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CFAP helpful but fundamental market improvements needed to return profitability to ag

Article cover photo
CFAP is a two-pronged approach to helping mitigate the economic pain in rural America. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Aaron Putze, APR

The Coronavirus Food Assistance Program (CFAP) announced Tuesday will inject much-needed liquidity into some sectors of the ag economy. But the fix will be short-lived and fall far short of what’s needed to keep farmers whole if market fundamentals don’t improve this growing season.

“The deck has been stacked against the American farmer for several years now, and the pandemic has made a bad situation even worse,” says Michael Dolch, public affairs director for the Iowa Soybean Association (ISA). “It’s not just a backyard domestic crisis but one of global magnitude and one we can’t spend our way out of.”

Totaling $19 billion, CFAP deploys a two-pronged approach to helping mitigate the economic pain crippling rural America. It includes direct payment assistance to qualified farmers and purchasing significant quantities of agricultural commodities for distribution to people in need.

Producers of soybeans and other eligible commodities can apply for assistance beginning Tuesday (May 26) through their local Farm Service Agency (FSA) Service Center. Applications will be accepted through August 28.

The administration says payments will be expedited to eligible farmers within a week to ten days of an application’s approval.

The American Soybean Association, in a bulletin distributed Tuesday, reminds farmers that USDA Service Centers are open for business by phone appointment only. Once the application period opens, farmers are encouraged to call their FSA county office to schedule an appointment.

Eligibility provisions

CFAP payments are available to producers of agricultural commodities who have suffered a 5% or greater price decline from mid-January to mid-April 2020 because of the COVID-19 pandemic, and who are facing increased marketing costs for product in inventory.

Eligible farmers will receive one CFAP payment drawn from two possible funding sources. The first is $9.5 billion in appropriated funding provided in the CARES Act and compensates farmers for losses due to price declines that occurred between mid-January 2020 and mid-April 2020 and for specialty crops for product that was shipped and spoiled or unpaid product. This payment rate for soybeans is $0.45/bushel.

The second funding source uses the Commodity Credit Corporation (CCC) Charter Act to compensate producers for $6.5 billion in losses due to on-going market disruptions. This payment rate for soybeans is $0.50/bushel.

The payment limitation for CFAP is $250,000 per person or entity for all commodities combined. To ensure there is available funding throughout the entire application period, farmers will receive 80% of their maximum total payment upon application approval, and the remaining portion will be paid at a future date as the funds remain available.

Michael Dolch and Grant Kimberley discuss storage options during a farm visit earlier this week. (Photo: Aaron Putze/Iowa Soybean Association)

Soybean payments are estimated at $845 million. Dairy producers are expected to receive $2.8 billion, corn farmers $2.3 billion and hog producers $1.6 billion. Additional payments will be made to fruit and vegetable growers also impacted by the market freefall caused by COVID-19.

“Farmers are needing access to capital,” Dolch says. “So, injecting liquidity and providing some confidence to farmers saddled with low commodity prices is desperately needed. With the onset of the pandemic, even veteran farmers are in distress.”

Sen. Joni Ernst heralded the economic assistance targeting rural America.

“The support is necessary in ag right now and farmers are appreciative,” she says. “But, they’re also anxious to get the economy back to where it’s needed so these direct payments are not needed.”

ISA Market Development Director Grant Kimberley agrees.

Participating in an on-farm video shoot for ISA’s The State of Soy program Tuesday near Maxwell, Kimberley says the infusion of capital will provide much-needed cash flow for some farmers.

But it won’t come close to making farmers whole.

“The need in agriculture is so great,” says Kimberley who farms with his father Rick in central Iowa. “The dollar amount is limited and doesn’t go far when spread across so many ag commodities.

“It will help but doesn’t come anywhere close to what’s needed to truly help the soybean farmer and agriculture turn the financial corner on what has been a very difficult past few years.”

Changes needed

Kimberley and Dolch agree that for the ag economy to pivot to black ink, fundamental changes in key sectors of the ag economy are needed. They include:

· Repopulating and growing domestic livestock, dairy and poultry herds to restore demand for soybean meal;

· Urging the USDA to think outside the box as it formulates updated policy provisions benefiting the rural economy in response to ongoing trade disputes with key historical U.S. trading partners;

· Ending attacks on the Renewable Fuel Standard (RFS) that have been detrimental to biofuel production. As motorists return to the roads this spring and summer, fuel demand will respond accordingly. Repeated attacks on the RFS waste precious time and resources that should be devoted to growing domestic, renewable biodiesel and ethanol production, both of which are key drivers to the market price of soybeans and corn; and

· Holding China accountable for provisions announced in Phase-One of what has been billed an “historic” trade agreement announced late last year between the country of 1.4 billion people and the United States. As many feared, China’s purchases of U.S. ag commodities have been significantly less than promised. Kimberley says prior to the trade war between the world’s two largest economies, China purchased more than 36 million metric tons (mmt) of U.S. soybeans. With nearly half of the current marketing year in the books, that amount has shrunk to just 13 mmt.

“To right the ship, we need marked improvements in key economic sectors of agriculture,” Kimberley adds. “China living up to its promises to buy ‘vast quantities’ of U.S. soybeans would be a good start as would be an end to repeated attempts to gut the RFS.”

Dolch welcomes connecting with soybean farmers to help sort through the myriad of economic resources and provisions that have been announced since the start of the pandemic.

“Farmers are looking at the headlines wondering what programs are truly available and applicable to their operations,” he says. “ISA is here to help sort through the policy blitzes to ascertain what matters most and can be of greatest help during these very difficult and stressful times.”

Dolch can be reached at mdolch@iasoybeans.com or 515-334-1025.

For media inquiries, permission to republish articles or to request high-res photos, please contact Katie James, ISA Public Relations Manager at kjames@iasoybeans.com. © 2020 Iowa Soybean Association. All rights reserved.