Inside D.C.

Fed aid swells farm bank accounts — for now

Those in Washington, DC, who watch and analyze the impact on conventional farm income numbers and their relationship to federal emergency program checks are getting increasingly nervous, as producers appear to be relying on ongoing government emergency payments to prop up income, a strategy seen as short-sighted given the iffy future of a fourth round of COVID 19 economic stimulus money.

USDA economists said this week in its “2020 Farm Sector Income Forecast” that 2020 net farm income will jump $19 billion or nearly 23% over a year ago, hitting $102.7 billion.  Net cash farm income will increase nearly $5 billion to $115.2 billion, USDA said.  The problem with those otherwise rosy numbers is that USDA says farm cash receipts will drop 3.3%, masking an almost 66% increase in government direct farm payments this year over last. 

The bare numbers also hide a disparity in economic outcomes between animal owners/producers and plant producers.  Overall, cash taken in for livestock and poultry is seen dropping 8.1%, while crop income is predicted to increase 1%, though wheat, corn and cotton revenues will be off roughly 6.5% on average, USDA says.   

The federal payment runup reflects higher expected outlays from supplemental and ad hoc disaster programs, including direct payments for COVID 19 relief.  Overall, 2020 payments are seen jumping $22 billion to $23.4 billion, with $16 billion coming from the Coronavirus Food Assistance Program (CFAP) and $5.8 billion paid out by the Small Business Administration’s (SBA) Payment Protection Program (PPP).  PPP monies start out as loans, but if all rules are followed those loans convert to grants.  Dollars taken in from the Market Facilitation Program (MFP), USDA checks to offset the economic pain of ongoing U.S. tariff wars with China and others, will hit $3.8 billion this year.  Other payments USDA adds into the total and which contribute to farmer bank accounts include Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), conservation payments and Dairy Margin Coverage (DMC), USDA reported.

It’s also possible the CFAP $16-billion price tag will jump significantly as the year cranks on, signaling that 66% portion of net farm income based on direct government payments will also increase.  While $16 billion was the original baseline appropriation for the first round of aid, Agriculture Secretary Sonny Perdue said this week that when that original CFAP program ends September 11 – the application end date – he’ll move to CFAP2, likely using $14 billion in congressional largesse included in the CARES Act to top up the Commodity Credit Corp.’s (CCC) emergency spending/lending account.   

While Republicans and Democrats agree more aid is needed, they can’t agree on a top-line economic stimulus number. The House approved in late May a $3.4-trillion HEROES Act, but the Senate refuses to budge much beyond $1.5 trillion in new spending.  House Democrats say they’ll come down to $2.5 trillion or so, but the Senate GOP shows no sign of willingness to spend more.  Hamstringing talks as the Senate returns from summer break next week are how much unemployment aid should the government provide, should the federal treasury send checks to state and local governments to replace lost tax income, and should the “phase four” package contain housing and federal food stamp supplements.

The good news is House Speaker Nancy Pelosi (D, CA) and Treasury Secretary Steve Mnuchin this week cut an informal deal to keep COVID 19 spending and straight government funding on separate tracks.  The two agreed on a continuing resolution (CR) to keep the federal government operating for “several months” past the September 30 end of its fiscal year.  The deal is reportedly a “clean extension” of funding, one with none of the controversial policy riders that have mired the process.  Neither party wants to argue appropriations and possible government shut-downs going into the November 3 election.

Senate Majority Leader Mitch McConnell (R, KY) told reporters at a home state event this week he’s not sure if an agreement can be reached.  “I do think we need to reach an agreement,” McConnell said.  “The cooperative spirit we had in March and April has dissipated.” 

Budget accordingly.  

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