Published June 24th, 2020 at 11:00 AM4 minute read
Many American farmers are getting government checks following the outbreak of the COVID-19 pandemic.
Just as individuals got stimulus checks and businesses tapped the Paycheck Protection Program to survive the economic shock caused by the pandemic, farmers are getting cash to compensate for steep drops in crop prices.
On June 4, farmers began receiving payments from the Coronavirus Food Assistance Program (CFAP). Under the program, the U.S. Department of Agriculture will give $16 billion to U.S. producers, and will add an additional $3 billion in purchases of fresh fruits and vegetables, dairy and meat products in partnership with regional and local distributors.
The $16 billion dedicated to aiding producers will make up for unsold crops that suffered more than a 5% price decline from mid-January to mid-April, or if they suffered losses due to a disruption in the supply chain. Essentially, if a farmer held off on selling their crop due to an expected market move in the spring, they will be compensated.
Grain prices saw a huge decline when COVID hit the states. Corn dropped from $3.77 a bushel at the beginning of March, to $3.12 in mid-April. Soybeans saw a decline from $9.35 at the beginning of 2020, to $8.32 in mid-April.
Those declines came at an inopportune time for farmers, as spring is typically a good time for them to market crops.
Jeff Nail, a farmer in Orrick, Missouri, said that a combination of good weather and South American harvests typically make for a beneficial market to sell grain. With COVID, that opportunity vanished.
“Traditionally we’ll get a bump in the market during the March and April time frame,” Nail said. “We always hold a few bushels over hoping to get a bump on it.”
Nail said the payments will help his operation, which typically holds back some of the crop to market later, especially with a location along the flood-prone Missouri River.
“You hate to market too much grain ahead in a flood plain,” Nail said. “If you don’t have enough bushels, you still owe the elevator.”
Farmers will receive a payment for 50% of their unmarketed crops at a rate of 95 cents per unmarketed bushel on soybeans, and 65 cents on corn. The cap on the payment is $250,000.
Scott Brown, director of strategic partnerships for the University of Missouri’s College of Agriculture, Food and Natural Resources, said that farmers won’t be able to rely solely on the payments for unmarketed crops.
“It was certainly helpful in trying to offset the effects of COVID-19,” Brown said. “It does not make farmers whole, and I don’t think that was the intent by the way.”
“It’s not great, but it’s a hell of a lot better than what we had,” Nail said.
U.S. Secretary of Agriculture Sonny Perdue acknowledged in a press call that the program won’t make all farmers happy. But the short-term goal was to cover both small farmers and large farmers, then see where the gaps are later on.
There is a debate on who will benefit most from the program. Some farmers who marketed their grain ahead of time believe that their peers who didn’t could be receiving a bailout.
Trey Garst, a farmer in Watson, Missouri, understands the debate, but doesn’t think the argument holds up.
“If I was sitting with four bucks (on corn) I wouldn’t be upset with what everyone else made,” Garst said. “I’m happy with what I got. I don’t look at it as much as a hand out, but more of an aid for people who got caught in a bad situation. It all averages out anyways. I wouldn’t wish bad prices on anyone.”
Brown noted that most farmers were probably feeling optimistic about markets this spring because of the recent trade deal with China.
“Nobody back in November said, ‘We have a COVID-19 outbreak coming in March, so I need to sell my corn and soybeans right now,’ ” Brown said. “They were probably thinking positive because of the phase one trade deal that happened at that time.”
This is hardly the first payment farmers received from the U.S. government, and it probably won’t be the last.
In the wake of Chinese tariffs placed on U.S. exports in 2019, farmers received payments from the Market Facilitation Program (MFP). Missouri farmers received an average of $59 per acre in relief money through MFP.
Brown believes that if China doesn’t make good on some of their promises made in the trade deal, more MFP payments could be on the way, as well as more coronavirus assistance if another shutdown happens.
“I don’t think we are done with COVID-19, and I don’t mean new cases. It’s the drag on the economy that I worry about,” Brown said. “As consumers have less money in their pockets to spend on food, I’m worried we are going to see more financial stress for the next two to three years.”
With a good harvest on the horizon in 2020, Brown worries there may be too much supply and not enough demand. He also said that market uncertainty is something producers will need to be concerned with going forward.
“If you take bacon, in the worst of the food services shutdown pork belly prices were 30 cents a pound,” Brown said. “In three weeks they were 90 cents a pound. What other kind of market sees that volatility?”
Brown emphasized that farmers need to focus on risk management to help blunt the volatility of the markets.
Farmers have been working throughout the pandemic, ensuring they are ready for harvest in the fall. Back in Orrick, Nail isn’t relying on government payment to keep working, and doesn’t think his peers will either.
“We don’t get up and go to work everyday to collect a check from the government,” Nail said. “We’d rather have a good crop and good trade.”
Jacob Douglas covers rural affairs for Kansas City PBS in cooperation with Report for America.