Following the trade aid announcement earlier this week, farmers were left with more questions than answers. We compiled the most frequently asked questions to provide as much clarity as possible around this program with the information available at this point.
Which crops will receive a payment? According to USDA, producers of alfalfa hay, barley, canola, corn, crambe, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton, and wheat will receive a payment based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019.
Will acres included in a prevent plant claim be covered? No. “We have a safety net program for prevented plant, government insurance perspective, it's pretty lucrative, honestly,” said Agriculture Secretary Sonny Perdue. “The premise behind this market facilitation program is trade disruption and if you don't have a crop to sell, you have difficulty proving a tariff disruption or tariff damage in that regard. We're gonna have to rely on our basic safety net programs through the farm bill for prevented plant.”
Will acres added to a farm in 2019 be eligible for a payment? Yes, if those acres were planted to a Title 1 crop in 2018, according to Perdue. He provided the following example: “If you were planting 1,000 acres last year, and I planted 1,000 acres and you retired, and I took and planted your thousand, so I had 2,000. Those would be eligible because they were they were planted in 2018. But if I had 1,000 acres of grasslands and I said well, I'm gonna go plant wheat or soybeans so I get this payment, that will not be eligible.”
Can I plant a crop that's outside of my normal rotation? Yes. According to USDA, per acre payments are not dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions. Moreover, total payment-eligible plantings cannot exceed total 2018 plantings. Perdue added “If those acres were farmed last year, and in those Title I crops, they will be eligible,” he said.
How will payment rates be calculated? According to USDA, there will be one payment rate per county that will be calculated based on the economic impact the trade war has had on farmers within that county. “There will be a range. We’re not releasing all those payment numbers now. You can appreciate that we have several different mechanisms we need to go through here and other approval processes,” USDA undersecretary Bill Northey said in a press call on Thursday. “It will vary from county to county, depending on the commodities produced in those counties. Certainly, there are commodities that are planted in one county more than another and they’re impacted to a greater degree. But within each county, that number will be same.” On Friday, Perdue reiterated the “leaked” payment rates published by Bloomberg earlier in the week are inaccurate. “You mentioned a $2 amount on soybeans. I can tell you, unequivocally that article was inaccurate,” Perdue said. “I'm not sure where they came up with their guess. But I want to make sure no other media has picked it up. The originating media did not have the correct information.”
Individual payments will be calculated by local FSA offices based on regular summer acreage reporting.
When will payment rates be announced? This is still unclear. On Friday, Perdue signaled it would be after the June acreage report. “Probably after planting intentions report, the middle of July,” he told Chip Flory, but when pressed if it would be after the June acreage report he said, “I’m not saying that for sure, but I want to let people know that they need to make their planting decisions based on what the see in the market.”
Who is eligible for a payment? Perdue confirmed on Friday there would be a means test for this program to determine eligibility, but it would “not necessarily be what people have been used to.” Read: potential for higher adjusted gross income (AGI) limits for eligibility. The disaster aid bill passed by the Senate on Thursday includes language to make producers who earn 75% or more of their income from farming eligible for MFP even if their AGI is more than $900,000. That bill was stalled in the House on Friday and will be picked back up when Congress returns to Washington following their Memorial Day recess next week.
Will there be payment limits? Yes. While USDA officials have not released payment rates, there’s no doubt they will be included. The pending disaster aid bill outlines the following payment limits. MFP 1 payments are capped per person or legal entity as follows:
• A combined $125,000 for eligible crop commodities
• A combined $125,000 for dairy production and hogs.
• A combined $125,000 for fresh sweet cherries and shelled almonds.
It’s important to note MFP payments do not count against other 2014 Farm Bill payment limitations.
When will the first payment be issued? According to USDA, the first tranche will begin in late July/early August “as soon as practical after Farm Service Agency crop reporting is completed.” In other words, don’t ignore that postcard you got in the mail last week, report your planted acres as soon as you can.
What will determine whether a second or third payment are made? Trade negotiations. If the U.S. and China can agree to a trade deal that includes President Xi changing non-tariff barriers and “the things we’ve asked him to do which are absolutely reasonable” the administration will reevaluate the second and third tranche, Perdue said. “I would think that would have a big positive market impact there. We don't want to be seen as giving money if farmers are not harmed by the trade issues,” he added. “We have to look at that and reevaluate that.”
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