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Manage your land rent risk for 2021

Uncertainties abound, but farmers need to focus on areas they can control.

Janet Kubat Willette, E-Content Editor

May 18, 2020

3 Min Read

Farmers manage uncertainty on daily basis, but the pandemic and the government response have delivered a new helping of unpredictability.

The congressional-approved CARES Act, which passed in March, introduced a new crop of acronyms and programs for farmers to learn and apply for, including the PPP and EIDL. The Coronavirus Aid, Relief and Economic Security Act contained $9.5 billion specifically targeted for agricultural producers, said Jonathan Coppess, director of the Gardner Agriculture Policy Program and the Bock Ag Law Policy Program and assistant professor in the Agricultural and Consumer Economics Department, University of Illinois.

Cares. Act. funding. for farmers

More recently, the CFAP was unveiled. A $19 billion relief program, the Coronavirus Food Assistance Program includes direct producer support as well as a Food Box Distribution Program.

The HEROES Act was expected to pass the House on Friday, but faced an uphill climb in the Senate. The 1,800-page Health and Economic Recovery Omnibus Emergency Solutions Act contains direct assistance for farmers and ethanol plants among a bevy of other aid.

There aren't a lot of details for many of the programs, but presenters on the latest FarmDoc Daily webinar gave a broad overview.

CFAP Assistance For Farmers

The ARC and PLC programs, the conservation program and crop insurance are in place through the farm bill, Coppess said.

Related:U.S.-China edge closer to confrontation

The Market Facilitation Program was introduced by the Trump administration in response to trade disruptions caused by Trump's efforts to renegotiate NAFTA, now the USMCA, and his tit-for-tat trade war with China that resulted in a phase one agreement earlier this year. Farmers also received assistance last year because of the record-setting flooding.

"The big question I think is: What do we expect for 2021? Can we continue to count on these ad hoc, as needed, support programs?" asks Nicholas Paulson, associate professor and director of graduate programs in the Agricultural and Consumer Economics Department, University of Illinois. "They are much harder to plan around than what we see in the crop insurance program."

Gary Schnitkey, soybean industry chair in agricultural strategy in the Agricultural and Consumer Economics Department, University of Illinois, said that while producers will have many decisions to make in the coming months, they should start thinking about cash rents for 2021.

"There's a lot of big decisions, but actually the next big decision will begin to be made in August, September, October and that will be setting cash rents for 2021," Schnitkey said. "At this point, we would be suggesting you be very careful in setting 2021 cash rents. There may not be an MFP and CFAP payment in 2021 and I don't know what those will be."

Related:HEROES Act unveiled in House

An audience poll with about half of the 325 people online responding found about half of those expected ad hoc payments to run between $0 and $50 in 2021. If that's the case, Schnitkey said, "we're still looking at losses."

While MFP payments have been helpful, they have been capitalized into land, he said.

Payment limits were also briefly discussed, with Coppess saying that unlike farm bill programs, the ad hoc programs have a set amount of money. If there aren't payment limits, it likely won't reach all growers.

Coppess sees the pandemic as a triage situation where the government needs to get food to people who need food first That helps farmers because they are in the business of producing food.

Address supply chain disruption and challenges. Then, look at direct payments.

"I think we look at payments down the road . . .  as we understand the way this is unfolding," he said. That also allows more data to be considered as payment plans are developed.

Download the meeting handout below.

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