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Summer Shower of Federal Cash to Follow Rainy Spring in Farm Belt
Farmers can expect a deluge of federal payments in the weeks ahead to cushion the effect of farm exports lost to the trade war and crops washed away by the rainiest spring in a quarter century, say analysts.
“It’s probably going to be August” when the biggest shower of payments begins, the multibillion-dollar, stop-gap Market Facilitation Program, according to Agriculture Undersecretary Bill Northey, who oversees farm subsidies.
“There’s a lot of money flowing into the sector,” said Joe Glauber, former USDA chief economist. In fact, Glauber told FERN’s Ag Insider, the U.S. might exceed its WTO limits on trade-distorting supports. Crop insurance and Trump tariff payments will be two large sources of money for producers this year. They also will receive money from crop subsidy and land stewardship programs. The Trump administration says the money will not hit WTO limits.
Crop insurance indemnities are expected to top $1 billion for prevented-planting claims on as many as 10 million acres, an unusually large number, although it could be late August before reliable figures are available, said Northey on the Adams on Agriculture program. The administration announced on May 23 that up to $14.5 billion was available for payments to farmers and ranchers to offset trade-war losses, but details of the program are still up in the air. When they are resolved and software is updated, the USDA will begin enrollment, said Northey.
“I hope signup can begin maybe (at the) end of July and be able to get some checks out…it’s probably going to be August now,” Northey told interview Mike Adams, according to a transcript by Farm Policy News.
The Trump tariff payments “will likely push 2019 direct payments above $21 billion, much higher than levels observed in recent memory,” wrote economist David Widmar at the Agricultural Economic Insights blog. That would be the largest total since $24 billion in 2005. “A very real possibility is that (Trump payments) continue for as long as the trade war continues.” Widmar estimated $9.7 billion in payments would be made from this year’s iteration of the stop-gap payments. The administration has said there could be three tranches of payments: in July/August, November, and early January.
Direct payments would account for 27% of farm income in 2019, compared with the recent average of 20%, said Widmar. During the worst of the agricultural recession in the mid-1980s, payments were 65% of net farm income.
Farm leaders have pointed to planting and trade disruptions in warning of hard times for the farm sector. Farm income has been in a rut since the collapse of the commodity boom early this decade. It’s one half of the record income seen in 2012, but other gauges of financial soundness, such as debt-to-asset or debt-to-equity ratios, are relatively strong. Farmland values have held steady and delinquency rates on farm loans are low.
“Is it a 1980s crisis? Not yet, it isn’t,” said Glauber. However, there are few leading indicators for agriculture, he said.
The Federal Reserve will issue its quarterly Ag Finance Databook, which examines the health of the farm economy and ag lenders, later this month. The USDA will update its estimate of farm exports, now forecast down by 4% from fiscal 2018, on August 29 and its farm income forecast for 2019 on August 30. In March, the USDA forecast net farm income at $69.4 billion, the third time in four years that income would be less than $70 billion.