International models used for farmer aid package

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DES MOINES, Iowa (KCRG) - The USDA is trying to help farmers impacted by the trade war with China with a $12 billion aid package, but there has been concern about the price spread between commodities.

The Office of the Chief Economist with the USDA released a methodology report showing how they reached the numbers in the payout plan.

Commodities like soybeans get a $1.65 a bushel while corn only gets $0.01 per bushel.

Iowa State University Extension Economist Chad Hart says the USDA had to look at international guidelines, using models that project potential damages, and specifically looked at tariffs between the U.S. and China.

He says it was limited there was no market observation of something like cross-commodity effects, "They did not look at the breath of all the trade disruption or how those trade disruptions echo or ripple across the ag economy. They were very specific at looking at individual relationships, individual commodities and estimating this potential damage."

Hart adds the first phase of the aid package for farmers is paying out half of the $12 billion promised but there is no promise it will use all the funds. The longer the trade dispute with China goes on, the more there will be a need for money.

For now, the USDA will come back and look at the trade numbers again in December and see if adjustments are needed. Then they can look elsewhere for long-term trade impacts.

Hart says, "If they're beyond China, we'll see some adjustments in these payment rates moving forward, so we're not locked into these for the next go around. They said we're going to re-look at everything."

Hart says at that time, agriculture will likely pressure the USDA to look at indirect impacts of global supply and demand of agriculture products, which has affected a commodity like corn much more than direct Chinese tariffs.