Farmers in the waterlogged Midwest who are struggling to plant their corn or soybeans and others who’ve given up and are deciding whether to buy seed for cover crops still lack key information from USDA despite new guidance this week for its trade and disaster aid programs.
Some, but not all, farmers who are unable to plant their normal crops this spring stand to benefit from both the Trump administration’s new Market Facilitation Program as well as the disaster aid bill that President Donald Trump signed into law last week.
USDA’s latest guidance confirmed that unplanted acres will be ineligible for MFP payments, which are designed as compensation for trade disruptions, but the department said acreage seeded to harvestable cover crops may be eligible for a “minimal” MFP check.
Farmers who file for prevented planting benefits on their crop insurance policies, as well as farmers with unplanted acreage who didn’t buy crop insurance, also could be eligible for disaster payments, if they live in an area declared a disaster by the president or USDA. Farmers in other areas may qualify for the payments on a “case-by-case” basis.
The amount of those payments will be limited by the overall $3 billion cap on total agricultural disaster payments in the disaster bill, which also covers hurricane and wildfire losses in 2018.
Farmers who are deciding whether to plant a cover crop now know this: "Presumably, you can take your prevented-planting indemnity, go in and plant a cover crop, and then there might, might, be a top-off to help offset some of that cost for the cover crop," said Jonathan Coppess, a farm policy analyst at the University of Illinois who was an administrator of the Farm Service Agency under President Barack Obama.
Jonathan Coppess, University of Illinois
He and University of Illinois economist Gary Schnitkey say the latest guidance raises new questions for producers, who have been struggling to determine what to do given the uncertainty about how they will be treated under the MFP program, which was announced May 23, and the disaster aid bill, which Trump signed into law last Thursday.
Among the questions now facing farmers with unplanted acres:
- What cover crops will qualify for MFP payments? The latest statement only says that they must have “the potential to be harvested."
- How much is a “minimal” MFP payment? (MFP hasn’t released the overall payment rates for MFP, which will vary by county based on a calculation of the impact of retaliatory tariffs and other trade disruptions. Rules for the program were forwarded Tuesday from USDA to the Office of Management and Budget for final review.)
- What counties will qualify for prevented-planting payments through the disaster bill? The Farm Service Agency has not released a list of the counties. Will contiguous counties also qualify? How will FSA determine eligibility in other areas on a “case-by-case basis”?
- How much will the prevented planting payments be? Under the disaster bill, payments are limited to 90% of the value of a crop, including indemnities, if a producer had insurance. For producers without crop insurance, the benefits would be limited to 70% of the crop value.
- Will the prevented planting benefits be calculated according to the harvest price? USDA said it is “currently exploring legal flexibility” to do that.
- Will farmers who plant cover crops be allowed to graze them or cut them for hay before Nov. 1, the earliest date allowed under crop insurance policies? USDA is considering an earlier date. “Further clarity regarding this haying and grazing date will be forthcoming,” the department said.
Coppess said the uncertainty about the MFP and disaster aid bill is unnecessarily creating problems for farmers as well as insurance agents and FSA county employees.
“The bottom line is this is very indicative of them having jumped the gun on making this Market Facilitation Program announcement before all the other chips had fallen,” he said. “It feels like they’re scrambling to put out one fire after another” since the original May 23 announcement.
Farmers will have some complex calculations to make to decide what they should do. A farmer in central Illinois stands to receive a prevented planting benefit of about $374 an acre on corn, assuming a 200-bushel-per-acre yield history, said Coppess.
Prevented planting benefits are capped at 55% of the crop’s value, but under a complex set of rules, the payments can be reduced to 35% if a cover crop is planted on the same ground. Cover crops typically cost farmers about $25 to $30 an acre, said Coppess.
Schnitkey said the availability of seed for cover crops as well as USDA’s definition of which cover crops are harvestable are both open questions. He said he doesn’t think farmers should be concerned with calculating the impact of a small MFP payment on that acreage. “The payment could be smaller than the per-acre seed costs,” he said.
The issue of disaster designations still needs to be clarified, too.
“It still remains to be seen what disaster-designations meet the requirements. Is it all disaster designation or those related to flooding, or what? Another question does the timing of the disaster designation matter. All of those answers matter as to how many farms will be eligible for payments,” Schnitkey said.
In releasing the latest guidance, Agriculture Secretary Sonny Perdue urged producers not to consider the potential government payments in making planting decisions and said the department would release more details on MFP and the disaster program "in coming weeks."
“I have been out in the country this spring and visited with many farmers. I know they’re discouraged, and many are facing difficult decisions about what to do this planting season or if they’ve got the capital to stay in business, but they shouldn’t wait for an announcement to make their decisions. I urge farmers to plant for the market and plant what works best on their farm, regardless of what type of assistance programs USDA is able to provide," Perdue said.
As of Sunday, 83% of the expected U.S. corn crop and 60% of the intended soybean acreage had been planted, according to USDA's weekly Crop Progress report. At this point, 99% of the corn and 88% of the soybean acreage has usually been sown.
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