2019 Tariff Aid May Not Be Enough to Revive Sluggish Farm Economy

Farm Journal Report 07/20/19
With poor crop conditions and a potentially record amount of prevent plant weighing on farmers' balance sheets in 2019, one economist thinks MFP 2.0 may not be enough to get net farm income back to a level needed for some stability and some confidence in the farm economy. ( MGN )

2019 is a year many farmers will never forget. A brutal spring continues to leave marks in fields, and for some farmers, the rains didn’t let up once summer hit.   

“It's been one for the books this year,” says Mike Cochenour, a farmer in Spencer County, Ind. “We've seen unprecedented water in the springtime, especially starting about Memorial Day. We've had relentless rain through June.”

The rains created widespread variability, not just county to county, but field to field.

“You can find anything you want to see,” he says. “There's a whole lot of stuff that's just been replanted the last few days. There's a lot of corn that's been described as the ocean waves, and that’s exactly what it looks like. Corn that's tasseling next to corn that’s less than the knee high in the same field.”

Cochenour said even the tile lines are visibly showing up from an aerial view, proof that even tiled land couldn’t handle all the rain that was served up over the past few months.

While it’s hard to get a grasp of how total crop production will end up on his farm, he’s thankful he had a crop to plant this year.

“We had a little bit of prevent plant in low lying areas,” says Cochenour. “I know my FSA office shared with me the other day they had more prevent plant than they've ever seen before. There's a lot of acres still not planted.”

He says the decision to plant or not to plant was tough, as farmers did whatever they could to get a crop in this year.

“The weather by the ultimate decision for us not to plant the acres,” he says.

He cites that the news regarding the next round of Market Facilitation Program (MFP) payments gave them more incentive to do everything they could to plant, but it ultimately came down to weather.

Those planting issues were widespread, as ag lender Alan Hoskins says unplanted acres aren’t hard to find in southern Illinois and Indiana.

“There are some spots around here that I think easily, you could say 25- 30% did not get planted, but it can be very regional,” says Hoskins, President of American Farm Mortgage. “If I go stand in one of the fields on my farm right now, I can turn a complete 360 degrees, and every field that borders the ground is prevented planted.”

He said for some farmers, the decision to leave some of their acres unplanted this year was tough and wasn’t made lightly, as a combination of factors were at play.

“Certainly, prevented planting looks a lot different than it does if you are crop sharing a lot of acres or if you're cash renting a lot of acres,” said Hoskins. “With MFP, obviously we don't know what may happen with the second or third payment, and I think that's one of the big unknowns right now that producers are still kind of scratching their heads saying even now, on this late date, maybe there's still an opportunity to plant.”

Those tough planting decisions are still being made in Mid-July, as Hoskins says he knows farmers are still planting today.

“One thing that I've heard this year are some folks that are typically very, very decisive, say ‘you know, there's days I'm just not sure what the right thing to do is,’” he says.

Uncertainty surrounds not only the crop, but what type of trade aid producers will get this year. The White House announcing last week it approved the $16 billion trade aid package. However, details regarding the amounts per commodities are still unknown and are expected to be released later this week.

“The payments last year were very beneficial, and certainly with the position of where we are today, I would believe that the sentiment is going to be very much the same,” says Hoskins.

Even with improved commodity prices, Hoskins thinks for some producers, MFP 2.0 will be more beneficial in 2019 than the aid was in 2018.

“I certainly don't see anything to say there any less important this year,” says Hoskins. “In fact, with the start that we have with the variability of the crop that's out there, I think they could end up being more important this year than last.”

David Widmar of Agricultural Economic Insights has been studying the 2018 MFP payments, as well as the possible outcomes for trade aid in 2019. 

“We saw there are three big areas where the payments got heavily allocated,” says Widmar. “It was the Delta Region, Central Illinois, and then South Dakota, and that was based on soybeans and large production in those areas.”

Widmar thinks the story in 2019 could be more of the same

“It looks like we're going to follow this soybean heavy payment structure,” says Widmar. “We know the mechanics are going to be different, and it's still going to set up to look like it's going to favor soybeans here in 2019.”

According to Widmar, MFP 2.0 will help, but he doesn’t think it will be enough to recover an eroding farm economy.  

“I think when we step back and look at it, it's going to have an impact, but it's probably not going to have an impact enough to get us back to that $80 plus billion of net farm income, and we're going to need to get to that. I think it's going to have a little bit bigger impact, as it's going be a bigger payment package, and we don’t know where net farm income is going to fall out yet, but either way, we don't expect at this point to get back to that $80 billion level that we think is needed for some stability and some confidence in the farm economy,” he says.

For Cochenour, the payments are welcomed, but he’s more focused on having a plentiful crop to sell, after a year that’s thrown him on an emotional rollercoaster from the start.

“It's been hell; it really has, it's been hell,” he says. “We're not in a boat alone. We've all seen and heard the stories of what’s happened to the west of us, but it's been almost nationwide this year, with a few exceptions rather than rather than isolated. Misery loves company, I guess but we're all in the same boat together.”