UPDATE 3-New Trump aid plan for U.S. farmers seen mirroring 2018 package

The Trump administration's second package of aid for U.S. farmers hit by the trade war with China is expected to total $15 billion to $20 billion and involve direct payments, the agriculture secretary said on Wednesday. The U.S. Department of Agriculture is still finalizing the plan, which is likely to prioritize hog and soybean farmers, the products most affected by the trade dispute between China and the United States, Agriculture Secretary Sonny Perdue and industry sources briefed on the plan said.

The world's two largest economies have been embroiled in a 10-month trade war that has cost billions, roiled global supply chains and rattled financial markets. American farmers, who helped carry President Donald Trump to his surprise 2016 election win, have been among the hardest hit. "Currently we are working out the details of the source of the funds which we assume will be similar to ... last year with the Commodity Credit Corporation," Perdue told reporters on a conference call, referring to a Depression-era program created to support farm income. Funds from the Corporation do not need to be approved by Congress.

The USDA in 2018 pledged up to $12 billion in aid to farmers to help offset their crop losses and has to date allocated a total of around $9.4 billion, with $8.52 billion of that as direct payments to farmers. Farmers have complained about the slow pace of payouts from the previous package and the deadline for applications for payments was extended last month to May 17.

The United States hiked tariffs on $200 billion worth of Chinese goods last Friday, escalating the trade dispute as the latest round of talks in Washington to resolve it ended with no progress. Beijing responded with retaliatory tariffs, and the escalation may not be over. Earlier this week soybean prices fell to their lowest in a decade, while benchmark cotton futures dropped to a three-year low.

"This package seems to be driven much more by what's going in with China," a source briefed on the package said. "Therefore you might see the payment rates or the percentage rate that each commodity could get quite a bit different," he said. One of the sources said the USDA had ruled out buying American farm products and distributing them to poor countries as part of an aid package, a possibility Trump had raised Friday that drew criticism.

'FAST-TRACK' While the White House had discussions about another round of aid, no plan was in the works at USDA until last week when Trump announced the second package, one of the sources said, adding that soybean and pork producers were likely to be prioritized.

Kirk Leeds, chief executive of the Iowa Soybean Association, said the USDA had contacted it and other farm groups for suggestions on a new package last week. "The program they had before made a lot of sense," Leeds said. "My anticipation is it'll look very similar to the payments that we had before."

The Trump administration wants any trade deal with China to include purchases of more than $1.2 trillion worth of American products, including agricultural commodities and industrial goods. The countries had appeared on track for an agreement before relations soured earlier this month. Sources said Beijing had backtracked on a series of commitments, prompting the United States to implement a previously delayed hike in tariffs on $200 billion worth of Chinese goods.

The "dynamic changed suddenly," a second source said, noting that USDA officials were racing to put something together. Prolonged economic pain across the American farm belt could complicate Trump's re-election efforts. Farmers have been key supporters of the president, even as his actions on U.S. trade policy have sunk key crop prices.

One of the sources said an announcement was likely to come next week. Perdue declined to give details on the timing. (Reporting by Humeyra Pamuk and Chris Prentice; Additional reporting by Tom Polansek; Editing by Tom Brown)

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