It's been a rocky road for American farmers under the Trump administration rule. Personal incomes have plummeted the most in three years last quarter, as the entire industry is on the verge of collapse from the ongoing Sino-American trade war.
The Commerce Department on Monday provided new details of the intensifying pressure on farmers hit by the trade war. The report cited a huge decline in farm proprietors’ income in March.
Trade wars, depressed commodity prices, natural disasters, and a synchronized global slowdown have brought many farmers onto the edge of bankruptcies.
"Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier."
As of Feburary, the Trump administration paid out a total of $7.7 billion in farm aid to offset the effects of retaliatory tariffs.
The aid "certainly was appreciated," Blake Hurst, the president of the Missouri Farm Bureau, recently told Yahoo Finance. The bailout propped up farm income in 1Q19, but earnings fell by an annualized $11.8 billion in the same period, according to seasonally adjusted data.
Hurst warned that the bailout "is not enough in the sense that it no way makes us whole for what we suffered from these trade disputes."
Trump's spending plan for 2020, which was submitted to Congress, would reduce federal subsidies for crop insurance to small farmers. It calls for crop insurance premiums to 48% from 62% and limits current subsidies for growers who make less than $500,000 per annum. A move that could paralyze small farmers.
Well before the trade war started, farmers have been battling deflation for 96 months, with Thomson Reuters/CoreCommodity CRB Index dropping around 30% since the April 2011 high. This drop in price has crushed rural America for years, which means fixed capital investments by farmers have suffered.
A surge in December income was "likely a function of gyrations in federal subsidy payments" because of the farm bailout, Stephen Stanley, chief economist for Amherst Pierpont Securities, wrote in a note to clients.
Trump has promised to "Make Farmers Great Again" - but as Zerohedge readers already know by now, when government intervenes in markets - they tend to create more harm than good.
"We’re doing trade deals that are going to get you so much business, you’re not even going to believe it," Trump told an energized crowd at American Farm Bureau Federation’s annual meeting in New Orleans earlier this year
While Trump whispers sweet nothings into the ears of Americans farmers, telling them what they want to hear so he can get re-elected in 2020, the entire farm complex is teetering on the edge of disaster: a perfect storm that has been in the making for many years, could unleash a monsterous bankruptcy wave in rural America.