Federal payments to farmers are forecast at a record $32 billion this year, with additional outlays all but certain due to the pandemic and economic recession, said two farm policy experts in gauging potential action in the near term. The size of the payments would depend in large part on whether Congress agrees to new coronavirus legislation.
The House voted in May for $16.5 billion in additional direct payments to producers on top of the $16 billion that the administration earmarked for farmers and ranchers last spring in its stopgap Coronavirus Food Assistance Program (CFAP). Senate Republicans proposed a $20 billion infusion for the USDA last month. Negotiations are stalemated, but there are hopes for a resolution.
If there is no agreement, the USDA has some money in reserve that it could use on its own, said assistant professor Jonathan Coppess of the University of Illinois, who oversaw the U.S. farm program for three years early in the Obama era. Congress provided funds in April for farm aid and said the USDA could access an additional $14 billion in July.
“In other words, I would bet on there likely being some other kind of payment,” said Coppess during a farmdoc Daily webinar earlier this week. “At this point in time, it’s really a question of the size of that payment, how much money the USDA has available to work with. And then that will drive the design and the payment.”
Agricultural economist David Widmar took a similar view in a blog last week. Half of CFAP disbursements have gone to livestock producers, he said. Payments for row crops, such as corn, soybeans, and cotton, were based on grain from 2019 crops that was unsold and held in storage early this year.
“Will there be payments for 2020 crop production? It seems likely, but it is unclear if these will come from a new stimulus package, existing [USDA] program funds, or a combination,” wrote Widmar at Agricultural Economic Insights.
Farm spending has ballooned under President Trump, first to mitigate the impact of the trade war on agriculture and then to shore up farm income during the pandemic. The USDA spent $23 billion in trade war payments for crops and livestock produced in 2018 and 2019 before setting up a $16 billion pandemic payment fund this year. As of Monday, $9 billion in coronavirus aid had been paid to producers.
Previously, direct payments to farmers, which include land stewardship programs, ran in the range of $10 billion to $15 billion a year. “Today, there is a strong possibility of direct payments exceeding $40 billion, a record-breaking level, and a 5 million-acre supply management program has passed the House,” said Widmar, referring to the Soil Health and Income Protection Pilot (SHIPP).
SHIPP was created as part of the 2018 farm law, with an enrollment limit of 50,000 acres. Producers would get a federal payment for putting land into cover crops for three to five years. The so-called HEROES Act passed by the House in May would expand SHIPP to 5 million acres. Corn and soybean stockpiles are on the rise following a string of large crops at the same time that commodity prices are low.
Agricultural economist Nick Paulson of the University of Illinois, who took part in the webinar with Coppess, said land set-asides and other supply management tools were “things we should stay away from.” U.S. competitors would expand production to take advantage of an attempt to boost prices by reducing output, he said.