WASHINGTON, D.C. — This year, what county your farm is in, more than what crop you grow, will determine the size of your Market Facilitation Program (MFP) tariff mitigation check.
The USDA has made some changes in its second year of MFP payments based on estimated losses farmers have suffered as a result of fewer export sales overseas, notably to China, in the wake of U.S.-led trade disputes. In 2018, it set fixed rates by commodity, from as little as a penny per bushel for corn acres planted, up to $1.65 for soybeans.
This year, pay rates for these and other non-specialty crops are based instead on a yet-unknown formula the USDA used to set a rate for each county. As long as a grower planted one of the following in 2019, they are eligible for the same payment based on acres seeded: alfalfa hay, barley, canola, corn, crambe, dried beans, dry peas, extra-long staple cotton, flaxseed, lentils, long and medium grain rice, millet, mustard seed, oats, peanuts, rapeseed, rye, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, triticale, upland cotton, and wheat.
The per-acre rate for each county is set from $15-$150, and Under Secretary for Farm Production and Conservation Bill Northey explained this includes prevent-plant acres due to weather – as long as they have been planted instead to cover crops.
That land qualifies for the $15 per-acre minimum, if the cover is planted by August 1. Johannson said USDA is still gathering data about how many prevent-plant acres there are.
USDA Secretary Sonny Perdue told reporters in a conference call last week the agency took in “a lot of input” about last year’s MFP to redesign it. It also took into account “the unprecedented weather this spring and summer” across the country “that has stressed already-depressed markets.”
Approximately $14.5 billion of the $16 billion 2019 MFP is earmarked for payments to farmers.
In addition to the non-specialty crops listed above, a second payment category covers specialty crops such as nuts and some fruits (including sweet cherries, at a rate of 17 cents per pound), which are paid differently per commodity.
The third payment category is for dairy and hog producers. Milk producers who were in business as of June 1 will receive 20 cents per fluid cwt. based on production history, and hog farmers are eligible for $11 per head based on the number of live hogs owned on a day selected by the farmer between April 1-May 15 this year. These are higher than last year’s respective rates of 12 cents and $8.
USDA Chief Economist Dr. Rob Johannson said the main goal in determining payment rates was to not distort planting decisions with it. Given the large number of old-crop soybeans in storage, “the last thing we wanted to do was to develop a program that would essentially make producers feel they should plant more soybeans to get a program payment.”
He said the calculation approach was the same as last year: To determine what trade sales could have been in the absence of tariffs. This year, instead of just looking at the previous year’s export numbers, Johannson said USDA considered the previous 10 years and determined the maximum amount of imports those countries imposing tariffs on U.S. goods – particularly China and India – could have made.
“I wouldn’t describe it as the worst-case scenario, but it does describe what our trading partners could be importing from us tomorrow” if the dispute were resolved, he said of USDA’s estimates.
“We spent hours and hours and hours trying to mitigate and reduce any disparities that were outstanding,” Perdue said, adding if a farmer is in a wheat-growing county but grew cotton, for instance, they’re not going to be as well-served by MFP as a grower in the reverse position. “There will be some disparities that will just be impossible to overcome.”
Dr. Scott Irwin, Laurence J. Norton Chair of Agricultural Marketing in Agricultural and Consumer Economics with the University of Illinois, said the 2018 MFP payments went almost exclusively to Illinois and Indiana for soybean export losses. This year, all non-specialty crops listed will receive the same payment rate.
“That’s potentially a big change,” he explained last Friday. “I think farmers are happy that in general the payment levels, I think, are maybe higher than many were expecting,” though he is “definitely hearing some grumbling about what farmers perceive as substantial payment differences in adjacent (or nearby) counties.”
One farmer, Irwin said, asked why his county was assessed at $15 per acre less than two counties over. “We have to get the formulas (from USDA) to really understand what is driving these payment differences,” he said.
For instance, he said one reason the acres in counties in some southern states are assessed at higher rates is likely because they grow cotton. Indeed, looking over rates shows the states that have a number of counties with $100-plus rates include Tennessee, Mississippi, Georgia, Arkansas, Arizona, and Alabama.
In comparison, counties in Illinois range from $55 at the low end to $87. In Indiana, the range is from $44 to $80; in Iowa, $40 to $79; in Ohio, $19 to $89; in Michigan, the $15 minimum to $68; and in Kentucky, $24 to $93.
Applying for payments
Northey said payments will be made in three batches, the first in mid- to late August and the others in November and January. Signup began this week and will end on Dec. 6. Producers need to report their acreage to FSA as part of application. “For the most part, this should be a fairly simple process,” he said.
The first payment, he explained, will be for half of what is claimed but at least $15 per acre. For example, if you have eligible crops in a county assessed at $40, you would receive payment for $20 of that – or half – in the first round. But if your county is only at $15, that is all in the first payment.
Last year, each person or legal entity was limited to a total of $125,000 in claims for combined crop losses and another $125,000 for dairy and hogs combined. This year, the combined limit for all categories is $500,000.
To be eligible, claimants also must either have an average adjusted gross income for tax years 2015, 2016, and 2017 of less than $900,000; or earn at least 75 percent of their adjusted gross income from farming or ranching.
Like last year, the 2019 MFP also includes a food purchase and distribution program of about $1.4 billion. Another $100 million has been budgeted to 48 organizations through the Agricultural Trade Promotion Program to help farmers identify and access new export markets.
To find more details about this year’s MFP – including your county’s payment rate for non-specialty crops under “How Do Payments Work?” – and apply, visit www.farmers.gov/mfp