The next round of farm bailout funds were announced in late May to the tune of $16 billion.

Corn and soybean producers with large farms in the Midwest will be the primary beneficiaries of the newest round of “help” meant to off set the cost of the tariff war with China.

There are two major problems with the bailout funds and their disbursement. First, the funds are tied to acres planted rather than historic acres and yields. Second, the timing of the announcement has the potential to have a direct effect on the number of acres planted.

Typically, farm subsidies are tied to an accounting of the number of acres a farmer has planted in a particular crop over a number of years. For example, corn subsidies are usually based upon an average calculation of acres in production for a period of time set by the local Farm Service Agency (FSA) office. 

The most recent round of subsidies to afford relief to farmers do not have a historic component. These subsidies are based upon the number of acres reported for 2019.

Having no historic component required of the current round of subsidies has one significant problem: approximately three-quarters of the nation’s corn and soybeans have yet to be planted because of catastrophic weather events.

The devastation of the floods in the Midwest has not ended. The soil has been too wet to plant until recently. The delay in planting, coupled with the timing of the announcement of a second round of subsidies that do not require historic acreage averages could result in a significant number of additional acres with no market available. Farmers, understanding they are guaranteed payment for every acre of corn, would overplant to take advantage of the subsidy.

Similar schemes aimed at the agricultural community have had poor results. For example, in the mid-1990s, when domestically produced ethanol was going to be the next big thing, farms across the U.S. planted corn in record numbers. 

In 1996, corn prices in April were $5.05/bushel, the highest price recorded since the 1960s. By August of 2000, corn prices had fallen to $1.77/bushel. When the bottom fell out of the ethanol market, there was nowhere for the millions of bushels of corn to go.

Because of the glut of corn, farmers throughout the United States were dumping corn on the ground for want of a market. Eventually the mountains of corn disappeared – sold for whatever farmers could get or just allowed to rot – and so did some of the farms not able to weather the financial storm they wrought.

If farmers, already suffering from poor commodity prices and escalating tariff conflicts, are blinded by the short-term monetary benefit of the new bailout, it is safe to suppose next year will see a market overcrowded with corn and soybeans again.

The solution to the poor trade situation the nation’s farmers are in is simple: stop fighting trade wars.

The best bailout a farmer in the United States can receive is the bailout of an open and competitive market. Some may argue the trade wars have been inspired by the lack of open and competitive market. We should never be complacent with the markets currently available to U.S. farmers.

If the tariff wars continue, we need to be focused on how to forge new relationships in markets that have been previously closed or overlooked. The U.S. produces the safest food on the planet. We need to be allowed to sell it wherever the market is the most beneficial.