This week USDA announced round two of the Market Facilitation Program, crops were down, and livestock contracts were up.
MFP 2.0
Yesterday, July 25, USDA announced round two of the Market Facilitation Program (MFP2) payments. The second round of the MFP program is a $14.5 billion aid package that, “provides assistance to farmers and ranchers with commodities directly impacted by unjustified foreign retaliatory tariffs, resulting in the loss of traditional export markets.” The MFP2 is coupled with a $1.4 billion Food Purchase Distribution program in the amount of $1.4 billion and the Agricultural Trade Promotion Program in the amount of $100 million for a total ‘trade aid’ package of $16 billion.
Payments are going to be made in up to three portions, however the second and third payment will only be made if conditions warrant later in the fall/winter. Payments for non-specialty crops will be made on a county basis (see map below for your county rate). Applications for the current round of payments begin next Monday, July 29. The first tranche (portion) of payments will be made in mid-to-late August, and will include the greater of 50% of a producers’ calculated payment or $15/acre.
As an example, lets take a look at Potter county payments for non specialty crops.
Map of Non-Specialty Crop MFP2 Payment Rates ($/acre)
As you can see from the map above, Potter county farmers’ total payment rate is $27/acre. So, if we calculate
$27/acre*.5 = $13.5/acre
Since $13.5/acre is less than $15/acre, producers in Potter county will receive $15/acre. So if a producer in Potter county farms 100 acres of non-specialty crops (including alfalfa hay, barley, canola, corn, crambe, dried beans, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, millet, mustard seed, oats, peanuts, rapeseed, rye, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, triticale, upland cotton, and wheat) they will recieve
$15/acre*100 acres = $150
Since Carson county will receive a $99/acre total payment the calculation of their first payment portion is a little different. When we do the math,
$99/acre*.5 = $49.5/acre
Which means that producers in Carson county will receive $49.5/acre given that 50% of their total payment rate is greater than $15.
Dairy, hogs, and specialty crops are included in MFP2, however they will be included under a different payment rate. Dairy producers will recieve $0.20/cwt based on their production history and hog producers will receive $11/head based on the number of hogs on one day between April 1 – May 15 selected by the producer.
You can find more details on the MFP2 payments and the process for applying at the MFP website.
Macro Economy
Next week will be a significant stretch for the U.S. macro economy. This week saw Q2 GDP reported at 2.1%, still growing but at a slower pace than Q1 growth. The Federal Reserve is expected to cut interest rates next week, citing trade tensions and weak overseas economic conditions as drivers of concern. Finally, the senate is expected to vote on (and approve) a bi-partisan debt-ceiling increase and budget to carry the U.S. through the next two years, beyond the 2020 presidential election.
China
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to China next week to meet with Chinese counterparts to resume in-person trade negotiations for the first time since the cessation of talks in May.
Among other demands, a key sticking point for the U.S. delegation is the need for China to purchase American agricultural products. China has requested the cessation of sanctions against the Chinese company Huawei in return.
As of yesterday, July 25, the Chinese government allowed several domestic companies to make tariff-free purchases of cotton, corn, sorghum, and pork. This is particularly good news for cotton where the Chinese government has approved a 50,000 ton purchase tariff-free. China is a world-leader in textile manufacturing and, prior to the recent trade dispute, was a top five importer of U.S. cotton.
Important Dates
July 29 – Crop Progress, NASS
July 29 – Begin signups for the MFP payments
July 30-31 – Meeting of the Federal Reserve
In the News
WSJ – U.S., China Set to Resume Trade Talks in Shanghai Next Week
AFBF – USDA Announces Details Behind the New Trade Aid Package