions to international trade, including milk, soybeans, corn, wheat, sorghum, cotton, and hogs.

The MFP payment for each commodity is intended to offset some of the adverse impact of losing market demand due to trade issues, for example, retaliatory tariffs imposed by other countries.

A payment rate per unit has been set for each commodity to reflect the severity of the impact of trade disruptions to that commodity and the commodity-specific period of adjustment to new trade patterns. For example, the payment rate for a commodity that is heavily dependent on export markets, such as soybeans, will be higher than a commodity for which most production is marketed domestically.

USDA estimated those impacts based on the percentage of 2017 US production of each commodity that was exported in 2017, the share of exports affected by trade disruptions, and the ability of consumers in retaliating countries to source substitute supplies and the sensitivity of consumers in retaliating countries to higher prices for those commodities.

For dairy, the milk equivalent for products facing retaliation was estimated based off the share of value of dairy products exported facing retaliation relative to total cash receipts.

Thus, 2017 milk production totaled 215.5 billion pounds; 2017 exports facing retaliation totaled 4.6 billion pounds, or 2 percent of production affected by trade disputes.

The MFP payment rate assumes that all production will be affected as marketing agreements are reconfigured and new global trading patterns emerge in reaction to the new global tariff structure. The rate is specific for each commodity and reflects the trade damage for each commodity.

Of the seven commodities detailed in USDA’s MFP cost benefit analysis, soybeans are most


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