January 3, 2019 / 9:54 PM / a year ago

As loans and aid dry up, U.S. farmers face fresh challenge from shutdown

CHICAGO (Reuters) - U.S. farmers, already battered by the U.S.-China trade war, are facing increasing anxiety as the partial government shutdown nears the two-week mark, leaving crucial aid and loan payments in limbo.

FILE PHOTO: A farmer watches as corn kernels are dumped into a grain elevator during a harvest on a farm near Dixon, Nebraska, U.S., October 26, 2017. REUTERS/Lucas Jackson/File Photo

The shutdown has blocked assistance for many farmers, who at this time of year apply for federal loans as they pay bills due from the previous year and begin budgeting for next season’s planting. It is also affecting aid payments promised to allay the effects of the trade war.

The timing is particularly bad for U.S. farmers, who are already suffering the fallout from the trade war’s raised tariffs and low prices for a top export crop, soybeans, with purchases by China lagging previous years.

“It’s just bad news on top of everything right now,” said Brian Duncan, whose family farms corn and soybeans and raises hogs in northwestern Illinois.

The partial shutdown was triggered last month by President Donald Trump’s demand for $5 billion to fund a U.S.-Mexico border wall. Democrats now controlling the House of Representatives have vowed to fund the government through legislation, but Trump has insisted that any measure to fully reopen the government include wall money.

Pressure on Trump and lawmakers to end the partial shutdown is growing from the agricultural sector. Many of the nation’s 3.2 million farmers and ranchers are Republicans, and have been steadfastly loyal to the president. But some farmers have warned their support for a Trump campaign in 2020 is not guaranteed if the farm economy worsens and trade disputes continue to threaten demand for U.S. crops.

About a quarter of the federal government, or 800,000 workers - including some from the U.S. Department of Agriculture - are off the job.

The USDA’s Farm Service Agency (FSA) managers and supervisors were instructed to cancel all previously arranged loan closings when the shutdown started, according to the agency’s shutdown plan posted online. Agency officials could not be reached for comment Thursday.

Commodity traders and farmers alike are also growing nervous that the USDA will also push back or possibly cancel a slew of global supply and demand grain reports set for release on Jan. 11. The data is watched by farmers when making their planting plans.

LEVELS OF UNCERTAINTY

U.S. grain farmers have been increasingly turning to the FSA for loan assistance as they struggle with low commodity prices and trade issues in recent years. Banks, too, have relied on the agency to help guarantee the loans they are issuing to farmers – particularly for shorter-term farm operational loans.

“This is the time of year when farmers are talking to their bankers to get operational loans, and the money from the federal government is not coming in,” said Ted Seifried, vice president of the Zaner Ag Hedge Group in Chicago, who works with farmers.

The government last year also pledged up to $12 billion in aid, much of it in direct payments to soy, pork and dairy farmers, to help offset some of the losses for crops hit by retaliatory Chinese tariffs imposed in response to Washington’s tariffs on Chinese goods.

The deadline to apply for the aid is Jan. 15, yet the FSA offices where farmers must submit their applications have been shuttered since Dec. 28.

FILE PHOTO: Lighting strikes over a barn surrounded by a soybean crop in Donnellson, Iowa, July 13, 2012. REUTERS/Adrees Latif/File Photo

Some farmers had been hoping to plant more corn, in the hopes that China will increase its corn imports for ethanol production. But planting corn can be more expensive than soybeans - a cost many operators cover through loans or aid payments.

For Duncan, a wet and snowy harvest season meant he was not able to finish harvesting last year’s corn until Dec. 31 - making it too late for him to apply for the corn trade aid for now.

“Between the tariffs and the government shutdown, it’s adding levels of uncertainty to farming that no one wants,” said Duncan, 54.

Reporting by P.J. Huffstutter, writing by Caroline Stauffer, additional reporting by Julie Ingwersen in Chicago and Ayenat Mersie in New York, editing by Rosalba O'Brien

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