Between the FARM Act originally proposed this fall, to the new Economic Loss Assistance program included in the continuing resolution (CR) released this week, financial aid for farmers has been a highly debated topic in the second-half of this year. However, a new AgWeb farmer poll shows farmers are overwhelmingly in support of financial relief before the end of the year.
As agriculture faces a recession, agricultural groups and ag lenders pushed for Congress to include emergency financial aid for farmers in the stopgap bill. The text was released late Tuesday night and included $31 billion in total aid for producers, including $10 billion in direct payments for farmers and $21 billion in ag disaster aid, a one-year extension of the 2018 farm bill and year-round E15.
The proposed CR does include an extension of the 2018 farm bill, but it does not include the push to raise reference prices.
You can dive into all the details of the stopgap spending measure here, which still needs to be approved by Congress.
Farmer Poll Results
AgWeb asked farmers in a poll whether Congress should pass economic aid for farmers before year-end, as well as if Congress should raise reference prices in a farm bill extension. The poll garnered more than 2,500 responses:
- 71% of respondents said Congress should approve emergency economic aid
- 29% responded no
- 81% of farmers said Congress should raise reference prices when extending the 2018 farm bill.
- 19% said no.
Possible Payments for Farmers
It’s still unclear exactly what the per acre payments will be if Congress approves the CR this week. Farm CPA Paul Neiffer estimated per acre payment amounts via the Economic Loss Assistance program based on his knowledge of the provisions. While USDA will make the final calculations, based on Neiffer’s estimates, producer payments look like this per acre, using the following calculation: (USDA’s Projected Cost of the Crop – National Projected Returns) x Eligible Acres x 26% = Total Payment.
- Corn: $43.80
- Soybeans: $30.61
- Wheat: $31.80
- Cotton: $84.70
- Rice: $69.66
How Ag Financial Aid Will be Determined
Neiffer says there is a payment limit of $125,000 dollars, which is down from the $175,00 originally proposed in the FARM Act. He says it’s also key to note with the updated relief, if 75% of your total gross income comes from farming, which includes wages and interest and dividends, then you qualify for the double payment.
The $10 billion in direct payments, along with the $21 billion in disaster aid, could help the farm economy in the coming months, according to Neiffer.
“Bottom line is you got an extra $10 billion of injected liquidity into your system automatically,” Neiffer said. “And then for those farmers that were facing some type of disaster, like drought, wildfire, hurricane, etc., you’re going to get an extra about $10 billion for 2023 and an extra about $10 billion for 2024. There’s $2 billion automatically allocated for livestock out of that $20 billion, and then there’s some other carve outs for forestry and honeybees and so on and so forth, but this is an extra $30 billion that’s going to get pumped into the farm economy here in the next three to four months.”
Economists at the University of Illinois calculated payments, which came out to be slightly different than Neiffer’s estimates. According to U of I economists, the payments will be:
- Corn: $42.94
- Soybeans: $27.69
- Wheat: $19.07
- Sorghum: $25.11
When will payments be received by farmers?
Farm Journal Washington Correspondent Jim Wiesemeyer reports if Congress passes the measure, the economic aid will come 90 days after enactment.
As for ag disaster, the push is on to use the 2020 approach where most payments came out of USDA’s Kansas City office.
How Does This Compare to the FARM Act?
The Farm Assistance and Revenue Mitigation (FARM) Act was proposed earlier this year. The bill was authored by Rep. Trent Kelly, R-Miss., on the House Ag Committee. That payment calculation was much higher than what’s included in the CR this week and based on the following: (USDA’s Projected Cost of the Crop – National Projected Returns) x Eligible Acres x 60% = Total Payment.
Possible payments under the previously proposed FARM Act totaled nearly $20 billion, and per acre payments were estimated at:
- Corn: $101
- Soybeans: $53
- Wheat: $73
- Cotton: $195
- Rice: $84
- Sorghum: $97
- Oats: $177
- Barley: $0
Mixed Reaction to Potential Direct Payments to Farmers
Many agriculture groups and associations have released statements in favor of the potential relief in Congress. The American Soybean Association (ASA) says inflation, historically high input prices, falling commodity prices, and a spate of storms have led to tougher-than-normal times for U.S. farmers, and the price of soybeans has dropped 40% in just two years.
“We appreciate that congressional leadership heard our fourth-quarter plea and understood the very real consequences of not including economic and disaster aid in their plans,” says Caleb Ragland, president of the ASA and soybean farmer from Kentucky. “This is a much-needed win at a time that has been exceptionally hard for many of our country’s farmers.”
Pete Meyer, crops economist with Muddy Boots Ag, says with agriculture in a recession, the relief is needed, but he’s worried about what impact it could have on input prices and other inflated prices that are causing farmers to see costs below breakeven.
“It is needed,” Meyer says. “I mean, we talk to plenty of regional banks, and this is renewal season, and the banks say they are having a difficult time for sure. It’s a sad commentary on what the farm economy looks like, but the fact of the matter is, there are marginal farmers out there. And what this does is it allows the marginal farmer or the hobby farmer back in the game.”
Meyer says this aid could prove to be problematic, pointing to the Market Facilitation Program (MFP) as one reason why.
“In my opinion, that’s where the inflation cycle started, because everybody wanted their piece of the pie. So now you have you have direct payments, which is probably going to end up in the pockets of of your input supplier, because your input supplier is probably not going to lower his or her prices because now they know you have a few extra dollars in your pocket.”
Is a Reset in the Farm Economy Needed?
Meyer says what the farm economy really needs is two-fold: more demand and a reset in input prices.
“Where we could get that demand from, I can point to sustainable aviation fuel just as a as a perfect example of that,” he says. “But who knows what the rules are on 45Z or sustainable aviation fuel. So that’s still an unknown.”
Meyer says the second thing the ag economy needs to see is a reset, which he says is already starting to take place in the used equipment market.
“You see some some fairly new 2-to-3-year-old combines trading for a fraction of what they traded new just two years ago, but we’ve not seen the reset on the input side. It’s your fertilizer, your seed and everything else that goes along with it,” Meyer says. “So the problem is now is that it might this might be another year where the input supplier is going to hold tight on his or her prices.”
