In a recent column, I discussed the broad, complicated and sometimes overlapping components of the federal farm income safety net. The combination of commodity programs, crop (and livestock) insurance, and standing agricultural disaster assistance programs provide a foundation of federal support for farm income and risk management.
The addition of ad hoc agricultural disaster assistance and ad hoc trade assistance in 2019 add to the support, but also the complexity. Now, some of those programs are being rolled out for producer sign-up and decisions.
Commodity programs. Since the passage of the 2018 Farm Bill in December, producers have been looking ahead to sign-up and looming decisions on new and revised commodity programs.
For dairy producers, the process has already been underway with the new Dairy Margin Coverage program that replaced the previous Margin Protection Program. The new DMC is similar to the old MPP-Dairy program, but with expanded coverage options and reduced premium rates at lower coverage and production levels.
Furthermore, the enrollment that started June 17 was retroactive to Jan. 1, and data already in hand pointed to how much potential DMC payments have accrued at different protection levels since the beginning of the production year.
Producers have until Sept. 20 to enroll and select coverage levels for 2019, or possibly select coverage and production levels through 2023 to receive a premium discount. Data from the USDA Farm Service Agency in late July indicated almost 30% of the 155 licensed dairy operations in the state (as of 2018) had applied. Most of the rest are expected to reach a decision and visit the FSA office before the September deadline.
For crop producers, the one-time decision between Agricultural Risk Coverage and Price Loss Coverage for the 2019 and 2020 crop years still could linger for some time. Enrollment in ARC and PLC is slated to start in September, but the sign-up period and the deadline to enroll are expected to stretch well into 2020.
As with dairy, the longer the wait to decide, the more information will be known regarding expected payments and support. By the time the decision is due in 2020, production levels for 2019 should be known and price levels for the 2019 crop will be much less uncertain. There may even be time to assess at least part of the 2020 production year before making a final decision.
Remember that the pending sign-up is a single decision for the 2019 and 2020 crop years. Producers will begin to make annual enrollment decisions starting with the 2021 crop year, likely with substantial information or expectations about each year before that year’s sign-up deadline.
Ad hoc trade assistance. The big headline for the moment is the announcement and sign-up for trade assistance through the Market Facilitation Program. As announced earlier this year, USDA is providing a second year of trade assistance to partially offset accumulating losses because of ongoing trade conflicts that have adversely affected agricultural exports.
As compared with the estimated $12 billion allotted to trade assistance in 2018, the 2019 round was announced at $16 billion — with $14.5 billion for MFP payments, $1.4 billion for food purchases and distribution, and $100 million for trade promotion.
Details of the MFP program were announced in late July, with a flat payment per county per acre planted to any of the MFP-eligible crops. Additional payment rates were announced for dairy, hogs and certain specialty crops.
The announced payment rates for crop acreage varied from $15 per acre to $150 per acre across the country, based on calculations of export losses by commodity aggregated over all commodities affected and divided over total acreage of affected commodities on a county-by-county basis.
Prevented plant acres in 2019 also are eligible for the minimum payment of $15 per acre provided they were planted to an acceptable cover crop by Aug 1. In Nebraska, the MFP payment rates range from the minimum of $15 in several western counties to as high as $74 in the east in Sarpy County.
While the exact details of the calculations and the determination of the payment rates had not been released as of early August, it appears that certain commodities drove the varying payment rates. Within the state, soybeans likely remained the primary contributor to the payment rate, just as they received the largest payments in 2018. Nationally, it appears that cotton also was a primary driver of the highest payment rates.
Sign-up for MFP assistance started July 29 and continues through Dec. 6. Payments will be made in up to three tranches or rounds, with the first round equal to 50% of the announced payment rate or $15 per acre, whichever is more.
Payments in the second or third round are subject to reevaluation of market conditions as time goes on. Based on announced payment rates and rough estimates of 2019 planted acreage of MFP-eligible commodities, the first round of 2019 MFP crop payments could amount to more than $450 million in Nebraska, not including adjustments for lower payment rates on prevented plant acres or restrictions because of eligibility and payment limits.
For dairy, the payment rate is $0.20 per hundredweight of production history. For hogs, the payment rate is $11 per head owned as of a given day selected by the producer between April 1 and May 15. Those payments should add several million more to the total payout in Nebraska.
Ad hoc agricultural disaster assistance. While the trade assistance is now open for sign-up and the commodity programs are underway or close to it, the details of the ag disaster assistance remain to be addressed.
With legislative language addressing both 2018 and 2019 losses, including assistance for stored grain losses and prevented planting, the program details and calculations will be complex. Expectations remain for the ag disaster assistance to cover a portion of the loss between expected revenue and actual revenue that is not covered by crop insurance and other disaster payments.
Furthermore, the portion of the loss to be covered should be higher for producers that bought crop insurance and bought it at higher levels of coverage. However, it also should be noted that total support was limited to about $3 billion nationally, and individual assistance could be prorated if total qualifying losses exceed the funding cap.
Adding up the effects of all these programs on top of the underlying crop (and livestock) insurance choices for 2019 will be complicated but necessary for producers to figure out how much support the safety net has provided.
As noted previously, all the programs combined may not make up for the production, market and financial losses producers are facing, but the safety net does provide a substantial help in a period of need.