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Federal funds should soften ag weather concerns

By Staff | Jul 8, 2019

This spring farmers have faced devastating floods, tornadoes and wet planting conditions throughout much of the Corn Belt. Farmers were storing larger volumes of grain for multiple years in anticipation of better prices. A few saw floodwaters that eroded their land and contaminated that grain. However, multi-peril crop insurance policies do not cover stored grain.

Farmers had already weathered five years of decline in net farm income before these weather disasters. During this same five-year period, farm debt has increased by nearly a third to levels not seen since the 1980s. The farm economy is expected to remain fragile in 2019 as farm profit margins remain tight, production costs are slow to decline, and Chinese tariffs continue to limit U.S. trade. Combine these tough financial concerns with this spring’s weather disasters and those farms affected may suffer both physical and emotional distress.

Late this summer expect two new federal funded programs to begin to provide financial assistance to those impacted by natural disasters and the ongoing Chinese tariffs on U.S. farm production. In addition, annual multi-peril crop insurance coverage provides farmers payments on replant, delayed and prevented planting acres.

New federal disaster funds

Congress passed Disaster Relief funding totaling $19.1 billion. The new law authorizes USDA to distribute $3 billion for famer losses stemming from 2018 and 2019 disasters, including grain destroyed by floodwaters. It provides the Environmental Conservation program $558 million and Emergency Watershed Protection program $435 million. Also, for the Army Corps of Engineers, this law provides just under $2.5 billion total for various flood and hurricane controls, including repairs and emergency operations, as well maintenance and natural disaster repairs such as levees along the Missouri river.

2019 Market Facilitation Program

In late May, USDA revealed a second year of tariff aid payments under the Market Facilitation Program (MFP) totaling $14.5 billion to farmers who produce commodity crops, as well as dairy and hogs. The direct payments for crops will be based on reported 2019 planted acres for each farm but can’t exceed the 2018 plantings.

Each county will be assigned an MFP payment rate based on historical production. All growers in a county will receive the same rate, regardless of the eligible crop grown but must plant their 2019 crops. Program payments will be split into three rounds, the first coming by August. The second payment would come in late fall and the third payment in early 2020, respectively. The latter two rounds of payments could be cancelled if the U.S. and China can resolve their trade dispute.

2018 farm bill programs

This new 5-year federal law was enacted in December 2018 and is currently being implemented by USDA. Funding includes over $6 billion annually for commodity crop and livestock programs including the ARC/PLC program for crops and improvements to the Livestock Indemnity Program (LIP).

The farm bill provides over $7 billion annually for crop insurance programs as farmers will continue to receive crop insurance subsidies. They typically purchase farm level revenue protection products that guarantee revenue using the farm’s actual production history (APH) times their choice of coverage level times the higher of the projected spring price or the harvest price.

Multi-peril crop insurance

Embedded in these crop insurance policies is coverage for replant, delayed and prevented planting. A farmer unable to plant a covered crop can still receive up to 55 percent of the original revenue guarantee for corn and 60 percent of the original guarantee for soybeans. Once the crops are harvested this fall, farmers will submit their actual production to their crop insurance agents. Expect larger than normal crop insurance indemnity payments to be made for both yield and revenue losses.

Steve Johnson is an Iowa State University Extension and Outreach farm management specialist. He can be reached at sdjohns@iastate.edu.

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