Focus On Ag: Written by Kent Thiesse Farm Management Analyst and Vice President, Minnstar Bank

FOCUS ON AG
Written by Kent Thiesse

Farm Management Analyst and Vice President, MinnStar Bank
November 5, 2018
SECOND HALF OF MFP PAYMENTS CONFIRMED
At the end of October, USDA announced that the second half of the direct aid payments under the
“Market Facilitation Program” (MFP) for soybeans, corn, sorghum, wheat, cotton, hogs, and dairy
will be made, staring after December 1, 2018. USDA originally announced the details for a $12 billion
“Trade Retaliation Mitigation” (farm tariff) aid package for 2018 in August of this year. The aid
program is intended to help offset the financial impacts on farmers that have been created by the
ongoing trade disputes with China, Mexico, Canada and other countries. The original announcement
included only 50 percent (.50) of the calculated total MFP payment for various commodities; however,
USDA is now verifying the entire calculated MFP payment will be made for all eligible commodities.
The MFP sign-up period began on September 4, 2018 and continues through January 15, 2019.
Local FSA offices are administering the MFP sign-up process, production verification, and other
details for the program. The easiest and preferred method to apply for the MFP program
payments is to complete the MFP application form (CCC-910), which is available on a USDA
web site at: www.farmers.gov/MFP. The web site also contains a MFP fact sheet and other useful
information on the MFP program. MFP applications can also be made local FSA offices, either in-
person, by mail, or electronically via e-mail, scan or fax. The first MFP payment of 50 percent of the
calculated total payment will made to producers once the application has been verified by FSA, and the
second payment of 50 percent will be made after December 1, 2018.
Crop producers can make application for MFP program once they have completed their 2018 crop
harvest and can verify their bushels of production. Acceptable crop production verification will be
similar to other required yield verification through FSA or federal crop insurance. The verification
documents are not required to be submitted with the MFP application; however they could be required
at a later date during FSA “spot-checks”. The MFP payment rates for crops are: $1.65/Bu. for
soybeans, $.01/Bu. for corn, $.14/Bu. for wheat, $.86/Bu. for sorghum, and $.06/lb. for cotton. The
$1.65 per bushel soybean payment rate would result in a MFP payment of $99 per acre with a 60
bushel per acre yield, $82.50 per acre at 50 bushels per acre, and $66 per acre at 40 bushels per acre.
Payments for dairy producers are based off the historical milk production levels that have been
reported to FSA offices under the Margin Protection Program (MPP). Payments to hog producers will
be on a per head basis, based on the number of live hogs owned on a specific date. Producers may
select a date between July 15 to August 15, 2018 to have their hog inventory calculated. Production
records for hogs will include breeding records, inventory record, sales receipts, rendering receipts, and
veterinary records. Eligible livestock producers that have not yet applied for MFP payments are
encouraged to do so. The livestock MFP payment rates are $8.00/head for hogs and $.12/cwt. for
dairy (milk).
Sonny Perdue, USDA Secretary of Agriculture, indicated that the MFP aid payments are intended to
help farmers with the unintended lost farm income that has resulted from the ongoing trade disputes
with other countries. However, he has also stated that the MFP program “will not make farmers
financially whole again”. He reiterated this statement when announcing the second half of the 2018
MFP payments, indicating that USDA will not be recommending any MFP payments for 2019. USDA
feels that crop and livestock producers should be able to adjust to the changes in market prices for the
2019 year. If commodity prices remain at current levels, many producers will likely have difficulty
showing a positive cash flow for 2019 with many of the affected commodities.
2018 CROP INSURANCE HARVEST PRICES FINALIZED
As of November 1, the 2018 crop insurance harvest prices were finalized at $3.68 per bushel for
corn and $8.60 per bushel for soybeans. The final harvest price for Revenue Protection (RP)
insurance policies is based on the average CBOT December corn futures and CBOT November
soybean futures during the month of October, with prices finalized on November 1. The harvest price
is used to calculate the value of the actual harvested bushels for all 2018 RP insurance policies. The RP
guarantees are based on proven average yield (APH) for a crop on a given farm or for all land in a
County times the base price for that crop. The established 2018 base prices for RP crop insurance
policies was $3.96 per bushel for corn and $10.16 per bushel for soybeans.
The fact the RP harvest prices are considerably lower than the RP base prices, especially for soybeans,
increases the likelihood of 2018 crop insurance indemnity payments for some farms that have 80% and
85% RP insurance policies for 2018. Indemnity payments will be most likely to occur when there was
a yield loss, due to some type of weather problem during the 2018 growing season; however, the yield
loss threshold for soybeans is quite small due to the much lower harvest price.
At the final harvest price of $8.60 per bushel, the “threshold” yield to receive a soybean insurance
payment is at 100 percent of APH yield with an 85% RP policy, 95 percent with an 80% RP policy, and
89 percent with a 75% RP policy. For example, with a 55 bushel per acre APH yield and a $8.60 per
bushel harvest price, soybean insurance payments would begin if the final soybean yield falls below 55
bushels per acre (the APH yield) with an 85% RP policy, below 52 bushels per acre with an 80% RP
policy, and below 49 bushels per acre with a 75% RP policy.
Using a harvest price of $3.68 per bushel for corn, the “threshold” yield to receive a corn insurance
payment is at 91 percent of APH yield with an 85% RP policy, 86 percent with an 80% RP policy, and
81 percent with a 75% RP policy. For example, with a 190 bushel per acre APH yield and a $3.68 per
bushel harvest price, corn insurance payments would begin if the final corn yield falls below 174
bushels per acre with an 85% RP policy, below 164 bushels per acre with an 80% RP policy, and below
153 bushels per acre with a 75% RP policy.
Kent Thiesse has prepared an information sheet titled: “2018 Crop Insurance Payment Potential”.
The information sheet includes a payment and “threshold yield” calculation table, which was updated
on November 1 using the final corn and soybean harvest prices. The crop insurance information sheet
is available by contacting: kent.thiesse@minnstarbank.com. The University of Illinois FarmDoc web
site also contains some good crop insurance information and spreadsheets to estimate crop insurance
payments. The web site is located at: http://www.farmdoc.illinois.edu/cropins/
**********************************************************************************
Note --- For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone --- (507) 381-7960);
E-mail --- kent.thiesse@minnstarbank.com) Web Site --- http://www.minnstarbank.com/

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