Details announced for 2019 MFP payments

Kent Thiesse
Farm Management Analyst and Vice President, MinnStar Bank

On July 25, USDA announced the details for the $16.0 billion trade assistance package for farm operators. A total of $14.5 billion, which is the largest portion of the aid package, is designated as direct payments to farmers, in the form of market facilitation program (MFP) payments.

The MFP payments are being made to offset the financial losses incurred from the impacts of ongoing negative trade situations with China, Mexico, Canada, and other countries.

2019 is the second year that farmers have been eligible for MFP payments. In 2018, approximately $8.5 billion in MFP payments were made to farm operators, with payments being made on the actual production of various crop commodities, and commodity payment rates being based on the calculated negative impact from the ongoing tariffs and trade situation. Soybean producers received the largest payments at $1.65 per bushel, with wheat producers receiving $0.14 per bushel, corn producers receiving only $0.01 per bushel, and many commodities receiving no payment.

In 2019, the MFP program will be based on total planted crop acres and will include a wider range of commodity crops.

Following is a brief is a brief summary of the details for 2019 MFP payments to farmers:

• Sign-up for the MFP program will be from July 29 through December 6, 2019 at local USDA Farm Service Agency (FSA) offices, provided that farmers are eligible for the MFP program and have certified their 2019 crop acres at the FSA office. Farmers can find more details on the MFP program and how to enroll in the program at: https://www.farmers.gov/manage/mfp

• Producers of corn, soybeans, wheat, alfalfa hay, barley, canola, crambe, dried beans, dry peas, extra-long staple cotton, flaxseed, lentils, long and medium grade rice, millet, mustard seed, oats, peanuts, rapeseed, rye, safflower, sesame seed, small and large chickpeas, sorghum, sunflower seed, temperate japonica rice, triticale, and upland cotton are eligible for MFP payments in 2019.

• Payments will be based on the total planted acres to those crops on a given farm unit and will not be dependent on which specific crops were planted in 2019. The total acres eligible for 2019 MFP payments can not exceed the amount of eligible crop acreage that a farmer planted in 2018, except for any crop acres that were added in 2019 due to land purchases, land rental contracts, family arrangements, etc. This does not include converted CRP acres.

• 2019 prevented planted crop acres will be eligible for minimal 2019 MFP payments ($15 per acre), provided that an eligible cover crop is seeded on those acres by August 1, 2019. Prevent plant acres that are not planted to a cover crop are not eligible for MFP payments.

• The 2019 MFP payments will be paid on a single county payment rate that was calculated based on the historical crop mix and production level in a county, as well as the likely negative financial impact that resulted from the added tariffs and negative trade situation.

• County payment rates range from $15 to $150 per acre, with the highest payment rates going to some counties in Southern States that have a high amount of cotton production. Payment rates in the Midwest were lower, with county payment rates averaging about $55 per acre in Minnesota, $66 in Iowa, and $69 in Illinois. County payment rates for all eligible counties in the U.S. can be found at: https://www.farmers.gov/manage/mfp

• In Minnesota, county payment rates ranged from $15 per acre in St. Louis County to $79 per acre in Hubbard County. In Iowa, payment rates range from $43 per acre in Dubuque County to $79 per acre in Cherokee County. Most counties in Southern Minnesota and Northern Iowa have payment rates from $60 to $75 per acre.

• The 2019 MFP payments will be made in three different tranches (or rounds), with the first round of payments likely to begin occurring in in mid-late August. The second and third rounds of payments are not guaranteed. If these payments occur, they will likely be made in November, 2019 and January, 2020, based on an evaluation of continuing trade related impacts on the affected agricultural commodities.

• The first MFP payment for crops will be the higher of 50% of the county payment rate or a minimum of $15 per acre. For example, a producer in a county with a payment rate of $60 per acre would receive an initial payment of $30 per planted acre, while a producer in a county with a payment rate of $25 per acre would receive an initial payment of $15 per acre. Farmers with eligible prevented planted acres in 2019 would receive $15 per acre in the first round of MFP payments.

• If warranted, the remaining 50% or the balance of the MFP payments, based on county payment rates, would be made in the final two rounds of payments. There are no provisions for additional MFP payments on prevented planted acres in the final two rounds of payments.

• Hog producers will qualify for 2019 MFP payments of $11 per hog owned on a specified date between April 1 to May 15, 2019 (producers select the date). Half (50%) of the eligible payment will be paid in the first round of payments. The 2018 payment rate was $8 per hog.

• Dairy producers that were in business on June 1, 2019 will also be eligible to earn a MFP payment of $.20 per hundredweight (cwt.), based on their production history. Again, 50% of the eligible payment will be made in the first round of payments. The 2018 MFP payment rate was $.14 per cwt.

• Producers of specialty crops will also be eligible for MFP payments. This includes a MFP payment rate of $146 per acre for producers of hazelnuts, pistachios, and walnuts.

• There is a payment limit of $250,000 per person or legal entity for the crop MFP payments, and a separate $250,000 payment limits for hog and dairy producers, as well as for producers of the specialty crops. No individual or entity can receive more than $500,000 in total MFP payments. The 2019 payment limits are double the payment limits for the 2018 MFP program. In addition, producers must have an average adjusted gross income (AGI) of less than $900,000 for the 2014, 2015 and 2016 tax years to be eligible for MFP payments, unless more than 75 percent of the AGI was derived from farming and ranching.

The trade assistance package also includes $1.4 billion for the Food Purchase and Distribution Program (FPDP), which will be used to purchase food commodities of trade-affected commodities for distribution to schools, food shelves, and other low-income assistance programs. In addition, the aid package will provide $100 million in added support for the USDA Agricultural Trade Promotion (ATP) program.

Most feel that the payment formula used for the 2019 MFP payment calculations, using total planted crop acres, is more equitable than the 2018 MFP payment formula, which was based on actual production of selected commodities with wide-ranging payment rates.

However, there will likely be some questions on the differing 2019 MFP payment rates from county-to-county. The good news is that the 2019 MFP payments will provide some much need financial assistance to farm operators that have been struggling financially due to low commodity prices and weather-related crop production issues in 2019.