More trade aid for agriculture, but questions remain

Although a new round of relief payments is headed to farmers, don’t base your planting decisions on it

This information is based on USDA details available as of June 5. More details are expected to be released.

Help is on the way to American farmers and ranchers who are feeling the brunt of the ongoing trade war.

A new round of “trade mitigation aid” totaling up to $16 billion for the farm economy was announced May 23 by U.S. Department of Agriculture Secretary Sonny Perdue.

Like the 2018 program, this year’s assistance package was authorized to help agricultural producers weather the impacts of trade disruption and retaliation involving the U.S. and foreign trade partners such as China. This year’s funding exceeds 2018’s authorization of $12 billion.

As of early June, there are still program details we don’t know. That’s intentional, says my colleague Matthew Farrell, K·Coe’s director of farm program services.

“Our government is very sensitive to creating and administering programs that may affect planting decisions and therefore the market,” Farrell says. “They tried to craft this program in a way to avoid disrupting the markets. They’re also waiting until planting nears completion before releasing more details, just to be on the safe side.”

But here is what we do know:

By far, the largest piece of the 2019 agricultural trade-war assistance package is the Market Facilitation Program. It accounts for $14.5 billion in direct payments to producers. Authorized by the Commodity Credit Corporation Charter Act, MFP will be administered by the Farm Service Agency.

Where the changes are

The biggest change from last year’s trade assistance is that 2019 payments for row crops won’t be based on actual production but, rather, on a single rate of dollars per acre, set at the county level. Each county will have its own rate.

Pending further information, it looks like an acre of corn will receive the same payment as an acre of soybeans in any given county, according to Farrell. The payment will be based on actual 2019 certified planted acres.

“This causes a problem in some of our areas that will have high prevented-planting claims, possibly forcing a big decision on whether or not to plant a really late crop,” he adds.

The total qualifying crop acreage in 2019 cannot exceed 2018’s total acreage. This is another area that could cause issue if farms fallowed large areas in 2018 or had large prevented plantings last year.

Everyone will be curious to see the county rates and how they vary from each other. Farrell believes that, just like Agriculture Risk Coverage payments, there could be questions and concerns if neighboring counties have large variances in payment rates.

Another change is that 2019 could see three tranches, or rounds, of direct payments. That compares to two last year.

This year’s first payment is expected in July or August, after FSA completes its crop-reporting July 15. The second and third payments will be made, if market conditions and trade opportunities dictate them, in November and early January 2020. Only the first round is guaranteed for now, but the percentage of each payment hasn’t been released. This makes budgeting and planning very tough for producers. 

Additional ag assistance

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The Trump administration also announced the trade-relief funding includes $1.4 billion for a Food Purchase and Distribution Program. USDA’s Ag Marketing Services will use the funds to purchase surplus commodities affected by trade retaliation. Those will then be distributed to food banks, schools and other outlets serving low-income individuals.

The overall package also allocates $100 million to an Agricultural Trade Promotion Program to develop new export markets for U.S. agricultural products. 

What to do now?

If you’re wondering how to move forward with this latest announcement, you’re not alone. There’s a lot of uncertainty about MFP details, especially with this year’s delayed plantings. FSA offices are still scrambling for information.

Farrell says the process will be simpler than last year for most crops due to no production being certified. But he advises ag producers not to make planting decisions based on the government’s new program.

“With crop insurance prevented-planting decisions, you can drive yourself crazy wondering what crop you should plant, if you should plant, how many acres or what payment you can expect,” Farrell says. “If you base your plantings mainly on this government program, you might be setting yourself up to be very disappointed.”

For more information, contact Farrell at 662-234-0203 ext. 5113 or [email protected].

Read about the trade-relief announcement at

Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally-managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies, or protect the current owners’ legacy through careful structuring and estate planning, Maxson applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at [email protected].