Crop farmers have stayed afloat because of government programs.
The $16 billion in CFAP (Coronavirus Food Assistance Program) funding comes from the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Commodity Credit Corporation (CCC).
The USDA estimates for CFAP distribution include cattle receiving the most funding, followed by nonspecialty crops, dairy, specialty crops, pigs, lambs and others.
Looking at nonspecialty crops specifically, payments are based on “eligible inventory” – the lower of self-certified, unpriced inventory with vested ownership as of Jan. 15 or 50% of 2019 production.
Unpriced inventory includes production that is not in an agreed-upon price in the future through a contract and is subject to price risk.
“This program is designed to provide some support for unpriced grain, unpriced commodities,” explained Nick Paulson, University of Illinois agricultural economics associate professor.
The eligible inventory is then multiplied by the average payment rate for each commodity. For example, the average payment rate for corn is 33 1/2 cents per bushel and for soybeans is 47 1/2 cents per bushel.
Cash corn prices fell from $3.86 per bushel to $3 per bushel from January to May. Soybean prices fell from $9.38 per bushel to $8.19 per bushel by the end of May.
Looking forward, Gary Schnitkey, U of I agricultural economist, suggests being careful when setting 2021 cash rents and evaluating price prospects at the end of the summer.
“The last several years we have made our economic situations work because of government programs,” said Schnitkey. “If you’re going to use a cash rent, I would suggest building in a clause with and without additional MFP (Market Facilitation Program) and CFAP payments.”
Unfortunately, agriculture is not out of the woods yet.
“While these are low prices, just remember that we are now operating where they could go lower if we have a good yielding year,” said Schnitkey. “So, if you’re looking at this, there is sort of a bright side and a not bright side. Crop farmwise, we will be able to manage 2020 with government aid, and it’s 2021 that we’re really concerned about,” concluded Schnitkey.
Source: Illinois Farm Bureau