GAO on USDA and MFP

 GAO questions USDA's approaches to calculating MFP benefits.  Too long, didn't read. (i.e., too complicated for an old man.)

MFP and CFAP Political Effects

The bottom line of a study trying to assess whether the MFP and CFAP payments resulted in more votes for Trump in 2020:

We find the MFP and CFAP programs generated 677,512 votes for Republican candidate Trump in the 2020 Presidential Election with an estimated cost-per-vote-gained of $66,124

I say it's the bottom line, but the next sentence says the added votes didn't swing any states; rural voters were already pro-Trump. 

MFP Revisited and CCC

 Three academics at U of Illinois examine some issues of the Market Facilitation Program.  As they say at one point, the questionable legality of the program is academic, because Congress didn't challenge it when they gave the Commodity Credit Corporation more money.

A history of CCC would be interesting. It was created under the New Deal, following examples from WWI and the Hoover administration of using government corporations to gain administrative flexibility, particularly IMO to evade the requirement for yearly appropriation bills passed by Congress.

USDA bureaucrats during my time used it creatively.  The administrative people used CCC authorities to go around the Government Printing Office rules to get fast printing of forms and directives when we were implementing new legislation and disaster programs.

In 1983 IIRC the Reagan administration used it for a disaster program for Texas counties which was part of a deal to get conservative Texas Democrats (which used to exist) in the House to vote for legislation.

Also in 1983 there was the Payment-in-Kind program, which used creative lawyering to transform CCC loan collateral into payments for farmers to divert acreage from production.

As computers came along, the procurement and IT people used CCC financing for computer equipment, setting off a 10-15 year battle with the Congress which ended with Congress tightening the restrictions on ASCS/FSA buying of computers.

After I retired there were further special programs authorized--I think by both the Bush and Obama administrations, but I don't remember the specifics.

Why Was Trump's Support Up in Rural Areas?

 I can think of two possible explanations I've not seen mentioned in discussions on this issue:

1. The billions of dollars Trump authorized paying farmers as compensation for losses from the trade war with China, along with the billions in food boxes under MFP.
2. More generally, I'm foolish enough to believe Trump got support because he was perceived as fighting for farmers and rural areas generally.  The facts may be that China won't fulfill their commitments under the agreement, at least not fully, but the drama of the tariff battles and the ensuing agreement would have been memorable.

Farm Program Payments

From  here, a nice graph of US farm payments, including MFP and CFAP.

 

Evaluation of MFP

 NYTimes has a piece tied to GAO's assessment of MFP in a report Monday.  The criticisms seem to focus on higher payments for Southern producers and for big producers.  

I'd note that the WTO just issued an opinion that Trump's tariffs on China were illegal. MFP was intended to counter the adverse effects of the Chinese tariffs which responded to Trump's tariffs.

MFP and CFAP and ?

Politico has a piece on Trump's payment programs for farmers, which have set new records, arguing it will be difficult to cut back.

It's not Trump's fault, entirely. Yes, he bears responsibility for the trade war with China, which then justified $23 billion in MFP payments, and seems not to have accomplished much. But the payments under CFAP to cushion the blows of the pandemic are as big, or will be bigger.  And farm state Democrats are as eager as Republicans to fund the payments. 

I'm waiting for the WTO evaluation of the programs, but Trump is likely to pull us out of that as well.

What's in the Covid-19 Bill for FSA?

From Politico:

Special deal: The stimulus provides $9.5 billion in emergency aid for the agriculture industry and replenishes $14 billion in spending authority to the Agriculture Department’s Commodity Credit Corp., a Depression-era financial institution set up to stabilize the farm economy — the same USDA agency sending trade bailout payments to farmers. Producers ranging from dairy farmers and cattle ranchers to fresh fruit and vegetable growers are eligible.

How they got it: Livestock groups have been leaning on lawmakers for weeks to pony up funds for producers who have seen commodity prices plummet since January. Western senators including John Hoeven (R-N.D.), who chairs the Appropriations panel that oversees agricultural spending, made sure those provisions were part of the stimulus plan from the get-go. Then, top Democrats like Michigan Sen. Debbie Stabenow, ranking member on the Agriculture Committee, pushed to include language making specialty crop farmers — like Michigan’s tart cherry growers — eligible for the emergency aid.

Trump's MFP Leads to WTO Violation?

That's the Congressional Research Service's tentative conclusion--US may be billions over its "amber box" limit in 2019.. Its conclusion:

According to the scenarios developed in this analysis, including a projected set of market conditions, the United States may potentially exceed its cumulative amber box spending limit of $19.1 billion in 2019. Excessive amber box payments in 2019 could result from the addition of large MFP payments to the traditional decoupled revenue support programs ARC and PLC.
However, this analysis found that U.S. compliance with WTO amber box spending limits was very sensitive to a change in market conditions and market valuations. Noncompliance hinges on many key market factors that are currently unknown but would have to occur in such a manner as to broadly depress commodity prices through the 2019 marketing year (which extends through August 31, 2020, for corn and soybeans). Another crucial uncertainty is how the U.S.-China trade dispute—with its deleterious effects on U.S. agricultural markets—will evolve.51 Resolution of the U.S.-China trade dispute and an improved demand outlook could lead to higher commodity prices and output values while lowering payments under countercyclical farm programs such as MAL, PLC, and ARC. Such a turn of events could help facilitate U.S. compliance with its WTO spending limits.

I Told You So--MFP/CCC Financing

The Rural Blog reports moderate House Democrats are willing to fund CCC, meaning it can continue to make MFP payments.

Actually my title is wrong, at least for this blog.  I know I had the thought, but I tweeted it.  Social media is too complicated.

I don't expect Rep Lowey's plan on CCC funding to last--Dems have representatives in Iowa and elsewhere to worry about. https://t.co/xLIaqC0wXa

— Bill Harshaw (@BillHarshaw) September 12, 2019

Re-upping CCC Money for MFP

Today the Post reports that Representative Lowery is not planning to include replenishing CCC's borrowing authority in the stop-gap continuing resolution   Depending on the timing, that means CCC will run out of money before it completes the full $28 billion in MFP payments.  (It's hard to find the current CCC balance.  The USDA website doesn't show it; you have to dig through the Treasury accounts to get an idea of how much is available of the $30 billion it's authorized by statute. The last time I did that, maybe 6 weeks ago, there seemed to be around $15 billion left.)

This is a followup to the Post story of a couple days ago on the rather unprecedented use of CCC for the MFP.. Unprecedented at least in terms of the size of the payments and also, IMO, in the basis for the use.

Farmers Working with FSA and NRCS

Agriculture.com talks about the traffic to FSA (and NRCS) offices, listing six trips required.  But I found these reported farmer interactions on the Agriculture.com talk forum interesting, with my comments in bold:

“There is a visit to the NRCS division to apply for cover crop cost share and then the one later to submit seed receipts for payment. [Can't mail them?}Plus, if you live in a county that doesn’t have an NRCS office, as I do, and you rent farms, you may get to make trips to several different counties to get all of them signed up,” the southern Iowa farmer posted. [NRCS hasn't enabled consolidation as in the last bit below?]
Hobbyfarmer adds, “Got a call literally 10 minutes ago from an FSA employee. He forgot to have me sign some MFP papers. They want me to have to drive 42 miles each way to finish it up, so they can pay me, maybe, sometime in next two weeks.” [Thought FSA had authorized electronic signatures a long time ago.  Maybe employees are still in the hard copy world?]

“Usually, I make two trips per year – one in late winter and another after planting. But with this MFP thing, there was an extra one in late fall and another one yesterday,”  [Wonder why he got away with two before, not the six above?}Rickgthf says.
Rickgthf adds, “I had all my business for the different counties consolidated to one office, so there’s no running around to different counties at all.” [Hmm--that should be great--wonder why NRCS hasn't done the same?]

MFP II

Farm Policy blog has a post on the announcement of signup for MFP II

If I'm correct, CCC may be getting close to exhausting its borrowing authority by the end of MFP II, requiring Congress to replenish it.

A Thought for FSA Personnel

Chris Clayton of Progressive Farmer has tweeted asking USDA for answers on prevented planting.

I  expressed doubts as to whether leadership could make fast, good decisions.  That's not necessarily a criticism of Sec. Perdue and his team--I wouldn't have had great confidence in the capability of any of the leadership teams during my time at agriculture.  It seems to me the prevented planting issue has spun up very quickly, more quickly than I can remember situations in the past.  With MFP1 there was a longish lead up, during which the analysis people could get their acts together and the implementation people in DC and KC could get prepared.  MFP2 is different, although to the extent it covers 2019 production there won't be that much impact.  Where it's key is on the plant/no plant/change crop decision.(

Another factor is FSA doesn't have recent experience with prevented planting.  Back in my early days in the agency the disaster program included PP. Then, as FSA  was phased out of the disaster business in favor of crop insurance, we lost that institutional memory.  The inclusion of PP in crop insurance policies means the implementation process is going to be more complicated than it was in the old days.)

(Can't resist noting that the combination of Trump's trade war and flooding has undercut the idea that crop insurance could mean the end of ad hoc disaster programs.)

Bottom line: FSA personnel in DC trying to implement whatever decisions are made are having a bad few weeks.  FSA personnel in the field are in worse shape: face to face with farmers desperate for information to make their decisions and lacking the direction from DC.   

My sympathy for both groups, but particularly the field.

More on the Disaster Aid Bill and Payment Limitation

From the text of the bill:

"Sec. 103. (a) (1) Except as provided in paragraph (2), a person or legal entity is not eligible to receive a payment under the Market Facilitation Program established pursuant to the Commodity Credit Corporation Charter Act (15 U.S.C. 714 et seq.) if the average adjusted gross income of such person or legal entity is greater than $900,000.

(2) Paragraph (1) shall not apply to a person or legal entity if at least 75 percent of the adjusted gross income of such person or legal entity is derived from farming, ranching, or forestry related activities.

(b) In this section, the term “average adjusted gross income” has the meaning given the term defined in section 760.1502 of title 7 Code of Federal Regulations (as in effect July 18, 2018)."

So someone whose gross income combines farm and nonfarm sources has an additional hoop to jump through.  My impression is that FSA enforces the basic AGI limit by passing the appropriate ID to IRS and gets back data (likely just a flag) on whether the $900,000 limit is exceeded or not.  Now they'll have another determination to make, after that.  I'm sure FSA welcomes the additional work (NOT).

Payment Limitations in the News Again

Been a busy day so I didn't get a chance to follow up on this piece.

What strikes me is the idea that the payments were on a US Treasury database.  I assume it's a result of the more general law requiring transparency on US payments  Wonder how EWG and the farm community will react.

MFP II Addenda

Via Farm Policy News further details on MFP II--based on the USDA big shots' discussion.  The key point I take from it:

"Referring to the market facilitation program, Undersecretary Northey indicated that, “So these payments are not designed to be a market loss payment. They are a market facilitation payment. It’s not going to perfectly reflect what some producers feel the loss of these markets have been.”

FWIW I don't know what the words "market facilitation" mean, at least not as applied to the $14.5 billion part of the program. 

MFP II Announced

NY Times writes about trade policy and Trump's trade war, including the announcement of $16 billion in MFP II.

Chris Clayton's article at DTN  has the details on the program, which has three tranches and uses county payment rates among other differences from MFP I.  He also notes Trump's lie about the history of farm income:

"President Trump reiterated, falsely, that farmers have seen a 20-year steady decline of income, despite farm income peaking in 2013. As a key part of the president's rural base, Trump reiterated, "They [farmers] are patriots. They stood up and they were with me. They didn't say 'Oh we shouldn't do this because we're going to have a bad year. They have had 20 bad years if you really look."

The county payment rate will be new and a challenge to implement. [Update: When I wrote this, I was wrong.  I was thinking county/crop payment rates, which I never dealt with back in the day, but the fact is FSA has had experience with them, both through price supports and the new 21st century programs which I don't understand.  However, the idea is one country price for all crop acreage, regardless of the crop planted.  That, I think,  raises new problems.  If all farmers in the county raise crops in the same proportion, it could work.  But that's a big "if".  Say a country produces corn and soybeans 50/50, so the county rate is based on that proportion. But take a farmer who plants only corn, which I'm assuming is less affected by the trade war, she will get a higher rate than she "deserves".  Conversely the farmer who plants only soybeans will be screwed.  (Obviously I'm using extreme examples.)]

A New Market Facilitation Program?

Lots of talk about a new and bigger program to compensate for depressed prices due to Trump's trade war with China.

Will it just be the MFP for 2018 updated for 2019?  Maybe, maybe not.  There's talk of including prevented planting because of the widespread flooding and the very slow progress of corn planting.  We'll see.

[Updated--see Clayton's piece.]

FSA Goes Back to Work?

Only in part.  Here's the Politico piece on Perdue's telling 2,500 employees to return on Jan 17, 18, and 22.

And here's the USDA press release.

And here's the list of offices which will open.  (My impression is that a smaller share of offices in the Northeast are being reopened than in the rest of the country.  They may have given preference to locations with heavy MFP activity?)

I wonder how they determined the employees to call back?  All CED's of offices they're reopening?  Might not be the best employees to have. 

I wonder what happens after Monday?

Will be interesting to see how this works out.

And here's a NASCOE explainer from yesterday.  (Thumbs up to NASCOE for the post.)