Farm Income and Farm Program Payments Update (Oct. 15, 2020 webinar)
Department of Agricultural Economics
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10/16/2020
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Description
With Brad Lubben, associate professor and extension policy specialist, Agricultural Economics.
Farm program payments are a significant part of the bottom line for farmers and ranchers in 2020, whether from existing commodity programs, agricultural disaster assistance, or trade and COVID-19 relief. This session will review current program details and projections, including ARC and PLC payments due to producers in October (for the 2019 crop year). A broader outlook for farm income based on national projections from USDA in early September and state-level analysis will provide a baseline for economic outlook and farm policy issues and decisions moving forward.
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- [00:00:13.740]Austin Duerfeldt: Good afternoon, everyone. I'm Austin Deerfield extension educator and Southeast Regional economist in the Department of Agricultural Economics. Thanks for joining us today.
- [00:00:24.630]Austin Duerfeldt: This is part of a series of webinars produced by our extension farm and ranch management team that typically runs every Thursday at noon.
- [00:00:32.820]Austin Duerfeldt: You can find recordings of these sessions a schedule upcoming webinars and other resources at farm W and l.edu
- [00:00:41.550]Austin Duerfeldt: One resource that we would like to highlight is the Nebraska rule response hotline and times of stress, knowing when to reach out
- [00:00:49.980]Austin Duerfeldt: Is essential and Nebraska rule response hotline can provide mental health counseling information regarding legal assistance.
- [00:00:58.020]Austin Duerfeldt: Financial clinics mediation and more the hotlines toll free number is 1-800-464-0258. In addition, a wealth of resources related to stress and wellness can be found at rural wellness by you and l.edu
- [00:01:18.690]Austin Duerfeldt: During today's presentation, please use the chat box or Q AMP. A located at the bottom of your screen to ask questions we will address those at the end as time allows.
- [00:01:30.420]Austin Duerfeldt: Farm Program payments are a significant part of the bottom line for farmers and ranchers.
- [00:01:35.730]Austin Duerfeldt: Whether from existing quality programs agricultural disaster assistance or trading coven 19 relief. Today we will review current USDA program details and projections
- [00:01:48.000]Austin Duerfeldt: Including payments due to producers this month will also hear about the broader outlook for farm income.
- [00:01:55.200]Austin Duerfeldt: And how these national projections and state level analyses provide a baseline for economic outlook and foreign policy issues and decisions of the future.
- [00:02:06.180]Austin Duerfeldt: presenting today is Dr. grande Lubin so see it professor and extension policy specialist in the Department of Agricultural Economics, Brad. I'll turn it over to you.
- [00:02:17.970]Brad Lubben: Awesome, thank you very much for the introduction and for the assistance here today to to make this presentation.
- [00:02:27.120]Brad Lubben: I'll shut up now share my presentation. I want to confirm that you're seeing my title slide.
- [00:02:35.820]Austin Duerfeldt: Fantastic.
- [00:02:37.530]Brad Lubben: Again, thank you. Awesome. Thank you for the introduction.
- [00:02:41.820]Brad Lubben: Thanks to those that are joining us here for the opportunity to visit with you and discuss the current farm income situation in Nebraska and farm program payments both projections
- [00:02:52.170]Brad Lubben: Calculations of what we have today and projections of what we think we are looking at in the future here. I want to start with by
- [00:03:00.840]Brad Lubben: Some recognition here of what the broader safety net. Looks like we have the commodity programs. The title one programs and I'm focusing here on the crop programs.
- [00:03:11.970]Brad Lubben: But these are the title one programs that are authorized in the 2018 farm bill. We would add dairy programs in there as well. But then that we're fundamentally represents the title one safety net.
- [00:03:25.440]Brad Lubben: We have crop insurance programs which are authorized in Title 11 of the farm bill.
- [00:03:31.080]Brad Lubben: They fundamentally represent part of the safety net, given the federal support for the crop insurance program, but they are obviously unique and different in that they are a producer purchase and a participation decision.
- [00:03:44.130]Brad Lubben: And then we have emergency assistance. Importantly, there is already standing Disaster Assistance permanently authorized disaster systems.
- [00:03:52.470]Brad Lubben: That will talk about briefly that is technically part of Title one so I should clarify title one being traditional commodity programs plus
- [00:04:01.230]Brad Lubben: The standing disaster assistance programs. But then we have also had substantial ad hoc support ad hoc programs, whether
- [00:04:10.260]Brad Lubben: legislated through Congress or whether directly implemented through USDA various programs over the last three years that advantage to
- [00:04:20.040]Brad Lubben: The safety net for producers and embedded substantial payments, but also come with sort of relatively little long run framework for how they are are implemented or what they provide
- [00:04:33.030]Brad Lubben: We start with commodity programs start with just a comparison of the reality that we have combined programs when I focus on ARC and PLC.
- [00:04:41.730]Brad Lubben: The Agricultural Risk Coverage Program or The Price Loss Coverage Program Ark was the predominant program utilized in Nebraska in under the 2014 farm bill, but under the 20 1920 2018 farm bill. We had a new decision for net
- [00:04:59.700]Brad Lubben: There was a substantial shift nationwide away from arc and toward PLC for corn and soybeans.
- [00:05:08.670]Brad Lubben: For grain sorghum for wheat peanuts rice and cotton. Some of the Southern commodities. You see, there were already overwhelmingly PLC. In the last farm bill and have remained so in this one, but there was a substantial shift toward PLC.
- [00:05:23.670]Brad Lubben: These are national numbers not Nebraska. We don't have state specific numbers yet, but we would expect similar
- [00:05:30.270]Brad Lubben: Similar shift substantial shift towards PLC because of price expectations and because of the potential safety net provided by either program.
- [00:05:39.030]Brad Lubben: You will also notice there was a substantial shift toward arc at the individual farm or individual coverage level.
- [00:05:46.320]Brad Lubben: And I would venture that most of that nation enrollment was right here in the Midwest as arc icy became relevant for producers that knew they had already faced losses in 2019
- [00:05:59.160]Brad Lubben: By the time that they were faced with the signup decision so dramatic increase in arc IC participation nationally relative to what were minimal levels before and I would venture that most of that is where it was relevant right here in the Midwest.
- [00:06:15.660]Brad Lubben: So we look at some current projections and current payments and on the 2019 crop the Price Loss Coverage Program should be paid out to producers and in fact is being paid out this month we have national prices final marketing your prices.
- [00:06:32.760]Brad Lubben: Based on those prices we have PLC payment rates with a reference rate for corn have $3 and 70 cents and a final marketing your average price of 356
- [00:06:43.710]Brad Lubben: That ended up being a should be a 14 send payment rate typo there already, but it translates into more than a $20 per acre payment rate. And if you recognize a
- [00:06:57.600]Brad Lubben: PLC payments are paid on 85% of base acres that translates into something between 17 and $18 per acre in terms of cash flow to
- [00:07:07.740]Brad Lubben: Two producers with Coinbase grain sorghum base would be substantial payments. We base would see substantial payments soybeans finished the marketing here for the 2019 crop at 857 above the 840 reference raid. So no payment there.
- [00:07:25.710]Brad Lubben: But trying to predict where that PLC payment will end up is always going to be a complicated scenario.
- [00:07:32.610]Brad Lubben: If you went all the way back to May of 2019 when the first USDA supply and demand projections in the was the report republished for the 19 crop.
- [00:07:43.470]Brad Lubben: We started with a corn price projection that was down around 330 we started with the soybean price protection projection that was down around 810 or 820
- [00:07:52.950]Brad Lubben: Both of those would have triggered substantial PLC payment rates but month by month there's an updated price projection
- [00:08:00.900]Brad Lubben: We spent quite a bit of time above the the reference rates to the tune that we would not expect any PLC payments, but then we dipped back below.
- [00:08:11.640]Brad Lubben: Here in 2024 corn we ultimately ended up at at 356 rate that we just discussed for sway means we ultimately ended up at just over the dollar and 50 cent reference price and nothing forward.
- [00:08:28.530]Brad Lubben: For soybeans for the 2019 crop. But then I also plug in the 2020 crap. We just started MAKING PROJECTIONS ARE WE SAW projections in velocity report as of May.
- [00:08:41.100]Brad Lubben: We started with low $3 and low $8 projections that again would presume rather substantial PLC payment rates on the 20 crop that would be paid a year from now, but with the rally since August we in fact are at a point now where
- [00:08:58.770]Brad Lubben: The corn payment rate.
- [00:09:01.140]Brad Lubben: Would project to a price of 360 and only be a 10 cent Amory going forward.
- [00:09:05.970]Brad Lubben: The soybean price is projected from below the reference to now a projection of $9 and 80 cents a bushel far about the reference. And so, just like that. Suddenly the PLC program is is really sort of out of the money.
- [00:09:20.910]Brad Lubben: Now we presumably are much better often and recognize where we would be better off with higher prices and lower government payments, but recognize that that cash flow is a substantial part of the equation and looking ahead, what cash flow could be on the 2020 crap. A year from now.
- [00:09:40.140]Brad Lubben: A modest payment for corn grain sorghum wheat. Again, nothing projected for soybeans.
- [00:09:46.380]Brad Lubben: Now, compare PLC to the art program for 2019 I want to look first and note that the benchmark price.
- [00:09:54.810]Brad Lubben: In the art program. There's a revenue guarantee tied to a benchmark price of benchmark yield. And that's a benchmark revenue and then the protection is 86% of that benchmark revenue well with the benchmark price in there for corn at 370
- [00:10:12.120]Brad Lubben: That leaves you with the marketing your average prices we saw 356 that's a four cent drop below the benchmark.
- [00:10:21.060]Brad Lubben: To get to that 14% drop and below benchmark revenue where arc would begin to trigger you would need an additional 11% dropping yield.
- [00:10:32.190]Brad Lubben: Based on the analysis of arc payment yields are our program meals that have been published by FSA, it appears that 6% of all of our county practice combinations record.
- [00:10:44.100]Brad Lubben: Actually fell below that you'll triggering level that it actually triggered an arc payment for the 2019 crop to be paid this month.
- [00:10:54.060]Brad Lubben: If you average up those minimal number of payments across all of the crop and practices for corn. It's a minimal payment about $1 85% on average across Nebraska.
- [00:11:06.840]Brad Lubben: Where it gets paid maybe substantial but on average it's a minimal part of the safety net this year.
- [00:11:12.960]Brad Lubben: For grain sorghum with a benchmark price of 395 and an actual price that 16% below you actually would see arc payments at average or at Benchmark yields.
- [00:11:24.210]Brad Lubben: Let alone, even a couple percentage points above and more than half of the grain sorghum practice combinations across the state appear to trigger this year. So I beans about a fourth of them. Do we, about a third of them do. And you'll see modest
- [00:11:41.490]Brad Lubben: Arc payments projected accordingly.
- [00:11:44.880]Brad Lubben: If we look ahead and on the 2020 crop.
- [00:11:48.720]Brad Lubben: With today's price projections from the October last year report, we see a small price decline for corn sorghum relative to the benchmark.
- [00:11:59.730]Brad Lubben: That would demand it further yield loss before anything would begin to train to pay under arc
- [00:12:06.330]Brad Lubben: We can project that there would be some counties that are likely to see that yield loss and expect some art payments on the 20 crop paint next year.
- [00:12:16.590]Brad Lubben: But it's difficult to project. Many that would and until we see some yield data by county. It's certainly not really feasible to to try and make a projection on actual payments.
- [00:12:30.000]Brad Lubben: For soybeans. The benchmark price was 925 the current projected market your average price was nine at that 6% above benchmark.
- [00:12:40.440]Brad Lubben: It would take a 19% your boss to imagine triggering any soybean arc payments. I don't know that we'll see a county with a 19% yield boss, even in the midst of some of the dry conditions and perhaps
- [00:12:54.480]Brad Lubben: you'll drop off at the end of the season. It might be very doubtful that we would see your boss. If we maintain prices at those levels are better.
- [00:13:03.720]Brad Lubben: So projections ahead for the arc program on 20 crop to be paid in 2021 look minimal at best.
- [00:13:14.070]Brad Lubben: I want to mention one part of that other part of the safety net and I talked about crop insurance, the base price is the
- [00:13:21.810]Brad Lubben: Is the planting time futures average price that's used as the base for both the revenue policies and as the established price for the yield policies, but if we look at the revenue policy guarantee we use the higher the base or the harvest
- [00:13:36.660]Brad Lubben: As we see it today, at least based on features pricing information through earlier this week.
- [00:13:42.900]Brad Lubben: The projected harvest price is almost in line with the base price for everything except soybeans, in which case it's 13% above what the base price one
- [00:13:55.410]Brad Lubben: That implies that the guarantee is effectively stable to increasing for the revenue policies, what that also means is that there aren't any.
- [00:14:05.010]Brad Lubben: Insurance in Denmark is really to be happy, unless there is a substantial yield loss to be experienced and that certainly will happen in places.
- [00:14:13.830]Brad Lubben: Whether it's storm or drought or other factors but crop insurance is not a big part of the safety net in terms of price this year because ultimately to harvest prices very close or above where we started at the inn at point in time.
- [00:14:31.050]Brad Lubben: So that I mentioned the standing disaster assistance programs and remember that there's a portfolio of disaster programs that are permanently authorized and funded
- [00:14:40.110]Brad Lubben: originally created in the 2008 Farm Bill after they expired. They were reauthorized and permanently funded in the 2014 farm bill. They include LLP. The live site for each program, which is a for each disaster program tied to drought conditions. And that's the reference to the drought monitor
- [00:15:00.690]Brad Lubben: This is the current drought monitor from last week.
- [00:15:05.070]Brad Lubben: With showing drought conditions really encompassing almost all of the state but severity conditions query in some areas.
- [00:15:12.900]Brad Lubben: This is not, these are not the drought conditions throughout the entire growing season. So it's important to note, there are certain parameters for how LLP works. And so some detail.
- [00:15:24.840]Brad Lubben: LLP covers grazing losses due to drown, but it covers them by making payments to livestock owners and contract growers that face those grazing risks and it ties the payment down there at the bottom to an estimated feeding cost.
- [00:15:42.060]Brad Lubben: Says approximately 60 you should say approximately 60% of the monthly feeding costs for various categories of livestock and I've shown the the beef cattle categories there.
- [00:15:53.820]Brad Lubben: If it COUNTY HAS A PORTION OF THE COUNTY IN THE DROUGHT MONITOR at the level of D to for eight weeks that qualifies for one a monthly payment.
- [00:16:06.300]Brad Lubben: If that counting any portion out of County is in D3 at any time. That's qualifies for three months of payments, if it's in D3 for four weeks or D for it anytime. It's for monthly payments and if it's in D four for four weeks or more. It's five monthly payments.
- [00:16:23.850]Brad Lubben: In Nebraska today you have eligible counties for LLP assistance, the Panhandle the Southwest the Northeast, the areas where the intensity of the drought.
- [00:16:35.910]Brad Lubben: Was focused earlier this year during the grazing season. And so whether it's full season pasture and improved pasture or native grass those counties show up as eligible for one to four months of payments and so LLP assistance is available NFC LLP assistance is a substantial
- [00:16:59.250]Brad Lubben: Help for livestock producers this year.
- [00:17:04.110]Brad Lubben: And then we have a whole bundle of ad hoc programs and I back up first 2018 when these really first started to appear the whip program technically
- [00:17:16.260]Brad Lubben: Is is titled to the wildlife and hurricanes and density pro or some of the wildfire and hurricanes indemnity program.
- [00:17:24.210]Brad Lubben: I already had a slip of the tongue because whip is actually an old acronym. It used to stand for the wildlife habitat incentive program on the conservation site.
- [00:17:33.570]Brad Lubben: That program got wrapped up into the equipped with as an acronym disappeared. Well, I guess in, you know, there's nothing new, that
- [00:17:42.150]Brad Lubben: Didn't previous exist so whip has reappeared as an acronym in 2018 legislation, it was, it was passed to provide assistance for 2017 losses wild fires hurricanes and citrus.
- [00:17:58.140]Brad Lubben: There were not substantial payments or supports from with that would have affected Nebraska producers at that time.
- [00:18:05.700]Brad Lubben: But in 2018 and we also saw trade assistance directly from USDA not technically addressed or authorize through legislation but directly administrative we've delivered from USDA
- [00:18:19.170]Brad Lubben: That trade assistance included market facilitation program payments payments that were specifically tied to production of a given crop that you're based on that crops estimated trade losses.
- [00:18:33.090]Brad Lubben: And without the detail or the comparison of payment rates, etc. Ultimately, that translated into more than $8 billion of NFC payments across the US at about 570 $5 million of payments in Nebraska. Some of them received an 18 some of them received and
- [00:18:52.050]Brad Lubben: It's worth noting trade assistance did include some additional funding for direct commodity purchases that included lots of specialty crops as well as
- [00:19:01.380]Brad Lubben: Beef, pork and dairy products and also included funding to help leverage existing trade promotion programs.
- [00:19:09.630]Brad Lubben: That was 2018
- [00:19:12.180]Brad Lubben: And 2019 we saw a return of whip, but this time it was called whip plus and in 2019 with plus was authorized through legislation to fund assistance for losses in 2018 and 2019
- [00:19:28.770]Brad Lubben: And it was still hurricanes. It was to wildfires, but it was also floods, tornadoes, typhoons volcanoes. We don't have those in Nebraska either snow storms drought and accessing moisture. It was the pretty much the whole potential
- [00:19:47.280]Brad Lubben: Parallel list for agricultural disaster losses, much like whip, whip plus was tied to an estimated a payment formula that paid revenue Austin is
- [00:20:00.750]Brad Lubben: Below a guarantee. And that guarantee was a whip factor, based on the level of crop insurance purchased
- [00:20:08.190]Brad Lubben: If a producer didn't purchase crop insurance, the whip factor was at 70% if a person purchased additional or higher levels accomplishments that would factor would increase as high as 95%
- [00:20:21.060]Brad Lubben: That with plus program did also include importantly for producers in Nebraska and surrounding states.
- [00:20:27.870]Brad Lubben: It included some assistance for on firearms storage boxes as well as this much talked about payments for prevented planning and some direct dairy program for dairy producer support as well.
- [00:20:41.250]Brad Lubben: That was with plus and that included a discussion of two to $3 billion in potential assistance at the same time, USDA
- [00:20:51.750]Brad Lubben: Released or or announced to the potential second round of trade assistance payments coming and ultimately trade assistance for 2019 was announced a return of the MSP program.
- [00:21:04.830]Brad Lubben: Payments weren't tied to a specific crop or to production with specific crop payments are now tied to points of acreage
- [00:21:13.350]Brad Lubben: And a payment rate by county was calculated based on the mix of crops in that county multiplied by the way to process by crop. And so ultimately became not a payment for production, but a payment four acres, and it was a payment for Planet acres. There was a payment established four
- [00:21:35.190]Brad Lubben: acres planted acres. The word not planted because they were prevented plan, but we're ultimately planted to approve cover crops.
- [00:21:43.290]Brad Lubben: Without revisiting again all the sort of the logistics and the complications at that time. Note that that was about 14 and a half billion dollars in the US close to a billion dollars in Nebraska.
- [00:21:56.460]Brad Lubben: And again, trade assistance in 19 did include some additional commodity purchase and trade promotion funding as well.
- [00:22:05.490]Brad Lubben: Not that we want to remind her of 2019 but
- [00:22:10.230]Brad Lubben: In terms of whip plus to be in a disaster counting. To be eligible for the program that was ultimately most of the state, either for losses in 18 or losses in 19 or both. In fact,
- [00:22:25.560]Brad Lubben: And then we get to 2020 and we now have see fat.
- [00:22:31.110]Brad Lubben: CIF app was announced earlier this year was part of the Cures Act legislation see fat provided assistance for market losses roughly from the January to March time period, due to the price declines, and the market disruptions from coven 19
- [00:22:48.930]Brad Lubben: Included crop payments based on 2019 production that was held in inventory and was unprocessed as of January.
- [00:22:58.590]Brad Lubben: It did include additional payments for specialty crops in multiple formulas for crops that were had to be abandoned field or crops that had been delivered, but not paid
- [00:23:10.350]Brad Lubben: Etc. But fundamentally, we're talking about 2019 production that that suffered price losses in the market in early 2020
- [00:23:21.900]Brad Lubben: We're also talking about substantial livestock payments first for sales during that are we 2020 period January to April when price declines really
- [00:23:31.650]Brad Lubben: took note of the pre code to sort of MIT right you know at the heart of the code downturn. It also made payments on inventory in that mid April to mid May time period from the, from the depths of the coven to the to the actual legislation or or sign up period.
- [00:23:54.360]Brad Lubben: There were additional lifestyle products like whoa, and eggs and aquaculture also provided with assistance, but fundamentally beef, pork, sheep and lambs, etc.
- [00:24:06.720]Brad Lubben: I should say cattle, swine sheep and Williams, etc. No production payments per hundred way to milk production.
- [00:24:15.480]Brad Lubben: All of that said payments on see fat one were originally announced as $16 billion.
- [00:24:23.820]Brad Lubben: Ultimately, as of this week.
- [00:24:27.780]Brad Lubben: A total of $10.2 billion has been paid out across the United States. Some estimation of
- [00:24:34.860]Brad Lubben: Whether 16 billion was assuming too many bushels or too many had a wife soccer might actually be eligible, but fundamentally see fat one spent less than originally projected 10.2 billion nationally about 716 million paid to date in Nebraska.
- [00:24:52.800]Brad Lubben: That meant that there was roughly $6 billion of that original authorization not yet span.
- [00:25:00.180]Brad Lubben: The secretary announced see fat to more recently here and see fat to as as just recently started sign up and sign up continues through mid December.
- [00:25:13.140]Brad Lubben: See fat to provides additional assistance in this case it's additional assistance from market losses that really have continued since the CIF at one time frame losses from
- [00:25:26.550]Brad Lubben: From from January through July on on production.
- [00:25:31.110]Brad Lubben: Including a broader list of eligible crops. So this time, instead of 2019 production that was held in inventory. It's tied to 2020 production that is presumably or would presumably have been marketed in in the 2020 calendar year.
- [00:25:50.100]Brad Lubben: Whether that's specifically means that's commodity that would have already been priced or whether it's just the email marketing ultimately there was a national marketing percentage calculated
- [00:26:00.420]Brad Lubben: So 2020 production. It's an estimated production level tied to a plane today creature that was already submitted perhaps an acreage reports.
- [00:26:11.640]Brad Lubben: tied to an estimated deal based on the producers, a pH or the Ark county program you'll be at a pH was not available.
- [00:26:20.610]Brad Lubben: So the signup process was really very straightforward. The acreage theoretically is already reported the yield is already in records. It's just a matter of confirming and and and signing away.
- [00:26:34.890]Brad Lubben: For crop payments that translates into some substantial dollars, there's additional specialty crop pigments as well.
- [00:26:41.340]Brad Lubben: For livestock producers would be required to document inventory on any day between an April and August period so effectively a maximum inventory date and then a payment per head for milk. It was based on production over the April to December time period.
- [00:27:00.900]Brad Lubben: The secretary announced CIF app to and announce it is about $14 billion of assistance if 6 billion was not spent on see fab one
- [00:27:11.610]Brad Lubben: Then it really represents an extra $8 billion above and beyond what was originally proposed to date about 4.5 billion is already been distributed nationally about 347 million here in Nebraska.
- [00:27:26.160]Brad Lubben: Now I stopped there with the detail on these programs over 1819 and 20 but it's worth noting in 2020 as part of the Cures Act. There was also substantial assistance provided through
- [00:27:38.640]Brad Lubben: The paycheck Protection Program and the economic Andrea disaster known program, both with the US Small Business Administration.
- [00:27:47.070]Brad Lubben: There was also substantial assistance provided through the Nebraska small business stabilization grant
- [00:27:52.800]Brad Lubben: Through Nebraska Department of Economic Development and other programs likely as well but substantial dollars here flowing to agricultural producers to assist in the losses accumulated this year.
- [00:28:07.290]Brad Lubben: Now one note that may come up in a question. There's a distinction between see fat one and see FAB to see fab one covered losses on the 2019 crop that was effectively underpriced yet when Kovac losses really started to accumulate so that
- [00:28:25.680]Brad Lubben: Sort of provided support on the bushels that last price or on the commodities, the last value do to cope and it also meant that it
- [00:28:37.080]Brad Lubben: sort of build out producers that had not done any sort of pre harvest or or pre pre sales any hedging activity. So it rewarded the the underpriced
- [00:28:47.970]Brad Lubben: Commodity see fat to that we use for crops is calculated payment rate tied to an estimated marketing percentage, which would appear to say it's trying to pay producers that have already marketed
- [00:29:02.790]Brad Lubben: To offset the fact that that they marketed at a loss. And now that we've had a recent rally.
- [00:29:10.260]Brad Lubben: The it's trying to reward only that marketed percentage, but it's a national calculator grade. So regardless of whether you did or didn't market your commodity already
- [00:29:20.670]Brad Lubben: Everybody gets the same payment rate.
- [00:29:23.430]Brad Lubben: There's a distinction there. It does not really help provide a good signal to producers about precious management activity, but that's the reality of the program mechanics.
- [00:29:36.720]Brad Lubben: If I sum all these things up to try and give a picture of where we're at Nebraska net farm income projections for 2020 actually look relatively strong
- [00:29:47.280]Brad Lubben: You see a price for income projection there that is close to $6 billion, which in fact would be high relative to recent years.
- [00:29:56.160]Brad Lubben: That $6 million is more than 2 billion in government payments.
- [00:30:02.220]Brad Lubben: Accumulating some NFP payments that did not actually arrive until 2020 as well as the Cures Act or the C, D. C. Fat payments as well as the PPP loans which affected we've encountered is payments as well as the ag disaster assistance under with plus or LSD or other programs. It is a substantial
- [00:30:28.380]Brad Lubben: safety net for producers the 2 billion plus and in government payments, but it's also the primary reason why we're talking about higher net income release higher projections
- [00:30:39.930]Brad Lubben: Now I have already also incorporated into these projections. The best I can. The price rally and commodities of the last two months I start with farm income projections that USDA publishes and they published projections. In early September based on August data.
- [00:30:58.650]Brad Lubben: They publish estimates for the US for 2020 that publishing official farm income estimates by state for 2019 so I have a main team number from USDA
- [00:31:09.780]Brad Lubben: That came in just over $4 billion. I have a 20 number that I first estimate from proxy national and state members and then I make this adjustment that says, you know, a pressure only 50 cents on corn.
- [00:31:24.870]Brad Lubben: If we assume it's only on the on price portion might be close to 500 or 550 million dollars of value bump up in farm income projections and just the last two months.
- [00:31:36.180]Brad Lubben: A price rally of $1 40 on soybeans. If again we limited to that less than half that theoretically is not price Gina is another 200 million plus of its own.
- [00:31:48.270]Brad Lubben: We're talking three quarters of a billion dollars just in the price rally of the last two months, remember some of that gets fed to I've started
- [00:31:57.090]Brad Lubben: And so not all of that shows up and final farm income if you back off maybe a third of that we still have
- [00:32:03.630]Brad Lubben: A farm income number for 2020 that is about a half a billion dollars higher than what it was at the beginning of September, before the recent commodity price rally took effect.
- [00:32:15.240]Brad Lubben: I recognize some of that price rally as a function of declining crop conditions or crop expectations. So there's a trade off there. And in terms of what we what we expect or not, but
- [00:32:26.370]Brad Lubben: But fundamentally, the rally plus your payments and made a sizable contribution to farm income projections here late in the year.
- [00:32:35.940]Brad Lubben: Now I showed you farm income numbers. I want to show you a government program payment numbers. More specifically, when we're talking about $2 billion plus in Nebraska.
- [00:32:45.300]Brad Lubben: We're talking about a sizable shoot more than three fourths of that actually coming from the supplemental and disaster assistance programs, almost all of that ad hoc I've estimated about $40 million dollars from the standing disaster assistance programs will see if that
- [00:33:03.810]Brad Lubben: If that she said the standing plus the with post program will see exactly where that final number could come out but that's important, but frankly, most of the government payment is ad hoc support this time, there's
- [00:33:20.730]Brad Lubben: 200 to 250 million in estimated commodity program payments 200 million plus from PLC.
- [00:33:30.720]Brad Lubben: Maybe 40 million plus from from the art program half of that maybe from arc at the county level half of that I think in Nebraska could be archived the individual coverage level.
- [00:33:41.730]Brad Lubben: Recognizing the close to 200,000 acres that sign up for arc ice in the state and recognizing that there were already known losses. When that sign up occurred.
- [00:33:53.700]Brad Lubben: There's about 150 million plus of conservation program payments that are fairly consistent year in and year out the show up there in the green bar. But again, more than three fourths of the of the farm in the farm payment portfolio is ad hoc support at this time.
- [00:34:11.910]Brad Lubben: That's the Nebraska picture the national picture to give you the same same picture. There's more than 28 almost $30 billion of ad hoc payments at this time that puts total projected payments above 40 or close to $40 billion.
- [00:34:30.870]Brad Lubben: I said above, but close to $40 billion.
- [00:34:34.860]Brad Lubben: That assumes that what's been announced today about two and a half billion paid out on disaster programs about 3.7 billion on the MSP that was paid in 2020 about 7.8 billion in the PPP program.
- [00:34:53.370]Brad Lubben: Technically, that came out as alone. It may not be recognized as income until the loan is forgiven. But for statistical purposes, USDA started
- [00:35:05.730]Brad Lubben: It was Economic Research Service, put it into farm income essence as an income factor and certainly as cash flow.
- [00:35:14.160]Brad Lubben: About 10.2 billion and see fat one and 14 billion announced package and see fat to
- [00:35:21.060]Brad Lubben: With the signup deadline in December, it's quite possible that much of that gets rolled in the 2021
- [00:35:28.560]Brad Lubben: I made an assumption of 7 billion in 2027 billion in 2021 that's debatable, but suffice it to say, close to $40 billion in total government payments in 2020
- [00:35:42.720]Brad Lubben: If you add up what assistance or what ad hoc assistance has been provided in 18 and 19 and 20 between whip and with plus between trading systems and now see fat and PPP and other programs, we are spending nearly $50 billion over the last three years on ad hoc assistance.
- [00:36:08.670]Brad Lubben: By comparison, the commodity programs and title one of the farm bill were projected to spend $60 billion dollars over a 10 year period from 2019 through 2028
- [00:36:24.780]Brad Lubben: We have spent
- [00:36:26.910]Brad Lubben: Three forces, much as what we project to spend over 10 years on commodity programs we've spent three years on a ad hoc disaster assistance.
- [00:36:37.140]Brad Lubben: Now, that's not a judgment of whether disaster systems was needed or not query trade conditions and now code 19 conditions have been dramatic.
- [00:36:46.740]Brad Lubben: But it is a reality that substantial payments that are greater in nominal terms and greater in real terms of anything that we've seen recently at least back to the 1980s, we're talking about payments that are substantial and overwhelm the existing safety net.
- [00:37:09.840]Brad Lubben: So I closed with these questions and look forward to, or with these comments and look forward to questions from the participants.
- [00:37:17.730]Brad Lubben: Currently,
- [00:37:20.460]Brad Lubben: Ad Hoc assistance as I've described this effectively trumping Farm Bill programs and I I yes I meant to use the the pun there, but by all calculations and aka assistance is overwhelming. The, the traditional Farm Bill programs at this point in time.
- [00:37:39.000]Brad Lubben: That calls into questions about what the Farm Bill looks like going forward. One more current issue that I did mention that is noted FSA has opened up enrollment for the
- [00:37:50.910]Brad Lubben: Commodity program here and producers facing new arc versus PLC decision.
- [00:37:58.200]Brad Lubben: In 2014 they had one art versus PLC decision and they had to live with it for the life of the farm program.
- [00:38:04.260]Brad Lubben: In the 2018 farm bill they were authorized a new decision in 2019 that covered 19 and 20 but then it was also authorized to make a new decision every year and so 2021 represents a new decision.
- [00:38:20.280]Brad Lubben: If a producer is satisfied with their current moment. They don't have to decide to make something new. But if they would want to change. They can make a decision.
- [00:38:30.390]Brad Lubben: With the projections. We've seen I would venture that most producers that shifted the PLC are satisfied and like we stay there.
- [00:38:39.030]Brad Lubben: If commodity prices show stronger. It could be the PLC isn't particularly significant in 2020 or 2021 and it could be that arc is not significant. So it might not be much of a decision anyway but recognize producers do face and a decision as they enroll on the farm bill next year.
- [00:38:58.980]Brad Lubben: Those are the current questions.
- [00:39:01.500]Brad Lubben: Questions for the future really way with
- [00:39:05.010]Brad Lubben: Will federal budget pressure member will that put a constraint on either additional ad hoc assistance or future Farm Bill decisions.
- [00:39:14.970]Brad Lubben: We've made substantial payments in 1819 and 20 we could end up in 2021 with higher farm commodity prices but
- [00:39:26.460]Brad Lubben: Essentially a shut off the spigot of ad hoc assistance and will or farm income projections
- [00:39:34.200]Brad Lubben: That would be weaning away from from the programs very quickly and very painfully, but it could it could happen will federal budget pressures really matter.
- [00:39:45.120]Brad Lubben: At the same time, we're talking about BILLIONS OF DOLLARS AND OUR PROGRAM, SPENDING and what that may mean for the future. We're also still debating whether there will be another
- [00:39:55.170]Brad Lubben: coven stimulus or Kovac relief bill with the debate between a republican or democratic offer of 2.2 or more trillion dollars and a republican counteroffer at 1.6 trillion dodge and no consensus apparently on moving forward for now.
- [00:40:14.400]Brad Lubben: If we're talking trillions maybe billions don't matter. But at some point, you can presume that the budget does again matter or whatever the budget level is there's always a contest or a challenge over over budget priorities. So those are issues we face.
- [00:40:32.490]Brad Lubben: A second question we face is trade.
- [00:40:36.960]Brad Lubben: Given the ongoing conflicts and the efforts at bilateral negotiations or perhaps we'll return to some collateral or broader negotiations.
- [00:40:47.070]Brad Lubben: But not much faith in additional WTF negotiations at this point, maybe trade doesn't matter either or, at least, trade commitments, but we tend to we
- [00:40:58.680]Brad Lubben: Live by the Uruguay Round agreement commitments that were made back in the 1990s that would limit us farm PROGRAM, SPENDING in what's called the amber box to $19.1 billion.
- [00:41:12.990]Brad Lubben: We will have shot long past that number with the additional with the ad hoc assistance, we're providing a present.
- [00:41:21.150]Brad Lubben: So does that matter. Well, it could be that almost every country has done something in terms of code relief and it's kind of hard to file a dispute against everybody
- [00:41:31.620]Brad Lubben: And so code relief is sort of ignored in the complainant process, and particularly may be ignored. If we think and hope that it's a one off sort of deal.
- [00:41:42.120]Brad Lubben: But the trade assistance does accumulate and does it look like a potential concern here will trade matter at some point that could also constrain our, our policy choices.
- [00:41:56.040]Brad Lubben: The 2023 farm bill is not that far ahead of us.
- [00:42:01.500]Brad Lubben: Theoretic theoretically we have five years, but when it takes two to three years to debate a farm bill before we get it in place. There's really not many offers
- [00:42:09.570]Brad Lubben: And the 2023 farm bill will be coming off of this substantial increase in ad hoc spending, but none of which officially shows up in
- [00:42:21.090]Brad Lubben: In a baseline to help pay for the next farm bill. And so we talking about a farm bill to be tied to commodity program spinning not ad hoc spend and if it's an ask for additional money to try and formalize some of that ad hoc support. That's a big ask and we'll see what happens.
- [00:42:39.870]Brad Lubben: Finally, one of the last questions or obviously the most prominent questions of the moment is political leadership and 2021
- [00:42:48.750]Brad Lubben: Whatever the outcome of the election next month.
- [00:42:52.350]Brad Lubben: Whatever that means for the White House, whatever that means for Congress. We know that there will be changes in in political leadership and Congress at a minimum, the
- [00:43:02.400]Brad Lubben: chairmanship of the senate Agriculture Committee will change because of a retirement time on the Republican side, but whatever direction.
- [00:43:11.520]Brad Lubben: Congress and the White House move forward in in the new term will certainly shape this ongoing policy discussion.
- [00:43:20.640]Brad Lubben: And whether we see a continuation of some of the temporary support, whether we see a dramatic shift in policy, whether we see a dramatic shift in direction for new foreign policy, those your questions yet and
- [00:43:34.830]Brad Lubben: Having laid out those things. Hopefully I left enough time to take some questions if they have any. So let me stop with that.
- [00:43:44.100]Brad Lubben: Let me stop the share to bring Austin back on the screen with us.
- [00:43:49.770]Brad Lubben: And then let's uh,
- [00:43:52.800]Brad Lubben: Let's move on to questions Austrian
- [00:43:54.840]Austin Duerfeldt: Yeah, so you let's go with the first question of any kind of touched a little bit there at the end, but let's
- [00:44:00.750]Austin Duerfeldt: Go deeper into it if you can. So the question was, do all these ad hoc payments over the last three years gets in trouble with the World Trade Organization, which you kind of touched on.
- [00:44:10.650]Austin Duerfeldt: Right. Um, are there any ramifications that they might pull out of the hat in terms of applications for what happened or what do you see coming out of that.
- [00:44:23.340]Brad Lubben: You know,
- [00:44:25.980]Brad Lubben: Query these ad hoc payments. Yeah. Do
- [00:44:29.610]Brad Lubben: They certainly look like they would take us over our limits in terms of our commandments WTF relative to the Cures Act payments, the code relief. So the see fat program the PPP program, etc.
- [00:44:44.880]Brad Lubben: I could imagine a scenario where where our other countries don't get too anxious about
- [00:44:52.290]Brad Lubben: challenging us provisions on that because, as I mentioned, almost every country has done something related to Coburg relief.
- [00:44:59.670]Brad Lubben: And given the cost, given the challenges of
- [00:45:03.450]Brad Lubben: Taking a dispute to the w to the time it takes as well as the frankly the stalemate, we have right now with the apple in the body process of
- [00:45:13.230]Brad Lubben: The Debbie to it's hard to figure out how we would easily resolve the dispute of the wtf wtf anyway. So if we think everybody did it and we hope that it's a one off.
- [00:45:25.530]Brad Lubben: Thing, then maybe there's not much challenge to the code really the trade payments will wipe it could be challenged, more, more directly
- [00:45:35.580]Brad Lubben: And it'll be a careful calculation of commodity programs plus trade does that get us
- [00:45:42.840]Brad Lubben: In trouble with the W to that'll be a more a more careful calculation.
- [00:45:51.000]Okay.
- [00:45:53.820]Austin Duerfeldt: Are there any key indicators that someone should look at when comparing our county and PLC for the annual election.
- [00:46:01.980]Brad Lubben: You know, for the election for 2021 and and recognizing moving forward that everybody's going to
- [00:46:07.710]Brad Lubben: Have that choice. Every year, but for the election for 2021 if if you look at the numbers and said, current price projections
- [00:46:16.530]Brad Lubben: That have been going up in the last couple months.
- [00:46:19.890]Brad Lubben: Mean that PLC projections are getting smaller.
- [00:46:24.660]Brad Lubben: And our projections are almost non existent.
- [00:46:30.060]Brad Lubben: It's difficult to project payments under the art program when prices are moving up because it takes a dramatic yield loss at the county level.
- [00:46:41.040]Brad Lubben: To to give us any sort of arc payments. So arc looks popular when prices are falling relative to a high benchmark arc doesn't look nearly as popular and prices are rising relative to a low benchmark. And that's the world we're in for now.
- [00:46:59.250]Brad Lubben: If we're high enough and rising high enough, neither nor PLC would matter much, but until we get back to a more consistently higher price level PLC probably wins. Most of the
- [00:47:13.590]Brad Lubben: direct comparisons.
- [00:47:18.510]Brad Lubben: There will be I should clarify. There also will be decision tools updated.
- [00:47:22.500]Brad Lubben: That producers can use for the 21 period, the same national tools. I, I understand will be updated again. But the presumption going in is that
- [00:47:33.900]Brad Lubben: A little bit short be PLC game to lose.
- [00:47:38.730]Austin Duerfeldt: Those tools agree still texting mmm boy in our third those two
- [00:47:44.040]Brad Lubben: Those two
- [00:47:48.090]Austin Duerfeldt: Or the tax ramifications of si, si fat one and two.
- [00:47:54.570]Brad Lubben: Well, you can help me out here.
- [00:47:57.630]Brad Lubben: See fab one and two are not a disaster payments that can sometimes be deferred. Well, let me clarify crop insurance and in these can sometimes be deferred to the following year based on the when the crop would normally be marketed
- [00:48:13.620]Brad Lubben: A disaster payments and whip or with plus
- [00:48:17.280]Brad Lubben: I believe have to be recognized the year that they are received.
- [00:48:22.380]Austin Duerfeldt: I believe that's correct.
- [00:48:23.910]Brad Lubben: And and I would expect the same for CIF app one into perceive that one all of those payments are received in 2020 the text when come from now.
- [00:48:34.200]Brad Lubben: For see fat to there's that question of if you've been paid already that's 2020 income if you wait to enroll late in the process and paint and those payments don't arrive until 2021 and presumably there'll be 2021
- [00:48:54.600]Brad Lubben: And then one other wild card. I mentioned in the Cures Act was the PPP program.
- [00:48:59.820]Brad Lubben: The peanut the paycheck protection program.
- [00:49:03.630]Brad Lubben: 200 million plus maybe the Nebraska producers.
- [00:49:07.410]Brad Lubben: Technically, that went out as alone.
- [00:49:10.140]Brad Lubben: But it was immediately received as cash flow. So did it get recognized as cash income or does it get put on the books as alone, and it doesn't get recognized as income until it's forgiven.
- [00:49:20.400]Brad Lubben: Some of those loans have already been officially forgiven. Some of them may be outstanding into the next year.
- [00:49:27.660]Brad Lubben: We need a good tax accountant Austin.
- [00:49:30.960]Brad Lubben: Thankfully, we know what
- [00:49:32.430]There you go.
- [00:49:34.920]Austin Duerfeldt: Are there any other questions.
- [00:49:44.940]Austin Duerfeldt: Seeing none, thank you everyone for joining us today. A recording of this webinar will be posted at farm W and l.edu where you can also register for upcoming webinars.
- [00:49:56.010]Austin Duerfeldt: As a reminder, check farm W and l.edu for a schedule of more webinars in this series, focusing on farm and ranch management issues relevant to Nebraskans
- [00:50:06.810]Austin Duerfeldt: series continues next Thursday at noon with a look at the financial position of Nebraska farm with Tina Barrett DIRECTOR OF NEBRASKA farm business incorporated
- [00:50:17.550]Austin Duerfeldt: You will receive a short 32nd survey and your email, and we would really appreciate your feedback on today's webinar and your input for future sessions. Thank you for joining us.
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