There is a lot to unpack from Tuesday's announcements and explanations of the Coronavirus Food Assistance Program.
Yes, there were multiple announcements. First came the White House event where the aid package was rolled out with a great deal of praise and gratitude, making it practically appear as if the $16-billion direct aid package would make agriculture whole. Then came the USDA press call in which officials understood not everyone was going to be happy and the aid package wasn't going to cover all the market losses across all of the commodities and farmers impacted by COVID-19.
Some economists and other agricultural policy wonks offered immediate confusion over how payments will be calculated. I concur wholeheartedly. In writing an article Tuesday afternoon breaking down just how the payments work, a glaring question showed up with crops. The final rule that will be published in the Federal Register highlights that unpriced crop inventory as of Jan. 15, -- not to exceed 50% of 2019 total production -- multiplied by 50% -- is then multiplied in separate equations by the CARES Act payment rate, and the Commodity Credit Corp. payment rate.
It was confusing enough that USDA had split payment rates. For corn, for instance, the CARES payment rate is 32 cents a bushel while the CCC payment rate is 35 cents a bushel. Effectively, if you do the math, crop inventory is being paid on 33.5 cents a bushel (67 cents divided by 2).
But the rule used that term "multiplied by 50%." The USDA website didn't state that. It simply stated a farmer would be paid on 50% of inventory, multiplied by the payment rates.
The distinction in all of that nuance is whether a farmer is getting paid 67 cents a bushel or 33.5 cents a bushel. Because the "multiplied by 50%" language basically cuts the payment in half. After a couple of emails from, well, yours truly, USDA changed the language on its website and added "multiplied by 50%" to the equation.
It's still complicated math. Agricultural economists at major universities went back and forth on Twitter on Tuesday afternoon with one commenting "This is so darned confusing."
Breaking down commodity payments, a Kansas State University economist looked at on-farm inventory and projected corn farmers would collect about $1.9 billion while soybean producers would collect about $602 million. They constitute the lion's share of grain and oilseed payments.
With the details of the package, and the way it provides aid to crop producers, some farmers immediately also picked up on a major element of the way the payments are structured. All unsold, unmarketed inventory is rewarded with a payment. So farmers who sit on their harvested crops are better off under CFAP than farmers who marketed their grain. Here were a few comments on social media and email.
"So people who do a good job of managing their business will be penalized and may be possibly worse off?"
"My frustration is that I forward contract all my production last July and completely give up on a potential rally in exchange for a secure price. The guys that roll the dice get bailed out. Obviously, I am in a better position, but we are training people to let government protect risk."
"Looks like zero in this for folks who sell their crops in the year they grew it. You really have to wonder who thinks of this (b.s.)"
Other producers have questioned why their food product was left out even though they have seen their markets devastated by the coronavirus. Greg Ibach, USDA's undersecretary for Regulatory Affairs, said on a call Tuesday that the department wants to hear from farmers whose commodities were not mentioned in the CFAP package. He specifically pointed to nursery products and aquaculture. Ibach mentioned the need for producers to comment on the final rule when it is published in the Federal Register. Some details of that information can be found on the Farmers.gov website. https://www.farmers.gov/…
And I'll keep noting the following because signing up for USDA programs, like everything else in the world, is different under coronavirus. Enrollment through local USDA Service Centers (Farm Service Agency offices) will begin May 26 and USDA expects payments could go out to producers within a week after signup begins. Farmers and livestock producers applying for aid will have to call their FSA office to set up a phone-call appointment because service centers are not meeting producers face-to-face due to coronavirus restrictions. Farmers also can communicate with FSA staff through email or use on-line tools to fill out applications.
We will certainly have more questions going forward, and I would be happy to hear from you.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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