No Record Expected, But Large Direct Payments Coming

(WEST LAFAYETTE, IN) While producers wait for the USDA to release meaningful information about how the latest round of Market Facilitation Program (MFP) payments might impact their farm’s financial projections, economist David Widmar examined the direct farm payments and how the latest round of trade aid will send direct farm payments significantly higher in 2019. USDA’s net farm income projection from March 2019 was used as the baseline for 2019 and MFP 2.0 payments for 2019 were assumed to be 2/3 of the total estimate of $14.5 billion, or $9.7 billion. The 3rd round of payments would be paid in early 2020. Of course, the 2nd and 3rd MFP payments are not a guarantee. Widmar explains that USDA’s initial projection for $11.5 billion in direct payments is based on higher income with lower direct payments and production expenses. These payments include carryover payment from MFP 1.0 ($3.5b), conservation ($4b), and ARC/PLC payments ($1.7b). With an additional $9.7 billion in MFP 2.0 payments paid this year, this would push total 2019 direct payments to $21 billion. Though not expected to be a record, it is very high compared to direct payments over the past ten years that have averaged $11.5 billion. In the late 1990s and early 2000, direct payments exceeded $20 billion four times and the record was set in 2005, with $24 billion handed out. A lingering question is how close will the U.S. get to the limit set by the World Trade Organization for subsidies to farmers in one year. In 2019, direct payments are projected to account for 27% of farm income.