New aid packages support agriculture

CHAMPAIGN, Ill. — Safety-net programs already in the books along with a series of new aid packages were outlined in a recent University of Illinois farmdoc-hosted webinar.

“Farmers are no stranger to uncertainty dealing with unpredictable variables including weather, international trade dynamics and global economic challenges, but yet our farmers continue to feed and fuel the world,” said Brooke Appleton, National Corn Growers Association vice president of public policy.

“This current pandemic represents yet another level of unpredictability that we’re all working through.”

One piece of the relief packages to address the impacts of the COVID-19 pandemic was the appropriation of $16 billion in direct payments to farmers and ranchers. Those included:

• $9.6 billion for the livestock industry, including $5.1 billion for cattle, $2.9 billion for dairy and $1.6 billion for hogs.

• $3.9 billion for row crop producers.

• $2.1 billion for specialty crop producers.

• $500 million for other crops.

Producers will receive a single payment determined using two calculations. The first is price losses that occurred Jan. 1 through April 15. Producers will be compensated for 85% of price loss during that period.

The second part of the payment will be expected losses from April 15 through the next two quarters and will cover 30% of the expected losses.

“The last eligibility piece of the program is that qualified commodities must have experienced a 5% price decrease between Jan. 1 and April 15. That won’t be an issue for corn as our losses are showing losses between 16% and 20% during that timeframe,” Appleton explained.

“We still have some questions on eligibility for this direct payment program and what methodology USDA will use to set the price per commodity. We’re not sure how that $3.9 billion will breakdown between commodities. We’re not sure what the formula looks like for determining losses.

“The program is subject to the rulemaking process, and we expect to see some of these details coming in the next couple of weeks once the rule is complete and before signup begins.”

Additional Aid

The Coronavirus Aid, Relief and Economic Security Act also includes provisions the farmers, ethanol producers and, in some cases, cooperatives can utilize. These programs are administered by the Small Business Administration and include:

• Paycheck Protection Program provides $350 billion to support loans.

• Economic Injury Disaster Loans and Emergency Economic Injury Grants provide an emergency advance of up to $10,000 to small businesses and private non-profits.

“We’ve been closely tracking these programs which are newly available to our farmers, encouraging farmers to reach out to their lenders for information on eligibility to see if they are viable options for them,” she noted.

Congress also passed a $484 billion relief package that was signed into law April 24, which included additional $321 billion for the Paycheck Protection Program and an additional $60 billion for the Economic Injury Disaster Loan program.

The EIDL appropriation also provided clarity that agricultural businesses with fewer than 500 employees are eligible for EIDL funds.

“This is an unprecedented amount of money going out the door in a short period of time and discussions on a fourth more comprehensive stimulus package are currently underway,” Appleton said.

Appleton also noted the following safety net programs that were already in place.

On ARC And PLC

The Agriculture Risk Coverage and Price Loss Coverage programs were designed to provide the frontline of financial defense for producers as revenues or prices fall.

The 2019-2020 calculators from the University of Illinois and Texas A&M generally recommended that most producers take PLC for corn acres. If corn prices stay at their current levels for the rest of the marketing year, analysis shows that PLC will generate a corn payment of $17 an acre for the 2019 crop.

If prices should increase, then no payment will be generated, which would be a positive sign that corn prices are recovering and the safety net PLC program is working exactly as it is intended to.

While the ARC program is unlikely to pay out for the 2019 crop year, producers in this program will be protected against revenue losses for their 2020 crop, particularly if low prices persist for an extended period of time or yields unexpectedly decline.

On Crop Insurance

Current projections indicate that it is unlikely a payment will be generated under the widely used 85% revenue protection policies for corn as was reported in the March 24 farmdoc daily report. However, crop insurance will be key to managing the uncertainty created by COVID-19.

If yields decline due to unexpected weather or prices continue to fall as the result of this economic downturn, then crop insurance support may kick-in to manage the damage to producers.

On Access To Capital

Adequate cash flows are key for farmers to continue operating their business, especially when prices are low and the future is uncertain. The Farm Service Agency operates as a lender of last resort providing a variety of programs and opportunities for producers that have limited resources available through traditional lending institutions.

USDA also announced that it is providing some flexibilities in these loan programs such as extending marketing assistant loan terms to 12 months and also providing flexibilities in loan deadlines.

On Market Development

With corn’s two largest demand markets — livestock feed and ethanol — currently under extreme stressed due to the pandemic, international markets are more important than ever. International trade is continuing to flow, and Appleton said NCGA is working with industry partners to prevent disruption in the market.

“We will also continue to enforce existing trade agreements while aggressively pursuing new market opportunities,” she added.

“A strong farm safety net, partnerships with our key customer industries and an aggressive international trade strategy creates a stable foundation at a time when so many are facing total uncertainty.

“Keeping growers safe and their farms operational remains our focus, and we’ve created a variety of tips designed to help growers manage COVID on their farms, as well as a number of documents laying out current policies and information based COVID relief.”

Those resources can be found at: ncga.com/covid-19.