Direct payments will help but maybe not enough
Farmers and ranchers can apply at Farm Service Agency for payments to offset the effects of price declines during the COVID-19 pandemic.
MANDAN, N.D. — Agriculture producers have started applying for direct payments through the Coronavirus Food Assistance Program, but it’s too early to tell whether it’ll be enough to help out farmers and ranchers struggling with low commodity prices and lost markets.
Brad Thykeson, North Dakota executive director for the U.S. Department of Agriculture’s Farm Service Agency, said FSA’s goal is to start getting money out next week.
“We want these dollars to get into the hands of producers so they can use them,” he said during a web conference hosted by Sen. John Hoeven, R-N.D., on Thursday, May 28.
The $19 billion CFAP program includes $16 billion in direct payments for producers and $3 billion in food purchases by the U.S. Department of Agriculture. The program is funded by the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, and the USDA’s Commodity Credit Corporation. Sign up for the direct payment portion began May 26 and there is a $250,000 per recipient limit.
Grain payments are figured on 50% of 2019 production or 50% of inventory as of Jan. 15. A single livestock payment will be calculated on the number of livestock sold between Jan. 15 and April 15, and the highest inventory between April 16 and May 14. That's multiplied by the payment rate per head. For dairy, payments are figured on first quarter milk production multiplied by a national price decline. The second part is based on a national adjustment to each producer's production in the first quarter.
Thykeson said FSA is asking producers to self-certify their production to speed up the process of getting money out. FSA officials will not be wading through shoe boxes of records to get answers needed for forms, he said.
‘Important first step’
James Reiner, an ag lender at Starion Financial in Mandan, N.D., on Wednesday, May 27, said most people he’s talked to believe the program seems simple and should provide producers with timely payments. The question, he said, is whether that will come to fruition. But one major concern is that only 80% of the payment amount will be paid out up front; the other 20% will come only if enough money remains by Aug. 28.
“There is concern that like the (Paycheck Protection Program) loans, the money will run out, at least the first round, unless they, for lack of better words, fill the bucket,” he said.
The payments also will not make most producers whole, Reiner said, though that will vary by operation. Some people may have made sales before the markets fell too far but will also qualify for payments. But for others, the timing of their sales or their lack of sales will make the payments far too little.
“As far as making the producer whole ... without a doubt, I think there is a general consensus that they will not,” he said.
Hoeven, during the Thursday meeting, solicited ideas from producer groups on problems or concerns with the program. Cattle groups on the meeting were quick to point out issues. Julie Ellingson, executive vice president of the North Dakota Stockmen’s Association, said one disparity is that the first part of the program will pay, depending on the class of animal, $92 to $214 per head for cattle sold between Jan. 15 and April 15. The second part of the program pays $33 per head across all classes of cattle, with the per head number multiplied by the highest inventory from April 16 to May 14. Ellingson said many producers were unable to sell before April 15 because of a lack of bid or held off because of low prices. And with the bottleneck at packing plants because of the virus, prices have not improved.
In many cases, losses during the second period seem to be “more significant than even the first quarter losses,” Ellingson said.
Reiner said livestock producers seem to have been the hardest hit during the pandemic, as supply chain problems caused prices to crumble.
“To me, looking at my portfolio, because of the beef producers lack of assistance in 2018 and into 2019 as far as what the crop guys got in terms of a (Market Facilitation Program) payment to supplement their depressed commodity markets, I think the beef guy seems to be suffering a bit more,” he said.
The 2018 and 2019 Market Facilitation Programs were meant to make up for price losses due to trade problems. While cattle prices were depressed, they were not included in the programs. That means cattle producers are happy to be included this time around, even if they’re not sure the payments will be sufficient.
“I don't know if it's adequate. At the end of the day it's a much needed boost in rural America. You know, it's the first time the feeding sector has ever received anything,” said Troy Stowater, president of the Nebraska Cattlemen Association.
Ellingson said the inclusion of cattle in CFAP is an “important first step.” She said USDA and Department of Justice investigations into whether packing plants are violating antitrust laws also are important steps that could be taken. The Justice Department, she said, sent a letter to the North Dakota Stockmen’s Association saying it could not confirm or deny the existence of such an investigation but that antitrust laws are important, she said.
Thykeson said producers can go to farmers.gov/cfap to start the application process and get information about forms that need to be completed.
Reiner advises producers to start the process, if they haven’t already. He also stresses the importance of keeping the cost of production low and keeping in contact with advisers, including bankers, accountants and agronomists. And he said positive thinking can help.
“You can only take one day at a time. Do what you can today and still realize the importance of family, friends and faith. Don’t get too negative, and focus on what is positive,” he said.
For payment rates and more information on CFAP, visit https://www.farmers.gov/cfap .
(Michelle Rook contributed to this report.)