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 The U.S. government
reacted, much the same as it did in the 2008 automaker bailout, for
the same reasons. Some say that President Trump bailed out the
farmers so they would vote for him again in the 2020 election, and
the money dispensed to farmers, called the MFP program, did indeed
enhance his chances of retaining their vote. But the real intent of
the 2018 and 2019 program was to prevent producer failure and
bankruptcy.
The trade war had depressed producer pricing to the point that the
majority of farmers could not achieve sustainable sales. In addition
to producer failure, the entire Ag supplier chain remains
threatened. The 2018 and 2019 MFP programs were only similar to the
automaker bailouts of 2008 in that their objective was to prevent
bankruptcy (and unemployment). In the case of the automaker
bailouts, the money was lent, the companies were nationalized
(meaning the government owned a significant portion of GM, GMAC, and
Chrysler), and the government stepped in to take part in the
management of those companies. The $80.7 billion dollars lent to the
automakers was largely paid back (all but $10.2 billion dollars),
and the government was divested of their interests and management.
In the case of MFP, money was delivered to producers based on
bushels produced (2018) and acres planted (2019). No farm takeover,
no government management of farms, no government ownership of
operations, and no expectation that the money will ever be paid
back.
The MFP program of 2018 was done hastily, done late, and was
somewhat confusing and ineffective. An early per bushel stipend was
augmented by a later added stipend. Efforts on a more effective 2019
program changed from per-bushel to per acre planted and was
announced in May 2019.
In much of the country, 2019 planting was delayed or cancelled by
late season rains which caused flooding and kept farmers out of the
field. So the offer of MFP dollars based on acres planted at first
seemed like an empty promise. Farmers who were unable to plant only
received federal crop insurance protection. Farmers who did get to
plant received a substantial amount on every acre planted (about $76
an acre for soybeans in Logan County).
The MFP program had a whole host of critics who said that Trump was
buying the 2020 election at the taxpayers' expense, and others who
said that rich farmers benefited at an unfair rate from the program
over poor farmers. The subsidy amount was the same, but small
farmers planted fewer acres than larger farmers and received less
money. The 2019 program capped the subsidy at $900k: only operations
grossing $900k or less were eligible for this subsidy. The result
was that $16 billion dollars were sent to producers in 2019,
compared to $12 billion in 2018. Of the $685,483,316.15 amount
appropriated for Illinois, the amount sent to Logan County producers
was $20,489,701.
A number of Logan County producers commented (anonymously) on the
impact of the 2019 MFP program to their operations:
• One producer said that the MFP funds came at just the right time,
when the bills were coming due and grain prices were skinny. That
producer said, "We can't know if grain prices would have been better
without the tariffs or not, but the MFP funds sure helped."
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• Another producer said, "The
MFP funds certainly helped offset some of the hit taken in the grain
market from the trade disputes." That producer agrees with the
tactics the U.S. is deploying in the trade war, saying that the feet
of some of our trade partners, especially China, need to be held to
the fire, and that if this is what it takes to bring about market
equity, he/she is on board for now. "Hopefully the short term
suffering will result in long term market growth."
• Still another producer said that the MFP money was substantial,
more than $70 an acre on beans. "Don't think that grain farmers got
hurt by tariffs this year, depends on if they were able to hold on
through earlier dips in the markets."
• [several other producers were asked for comments but were either
in the field, declined or were not able to respond in time for this
article]
Some forward motion in the trade war with China was reported this
week, saying they were close to finalizing part of a Phase One trade
deal. No details were provided, and it was said that talks would
continue. China announced that it was committing to the purchase of
$20B of soybeans from the U.S. in 2020. And further news reports say
that the two parties have reached a deal on tech trade. President
Trump said that he expected to sign a significant part of the trade
deal with China ahead of schedule but did not elaborate further.
Even with some positive news, there is no deal yet on the table that
will benefit the American farmer, and it is not yet known if a 2020
MFP program will be offered. The funds dispersed in the 2019 MFP
program were appreciated by Logan County producers. They continue to
be able to achieve top production results, even in a bad year. Now
if only they could get better prices for their products!
[Jim Youngquist]
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Read all the articles in our
new
2019
Fall Farm Outlook Magazine
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