This week we revisit the Market Facilitation Program (MFP) payments for 2019. USDA released a calculation for the county payments earlier this week, and we walk through an example.
Earlier this week, USDA’s Office of the Chief Economist released the method they used to calculate the 2019 round of MFP payments (MFP 2.0). Since the payment rates were first announced on July 25 of this year many producers and agents have asked how the rates were determined. Further in this article we’ll provide an example and I’ve again posted a map that shows county rates for those of you in Texas. This discussion will only apply to non-specialty crops. The USDA release, which includes information on MFP rates for dairy, hogs, and specialty crops can be found here.
The MFP payments’ purpose is to aid producers in dealing with surplus commodities and to aid in the expansion of domestic or international marketing opportunities. In general, the payments are an effort to mitigate the damage to producers from retaliatory tariffs enacted by other countries.
How was trade damage estimated?
The USDA estimated gross trade damages for the 2019 MFP payments using the same methodology as the 2018 MFP payments. Using a trade model called Global Simulation Analysis of Industry-Level Trade Policy, USDA established a baseline value of trade for each commodity and a new value of trade taking in to account new tariffs.
USDA utilized data from 2009-2018 to establish bilateral trade history with the retaliatory tariff-enacting country. 2018 was included to account for certain trade barrier changes (they list the opening of the Chinese market to U.S. beef) that occurred prior to the current trade dispute.
USDA used this simulated trade damage to estimate a commodity rate for each non-specialty commodity listed in the table below:
| Non-specialty crops | Commodity Rate | Units |
| Soybeans | $2.05 | BU |
| Cotton | $0.26 | LB |
| Sorghum | $1.69 | BU |
| Corn | $0.14 | BU |
| Wheat | $0.41 | BU |
| Rice | $0.63 | CWT |
| Peanuts | $0.01 | LB |
| Lentils | $3.99 | CWT |
| Peas | $0.85 | CWT |
| Alfalfa Hay | $2.81 | TON |
| Dried Beans | $8.22 | CWT |
| Chickpeas | $1.48 | CWT |
How are county rates calculated?
To make this more simple we’ll go through an example of how each county was calculated. Since we’re located in the panhandle we’ll create a situation that might occur in our area, but if you’re in a different location you can just replace the data in the formula below with the information for the crop you’re interested in (listed in the table above).
Our imaginary county, lets call it Ag County, will have 20,000 acres of corn, 10,000 acres of cotton, and 1,000 acres of barley. Our historical average corn yield will be 150 bu./acre, our seed cotton yield will be 1,250 lbs./acre, and we’ll set barley yield at 50 bu./acre. From the table above you can see that the corn payment rate is $0.14/bu., cotton is $0.26/lb., and barley is not listed. There are currently no retaliatory tariffs on barley, and so it will not be included in the calculation for MFP county payment rates, even though there is production history in the county.
***Keep in mind that the payments are capped at $150/acre and cupped (limited on the bottom side) at $15/acre.
Finally, to determine the full payment received, simply multiply the payment acreage for all eligible crops by the county payment rate. In the case of the MFP payments eligible acreage is:
Additional Information
Total payments are subject to payment limitations, AGI eligibility criteria, and adjustments to the payment structure. For non-specialty crops, the payment limitation is $250,000. If you receive other MFP payments, for instance from diary, then total MFP payments cannot exceed $500,000 per person or legal entity. Finally, we’ve copied the AGI rule stated in the USDA release that describes upper AGI limits and their impact on 2019 MFP payments.
“…if the average adjusted gross income of a person or legal entity is greater than $900,000, the person or entity is not eligible to receive a MFP payment unless at least 75 percent of the adjusted gross income of the person or entity is derived from farming, ranching, or forestry related activities. The relevant years used to calculate average AGI are the 3 consecutive tax years immediately preceding the year before the payment year, which will be the crop year, or the marketing year for livestock or dairy. For example, for 2019 the relevant years to calculate AGI are the 2015, 2016 and 2017 tax years.”
– Trade Damage Estimation for the 2019 Market Facilitation Program and Food Purchase and Distribution Program; USDA, Office of the Chief Economist
Keep in mind that the payments are being doled out in tranches. In theory, if the larger trade disputes that are leading to the need for the MFP program end, the second and third tranche will not be distributed. The maps below show two different figures. The map in red is the total 2019 MFP figure by county, which is what we calculated in the example above. The map in blue is the amount to be doled out in the first tranche. You can see our previous post about the MFP first tranche calculation here.
