USDA announces details of trade aid11/21/2019 | Economics
By Bethany Baratta, ISA senior writer
U.S. Secretary of Agriculture Sonny Perdue recently announced the second installment of Market Facilitation Program (MFP) program payments used to offset some of the damage done by trade retaliation through the U.S.-China trade war.
Producers of MFP-eligible commodities will now be eligible to receive 25% of the total payment expected, in addition to the 50% they received from the payments issued this summer. USDA began making the second tranche of payments this week and said the third and final round of payments could be made in January 2020 if conditions warrant.
“It doesn’t fix the problem and doesn’t make us whole, but it gives us a little extra cash to pay down notes or at least stay current on some of the money that’s borrowed,” said Iowa Soybean Association President (ISA) Tim Bardole of Rippey.
What’s the issuing of the second round of payments mean?
“It means we don’t have a trade deal with China yet,” Bardole said.
The ag industry — soybeans specifically — has been the tip of the spear when it comes to retaliation as a result of the trade war, said Grant Kimberley, senior director of market development for ISA.
“Farmers didn’t create this situation, didn’t ask to be a part of this situation, but here they are — at the tip of the spear,” Kimberley said.
Details of the payment
The first payment in 2019 was comprised of the higher of either 50 percent of a producer’s calculated payment or $15 per acre, which may reduce potential payments to be made in tranche three, the USDA said.
MFP payments are limited to a combined $250,000 for non-specialty crops per person or legal entity, according to the USDA. MFP payments are also limited to a combined $250,000 for dairy and hog producers and a combined $250,000 for specialty crop producers. However, no applicant can receive more than $500,000.
Eligible applicants must also have an average adjusted gross income (AGI) for tax years 2015, 2016, and 2017 of less than $900,000 unless at least 75 percent of the person’s or legal entity’s AGI is derived from farming, ranching, or forestry-related activities. Applicants must also comply with the provisions of the Highly Erodible Land and Wetland Conservation regulations.
Producers who filed a prevented planting claim and planted an FSA-certified cover crop, with the potential to be harvested qualify for a $15 per acre payment. Acres never planted in 2019 are not eligible for an MFP payment, the USDA said.
Acreage of non-specialty crops and cover crops had to be planted by August 1, 2019, to be considered eligible for MFP payments, the USDA said.
MFP signup at local FSA offices will run through Friday, Dec. 6, 2019.
A trade deal with China has yet to be fully negotiated, and in February, a projected large soybean crop from South America will hit the market. The window of opportunity to sell U.S. soybeans at a competitive price before South America’s crop comes to market is narrowing.
Kimberley said the effects of the trade war would extend beyond the months covered under the current MFP payments.
“From a realistic point of view, even if a trade deal is signed soon, it could take two years before the United States sees the full benefits of its implementation,” Kimberley said. That calls into question the future necessity of payments beyond the potential January tranche.
Perdue told farm broadcasters in Kansas City that they’ve already fielded questions about a 2020 payment, Hoosier Ag Today reported.
If a negotiated trade deal includes the sales of $40 to $50 billion in U.S. farm goods to China as previously discussed, it could be a major deal for the United States, he said.
“The purchase quantities are double what they’ve ever bought before,” Perdue said. “Now, you know, the proof’s in the pudding. We want to see the contracts. We want to see the orders here, not just the commitment. But if we have China buying twice as much as they’ve ever bought before, that ought to move the markets. It ought to move the markets significantly.”
Bardole said he’d rather have trade over aid.
“I don’t like to have to have the MFP payments, but by the same token, U.S. farmers have spent 40 years building a market in China,” Bardole said. “The government — whether you think it’s justified or not — has done irreparable damage to our markets in China, destroying the work the soybean industry has done to open that market.”
Contact Bethany Baratta at email@example.com.
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