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- DTN Headline News
Trade Aid Questions Loom
Tuesday, May 21, 2019 3:09PM CDT
By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- While at least some farmers are still trying to get into the fields, USDA is working to craft a $20 billion trade aid program for crops that largely have yet to emerge from the ground.

Farm groups have pushed for higher aid for their own commodities, and the National Farmers Union wrote Agriculture Secretary Sonny Perdue last week asking that USDA base payments on historical production. That would be different from the Market Facilitation Program payments created last year that were specifically tied to production levels.

With final planting dates for crop insurance quickly approaching, the formula used for trade aid could factor heavily in farmers' planting decisions in the coming weeks.

"I don't know that we have ever seen a government-type of announcement like this in the middle of a planting season," said Jonathan Coppess, a University of Illinois agricultural policy professor and former Farm Service Agency administrator. "To my knowledge, there's never been one."

Corn planting was only about halfway finished as of May 19, according to Monday's USDA Crop Progress report. Nationally, the top 18 corn states were at 49% planted acreage, 31 percentage points behind the five-year average. Soybean planting progress was at 19%, which is 28 percentage points behind the five-year average.

With planting so far behind normal and continued heavy rain and flooding still in the forecast for the Midwest and Plains through the end of May, expectations are high that the number of prevented planting acres could be large.

DTN's seven-day forecast of precipitation projects 2-3 inches across a large swath of the Corn Belt and significantly higher amounts from Illinois to the west.

"The row-crop guys aren't going to be able to do more planting, and they may be forced to replant," said DTN Senior Ag Meteorologist Bryce Anderson.

Because of floods this spring along major rivers such as the Missouri and Mississippi, there are already farmers in states such as Nebraska, Iowa and Missouri that are not going to be able to plant a crop this spring. Their fields are still heavily flooded or full of debris. Farm groups representing those producers would like to see any trade aid based on historical production, as well.

"We would certainly like to see those people who are unable to plant be able to participate in any kind of program as well, because they would be hurt as well," said Jay Rempe, a senior economist at the Nebraska Farm Bureau. "That is definitely something they need to take into consideration as they design the program."

A lot of questions already have been raised about how the new program would work, Rempe said.

"It's unclear what kind of impact that will have on planting season or if they will structure the program like they did last year. There's just a lot of uncertainty out there right now," Rempe said.

Brad Lubben, an associate professor at the University of Nebraska, said there are still a significant number of farmers who have to make late-planting decisions. The timing of details about a new trade-aid program could factor directly into those late-planting decisions.

"But we're still debating and wondering what it will look like, so we're still disturbing planting decisions based on conjecture," Lubben said.

USDA's press office did not respond to an email from DTN asking for clarity on when USDA expects to announce more details on the next round of aid.

Ideally, USDA would come out quickly and say that a new trade program would be based on historical production and the rest of the details would be announced after planting season is over, Lubben said.

"It appears everybody is expecting a very different calculation, something that would be spread across commodities," Lubben said. "There are quite a few questions left to answer there."

Planting season has already gotten to the point that grain traders are questioning whether farmers can catch up. December corn has moved 24 cents higher in the past week and closed at $4.04 on Monday.

USDA is creating a 2019 trade program even before opening enrollment and sign-up for the Agricultural Risk Coverage or Price Loss Coverage (ARC-PLC) programs under the new farm bill. Even before the trade situation, analysts expected farmers would shift heavily to PLC.

"We're already into PLC payment territory on the '19 crop," Lubben said. "So the downside is already covered for program crops on base acres at current price levels."

In USDA's first look at the 2019-20 crop in the May monthly World Agricultural Supply and Demand Estimates forecasts, the mid-level price for corn on the 2019-20 crop at $3.35 a bushel, below the $3.70 reference price. The mid-price for soybeans is $8.10 a bushel, which is below the $8.40 reference price. The wheat price for the 2019-20 crop is pegged at $4.70 a bushel, which also would be low enough for a PLC payment.

Lubben said USDA may want to calculate the trade impact down to the reference price, and put a cap based on any ARC or PLC payments.

A second round of trade aid was proposed on Twitter by President Donald Trump after the China talks stalled and there was a quick fall in commodity prices, as well as angry statements from leaders of various farm organizations. The conversation quickly changed into how as much as $20 billion in trade aid should be disbursed to farmers.

"From the farm perspective, the timing could not have been worse," Coppess said. "You still don't know planting, insurance -- any of that. It really complicates things at this point."

"The least problematic thing to do at this point would be to go on base acres and Actual Production History," he said.

Last year's Market Facilitation Program came out with the bulk of payments for soybeans at $1.65 a bushel. With crop insurance providing a longer latitude for full coverage on soybeans, the theory goes that more acreage could go to soybeans, despite the large stocks.

Rempe, though, thinks farmers struggling to get into fields will try to stick with corn as long as possible.

"There will be some people who have the flexibility to adjust. But, for a lot of people, the decision on corn isn't going to change unless the weather forces it," Rempe said. "If they have got a chance to put corn in, my hunch is they are still going to try to put corn in, unless something comes up quick on the trade-aid package."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/ES)


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