April 6, 2018 / 9:54 PM / in 7 months

UPDATE 5-U.S. lawmakers skeptical of promises to shield farmers from trade dispute

(Adds comment by White House adviser Kudlow, details on U.S. markets, paragraph 9)

By Tom Polansek

OVERLAND PARK, Kan., April 6 (Reuters) - U.S. lawmakers and the farm industry were skeptical of the Trump administration’s promise to shield farmers from the rapidly escalating trade dispute between the United States and China, concerned about the lack of details in protecting the U.S. agricultural export sector now embroiled in the back-and-forth.

Major farming states supported U.S. President Donald Trump in big numbers in the 2016 election, but lawmakers from those states were harsh in their criticism on Friday of proposed tariffs that have unsettled both the industry and agricultural trading markets.

It is unclear what types of options exist to protect the sector, though expectations were that the omnibus farm bill, the U.S. government’s main food and agricultural policy tool, could include crop insurance and potentially other subsidies that could address the concerns. That bill is up for renewal this year.

“This is not a good situation. It just isn’t,” said U.S. Senator Pat Roberts, a Kansas Republican who heads the Senate Agriculture Committee.

However, no specific proposals for protecting farmers have been suggested, and farming industry representatives were leery of tariff relief.

“We have heard no specific proposals and haven’t offered any,” said Will Rodger, director of policy communications at the American Farm Bureau Federation, the largest farm lobby group in the nation. “Our preferred outcome is a negotiated solution so that neither China nor the U.S. actually imposes tariffs.”

Beijing rattled markets on Wednesday by threatening extra levies on U.S. goods including soybeans, the most valuable U.S. farm export to China, in retaliation for earlier U.S. trade actions. Fears later eased as many cited China’s reliance on U.S. soybeans.

But on Friday, China warned it was fully prepared to respond with a “fierce counter strike” if the United States follows through on Trump’s latest threat on Thursday to impose tariffs on an extra $100 billion in Chinese goods.

White House economic adviser Larry Kudlow said the dispute might be resolved in a matter of months but that Trump’s threat was not a bluff. U.S. stocks tumbled on Friday as investors worried about an escalating trade war.

The administration has said it would find a way to protect farmers, but U.S. Department of Agriculture Under Secretary Bill Northey told Reuters on Thursday there were no specific plans yet. “There’s a lot of different options out there,” he said.

U.S. Senator Jerry Moran of Kansas, a Republican, said on the sidelines of a commodities conference in Kansas on Friday that he would support help for farmers, even though taxpayers would have to foot the bill for additional support for agriculture. Kansas was the nation’s largest producer of wheat and sorghum in 2016, according to the U.S. Department of Agriculture.

He added that the “better way to handle this is not to put the farmer in the damaging position in the first place.”

On Thursday, before Trump threatened extra tariffs, Roberts said the trade conflict created a background of uncertainty for negotiating the farm bill. The current bill was passed in 2014 and was expected to cost $489 billion over five years; it expires at the end of 2018.

“Farmers have to have some degree of predictability and stability,” he said on the sidelines of the U.S. Commodity Futures Trading Commission conference in Kansas. “This kind of environment certainly doesn’t provide that.”

U.S. farmers – particularly those who grow commodity grains and oilseeds, such as corn and soybeans – already benefit from a number of government-backed programs. These include subsidized premiums for federal crop insurance, which helps protect farmers against weather and insect damage and against low prices for their crops.

But whatever options the White House chooses, they could cause more problems than they solve, said Chad P. Bown, a trade expert with the Peterson Institute for International Economics. He said tariff-specific subsidies to U.S. farmers could incentivize them to produce more goods at a time when global grain supply is at near-historic highs.

In the previous century, farm bills subsidized farmland and grain purchases, a practice that was eventually ended.

“The question is: What kind of support would he have in mind?” Bown said, referring to Trump.

Soybean futures have dropped 1.5 percent over the last five days as the dispute has heated up.

“If (farmers) are worried about the price that they’re going to get eventually, they’re going to invest less, they’re less likely to spend on fertilizer and seed, though most of those decisions have been made already,” said Jonas Oxgaard, senior analyst at Sanford C. Bernstein & Co.

“It is my hope the Trump Administration will reconsider these tariffs and pursue policies that enhance our competitiveness, rather than reduce our access to foreign markets,” U.S. Senator Joni Ernst of Iowa said in a statement.

Iowa is the No. 2 U.S. agriculture state in terms of farm cash receipts, led by corn, hogs, soybeans, cattle and dairy products. Its soybean production was valued at nearly $6 billion in 2016, according to the USDA.

Reporting by Tom Polansek in Overland Park, Kansas; P.J. Huffstutter and Karl Plume in Chicago, Ayenat Mersie in New York and Richard Cowan in Washington Writing by David Gaffen Editing by Susan Thomas and Matthew Lewis

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