The Trump administration’s announcement of a new trade assistance package, plus congressional agreement on disaster relief for prevented plantings, will put billions of dollars into the struggling farm economy, but the prospective aid is injecting new uncertainty into the planting decisions facing growers across the soggy Plains and Midwest.
Agriculture Secretary Sonny Perdue emphasized that the administration doesn't want the $16 billion new trade aid plan to affect farmers’ decisions, but some economists, lawmakers and farmers themselves say that it inevitably will.
There also are still key unanswered questions, including the size of the new Market Facilitation Program payments.
What is known is that the new MFP payments will be based on county rates, which will be calculated according to the trade damage USDA estimates each county has suffered, and that payments will be limited to farmers’ 2019 planted acreage.
Farmers who don’t get acreage planted can file prevented planting claims on their crop insurance, and they could receive additional help in the form of a disaster relief payment. A provision added to the disaster bill before the Senate voted on it last week would provide payments for prevented plantings. The combination of crop insurance benefits and disaster relief could not exceed 90 percent of the planned crop’s value.
The promises of trade assistance and disaster relief come as many farmers are weighing whether to give up on planting corn or to plant soybeans or some other crop — or to give up on planting entirely. The potential government payments, including the restriction of MFP payments to planted acreage, is likely figuring into some growers’ decisions.
“I know USDA doesn't want to affect farmers' decisions, but what I can see happening here is that people may give up on corn and 'mud' a bunch of soybeans in just to qualify for the MFP,” said Scott VanderWal, a farmer in eastern South Dakota who is vice president of the American Farm Bureau Federation.
Scott VanderWal, AFBF
“That's possibly a bad decision as yields could be very poor, and we don't really need more acres of beans right now due to record carryout levels anyway.”
As of Sunday, only 58 percent of the nation's projected corn acreage had been planted, up from 49 percent the week before, according to USDA. On average over the past five years, 90 percent of the corn has been planted at this point. Just 25 percent of South Dakota's expected corn crop, 22 percent of Indiana's and Ohio's, and 35 percent of Illinois' were seeded as of Sunday.
Indiana Corn Growers President Sarah Delbecq, who farms in northeast Indiana near Auburn, said the trade package raised new questions for farmers. “I think the initial reaction was that this was introducing another set of variables into the equation.” The revised MFP “doesn’t look like anything we’ve seen before.”
VanderWal said Tuesday he had only planted 10 percent of the corn acreage he had planned this spring and none of the soybeans. “Our best fields have groundwater coming up through the surface so they are probably lost already,” he said.
The planting restriction on the new MFP payments makes some growers feel “like they are being kicked while they are down,” VanderWal said. “They were looking at negative margins in many cases to start with, then it started to look like the majority of their acres won’t get planted, and they don’t qualify for the MFP program.”
University of Illinois economist Scott Irwin said it’s difficult for farmers to know what they should do given the uncertainty of how big the MFP payment could be and whether USDA will relent on restricting the payments to planted acreage.
But he also says the disaster aid package that passed the Senate last week amounts to a “backdoor” MFP payment for prevented planting acres. In the more recent past, farmers who were unable to plant an insured crop had no federal relief other than their insurance benefits.
“I think it is the clear intention of Congress … to equalize trade mitigation payments between planted and prevent plant acres,” Irwin said of the disaster relief bill.
The disaster bill is the results of months of negotiations between congressional Democrats and Republicans and the White House. There is little doubt that it will become law, but it's not likely to get signed by President Donald Trump until next week.
The Senate passed the bill, 85-8, last Thursday but it still needs final approval from the House. On Friday and again on Tuesday, House Democratic leaders tried to get the bill passed by voice vote, but GOP conservatives blocked action on the measure both days. Putting a bill to a voice vote during a pro forma session requires unanimous consent.
House Agriculture Chairman Collin Peterson, D-Minn., told Agri-Pulse that he tried unsuccessfully to persuade Perdue and Deputy Agriculture Secretary Steve Censky to delay announcement of the trade package for a couple of weeks so that it didn’t factor into growers’ decisions. The announcement of a revised new MFP is “going to affect planting more than if they had used the program they did last year,” said Peterson. The original MFP payments were based on actual 2018 production, not planted acres.
House Ag Committee Chair Collin Peterson, D-Minn.
Sen. Chuck Grassley, R-Iowa, told reporters that he agrees with Peterson that USDA should have held off announcing the program.
“Since the money isn’t going to go out for a few weeks anyway I’m not sure that I understand why it was important to announce it before maybe two or three weeks from now,” he said.
The planting restriction on MFP could continue to be an issue, even with the prospective disaster aid payments.
Some economists, including Irwin, say USDA would be justified in providing MFP payments for unplanted as well as planted acreage. Their reasoning is the trade war with China has affected the prices on which revenue insurance policies are based, as well as market prices.
Prevented-planting insurance “coverage is based on the crop insurance price, and the crop insurance prices are depressed due to the tariff situation,” said John Newton, chief economist for AFBF.
“If you were unable to put a crop into the ground, prevent plant (insurance coverage) provides some benefit, but MFP, the trade aid package, should also provide some benefit because your prevent plant is lower because of the tariffs,” Newton said.
Even with the prospective disaster aid payments, deciding not to plant anything is not an easy decision, because that ground must be maintained during the summer, farmers say.
“You still have to protect that soil in some way, so you’ve got to have a cover crop on it,” said Ted Mottaz, vice president of the Illinois Corn Growers Association. “There’s going to be a cost involved in doing that, too.”
Mottaz, who farms 1,500 acres near Galesburg in western Illinois with his brother and father, said they were finished planting in April last year. As of Tuesday, they had only planted about one-third of their corn acreage and none of the soybeans.
"We’re in a situation that we’ve never been in before, there’s no two ways about it," said Mottaz. "It’s hard to know what the best thing to do is. You read a lot of information and hope you make the best decision."
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