As tariffs were traded between the U.S. and China in 2018, American farmers whose crops were affected received some needed help in the form of aid payments.
Those Market Facilitation Program payments — delivered in two parts with the second round still to come — helped negate some of the losses farmers were looking at and led to some increased profitability for 2018.
However, when it comes to the 2019 crop year, farmers shouldn’t take the payments for granted, said Tim Koch, Senior vice president and chief credit officer with Farm Credit Services of America and Frontier Farm Credit.
“We factored that in as part of the revenue stream for their 2018 crop, but we are not anticipating that same payment in 2019,” Koch said. “It may happen, it may not. So we aren’t banking on that being an ongoing or recurring payment. It was a nice boost to their overall profitability and helped the bottom line out.”
A total of $12 billion of aid was set aside in August through the MFP, with farmers signing up for payments starting Sept. 4 for the first round of aid.
As of Jan. 28, $5.94 billion had been paid to farmers, according to a USDA spokesperson, with the top five states affected being Illinois, Iowa, Kansas, Minnesota and Nebraska.
Soybeans were the headliner of the aid program, notching $1.65 per bushel for farmers who apply for the payments, leading to some nicer overall profits for Brian Thiegles, president of Iowa Farm Finance Corporation and a farmer himself.
“I believe it (helped),” Thiegles said. “I also own some farmland and custom farm it, and I made the most money I’ve ever made last year. I got $9.50 for my beans and $1.65 (through MFP), so I got $11.15 for my beans.”
He said he believes producers who are having problems can directly attribute those to their marketing strategy, and not necessarily the down market or issues regarding lending.
“The guy who is negative on the current position is straining because his lender is on his case, so he’s stressing,” Thiegles said. “The next guy who has no issues because his current position is good.”
While these payments are solely for the 2018 crop year, lenders and market analysts believe they will have impacts into the next season or two.
“Had we not had that payment, what we would have done is kept a lot more beans on the farm,” said Jeff Peterson, president of Heartland Farm Partners. “A lot more beans unpriced, and it probably would have caused us by now to have a little better improvement in basis than what we’ve seen already. It definitely had an impact.”
Peterson went on to say that, while farmers know not to plan on another trade aid payment for 2019, the possibility could factor in when deciding whether to switch from beans to corn in the name of chasing prices.
“I think in the back of their mind what their hope would be is there’s another payment (for 2019),” Peterson said. “What we commonly hear from guys is, if there isn’t another payment, many of them are going ‘why should I plant any soybeans?’
“It’s not that they won’t plant any beans, because they will, but I think the fact that it was paid out once gives them hope it might show up again.”
Overall, Koch said with the farm payments, things are looking a little better than anticipated from a financial perspective to cap off 2018.
Part of that was due to larger than average yields in parts of the Midwest, and some good opportunities to market early in the year. Adding the MFP payments only increased profitability.
“This margin compression cycle has been a challenge for a number of producers, but I think we’ve seen many of those producers have made changes, made adjustments and reduced their cost structure,” Koch said. “We feel good that a large portion of the agricultural community is actually performing pretty well right now.”
The deadline to apply for the second round of aid payments was extended because of the government shutdown and is now set to be Feb. 14.