Ag Policy Blog

Brazil Questioning U.S. Farm Programs as Crop Prices Slide

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Will Brazil take another run at U.S. farm programs in the World Trade Organization?

Reuters reported late last week that "Brazil and the United States may be headed for another clash" over U.S. farm programs. The article stated Brazilian officials are collecting information to show that the U.S. "is increasing subsidies for soy and corn farmers, which threatens to further push down prices for key crops grown in the South American country and hurt its already sputtering economy." Reuters cited four Brazilian officials who spoke on the condition of anonymity.

Reuters added that U.S. farm programs would be an issue Brazilian officials would raise when Brazilian President Dilma Rousseff comes to Washington in June.

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Reuters: http://dld.bz/…

Brazil and the U.S. have a lot of history when it comes to U.S. farm programs. Brazil sued in the WTO over cotton subsidies stemming from the 2002 farm bill. Even after losing the case, the U.S. was willing to pay Brazilian cotton producers $147 million a year rather than immediately change cotton programs. The 2014 farm bill effectively removed cotton from being part of Title I commodity payments. The U.S. settled with Brazil through a final $300 million lump-sum payment just before Brazil was ready to impose punitive tariffs on U.S. products. All told, the U.S. spent $880 million from 2010 to last year over cotton programs.

Several U.S. business groups raised questions in 2013 about programs in the House and Senate versions of the farm bill that eventually became the Price Loss Coverage program. The U.S. Chamber of Commerce, National Association of Manufacturers and the National Foreign Trade Council were among the groups questioning aspects of PLC. At the time, PLC was going to be based on planted acres instead of base acres. Pegging PLC to planted acres would have run a higher risk of the WTO calling declaring PLC a price-distorting program.

To bring a WTO case against farm programs, a member country must prove the existence of the subsidies and the effect of those subsidies. Brazil would have to show, for instance, that U.S. farm programs created "significant price suppression" for its commodities.

The 2013 report drafted by the Chamber of Commerce had fewer concerns about payment distortions in the shallow-loss program -- Agricultural Risk Coverage. However, a case could still be made because of the volume of exports that come from corn and soybeans, that ARC leads to a "substantial proportionate influence" on export markets and would "protect or insulate" U.S. farmers from lower prices.

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Comments

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CRAIG MOORE
5/7/2015 | 11:01 AM CDT
Am I the only one here that thinks Jay totally missed the point and tossed a response in from far, far left field?
Jay Mcginnis
5/7/2015 | 6:10 AM CDT
Raymond, that is capitalism,,,, are you suggesting the government should pay farmers to level the field? I bet you secretively listen to NPR and voted for Obama???
Raymond Simpkins
5/4/2015 | 9:50 AM CDT
Talk about disadvantages where else can you buy cheap land.Clear millions of acres of forest,and grow two crops per year.