By Max Fisher, Director of Economics and Government Relations
Sign-up is underway for producers to apply to receive 2019 Market Facilitation Program (MFP) payments. The U.S. Department of Agriculture (USDA) recently released the methodology used to determine the MFP county payment rates.
NGFA has summarized the payment rates below. (All producers in a county will receive the same MFP rate for planted acres, regardless of their productivity.)
USDA’s MFP methodology shows that it determined the MFP county-level payment rates by adding within each county each crop’s 2015-2018 average planted acres multiplied by the 2015-2017 average yield and the MFP crop rate, and then dividing by the county’s 2015-2018 average planted acres. Under this methodology, the MFP crop rates play a very large role in determining the county-level MFP payment rates. The MFP crop rates are listed below.
2019 MFP Crop Rates:
Alfalfa Hay $2.81/ton
Dried Beans $8.22/cwt.
Since USDA’s methodology for determining MFP crop rates exclusively relies on lost exports attributable to trade retaliation, the MFP rates for crops, such as cotton, soybeans, sorghum, lentils and dried beans, that are the most severely affected by the retaliatory tariffs levied by China, India, Turkey and the European Union are considerably higher than rates for other crops when compared to market values.
From an MFP payment perspective, the methodology USDA employed for MFP crop rates is good news for producers in regions with a high proportion of historical acreage planted to these highly affected crops. Conversely, producers in regions with a low proportion of historical acreage planted to these crops probably are less pleased since they are receiving lower MFP payments and the market values for their crops are under pressure given planting shifts that are increasing the supply of crops that supposedly are affected less by the retaliatory tariffs (i.e., the major shift from soybeans to corn in 2019 that has depressed corn prices).
USDA provided the following example to demonstrate how the MFP county payment rates were calculated:
- County A has planted an average of 20,000 acres of corn, 10,000 acres of soybeans, and 1,000 acres of barley. The historical average county yield is 180 bu./acre for corn, 60 bu./acre for soybeans, and 50 bu./acre for barley. The crop rates under the 2019 MFP for corn and soybeans are $0.14/bu. and $2.05/bu., respectively. Since there are no retaliatory tariffs on U.S. barley, the payment rate for barley is $0.00/bu.
- County A’s payment rate is calculated as follows:
- Step 1: For each crop in a county, multiply fixed historical acres, fixed historical yields and the payment rate per unit for each eligible MFP crop.
- County A Corn (Trade) Damage: 20,000 acres × 180 bu./acre × $0.14/bu. = $504,000
- County A Soybeans (Trade)Damage: 10,000 acres × 60 bu./acre × $2.05/bu. = $1,230,000
- County A Barley (Trade) Damage: 1,000 acres × 50 bu./acre × $0.00/bu. = $0
- Step 2: Add all calculated values from Step 1
- $504,000 + $1,230,000 + $0 = $1,734,000 in total crop trade damage
- Step 3: Add the acres across all eligible MFP crops
- 20,000 + 10,000 + 1,000 = 31,000 acres
- Step 4: Calculate the county payment rate per acre by dividing the result of Step 2 by the result of Step 3
- $1,734,000/31,000 = $56/acre MFP county payment
Sign-up for MFP at Farm Service Agency county offices continues through Dec. 6, 2019. The first of up to three tranches of MFP payments will be comprised of the higher of either 50 percent of a producer’s calculated payment or $15 per acre. USDA has stated the second and third tranches will be evaluated as market conditions and trade opportunities dictate, and if conditions warrant, the second tranche will be made in November, and the third in early January.
The NGFA appreciates USDA’s efforts to devise trade-mitigation packages to assist producers who have been harmed by the continuing trade disruptions with China, Turkey, India and the European Union. However, there are many sectors of U.S. agriculture that will not benefit from such assistance, including agribusinesses that constitute NGFA member companies, and will continue to be severely damaged economically by the ongoing trade disruptions.