Regarding the legislative language on the minimum payment rate calculation for economic assistance, we previously used 8% of the reference price multiplied by the national average yield. However, the legislative calculation uses the national average payment yield for PLC instead. The relevant line below is from the CR text:
(5) In no case shall the amount of an economic assistance payment to a producer for an eligible commodity under paragraph (1) be equal to less than the product obtained by multiplying—
(A) 8 percent of the reference price for the eligible commodity described in section 1111(19) of the Agricultural Act of 2014 (7 U.S.C. 9011(19));
(B) the national average payment yield for the eligible commodity described in section 1111(15) of that Act (7 U.S.C. 9011(15)); and
(C) the number of eligible acres for the eligible commodity described in paragraph (4)(C).
When will payments be received by farmers? Economic aid will come 90 days after enactment. As for ag disaster, the push is on to use the 2020 approach where most payments came out of USDA’s Kansas City office.
Impact of the economic aid and disaster aid payouts: Farmland prices will not likely decline as much as they could have. Also, some input suppliers could factor those payments into product prices.
Of note: Congress has not passed the CR yet and congressional leaders are asking commodity and farm group lobbyists to consider weighing in with their congressmen and senators today if they care about all of this. Vivek Ramaswamy, who along with Elon Musk is part of President-elect Donald Trump’s DOGE group, says the short-term government funding bill unveiled Tuesday night is “full of excessive spending, special interest giveaways & pork barrel politics,” in a post on X. “If Congress wants to get serious about government efficiency, they should VOTE NO,” Ramaswamy says. “The bill should fail,” he adds.
The following is what Combest-Sell and crew put out about the ag financial aid and disaster aid:
Crop Loss Assistance
For crop loss disaster assistance for the 2023 and 2024 calendar years, the measure makes provision for nearly $21 billion.
The language is pretty wide open with slight refinements of prior years’ disaster bills. There are some carve-outs including: $2 billion of the total amount is provided for livestock losses in 2023 or 2024 due to drought, wildfires, or floods; block grant authority to compensate producers with timber losses, citrus, pecan, and poultry losses (including poultry infrastructure losses); and a special provision for agricultural producers who suffered losses due to Mexico’s failure to adhere to its water rights treaty with the U.S.
For the bulk of the disaster program, the eligible causes of loss are the same as those under the 2022 program, including losses of revenue, quality or production losses of crops (including milk, on-farm stored commodities, crops prevented from planting, and harvested adulterated wine grapes), trees, bushes, and vines, as a consequence of droughts, wildfires, hurricanes, floods, derechos, excessive heat, tornadoes, winter storms, freeze, including a polar vortex, smoke exposure, and excessive moisture occurring in 2023 and 2024.
Please note that while the 2022 statute was used again as base text (and it used 2020 which used 2019, etc.), that is not an endorsement of the badly flawed implementation used by the Vilsack USDA. We would say that the disaster program from 2020 and 2021 is more of the standard bearer to think back to.
Losses are to be covered under terms and conditions determined by the Secretary but subject to previous requirements that: (1) smoke tainted wine grapes due to wildfires are covered; (2) losses due to drought are eligible if in a county with a D2 drought for 8 consecutive weeks or D3 drought or higher at any time during the calendar year but excessive heat as a cause of loss can cover lesser drought if it meets STC parameters; (3) sugar beet and sugar cane disaster be implemented through processors that elect to deliver aid to their producers; (4) not more than 1 percent of funds may be used for implementation; (5) payment limitations required under previous ERP programs apply (i.e., $125,000 per entity, or $250,000 if not less than 75% of AGI is derived from farming); (5) higher pay limits for specialty crops and high valued crops under previous ERP programs apply (i.e., $125,000 per entity, or $900,000 if not less than 75% of AGI is derived from farming) (Note: there is *no* AGI means testing for disaster aid; the portion of AGI derived from agriculture is just used as a measure to determine eligibility for the higher pay limit)] ; (6) prescribed pay limits are separate for each of the 2023 and 2024 calendar years; (7) payments under the program plus crop insurance and/or NAP (less premiums or fees paid) cannot exceed 90% of the loss; and (8) the same future crop insurance purchase requirements under previous ERP programs apply. In addition, to the extent that any factor must be applied to stay within budget, one single factor must be applied to the eligible benefit of each producer (i.e., no progressive factor). No gender or race-based components are expected to be applied either in light of the federal court’s injunction.
The Secretary may use $30 million to provide equitable relief for specialty crop A&O for 2022 and 2023 reinsurance years.
The Secretary shall use $3 million to test product coming into the country under the molasses tariff line to ensure that it is molasses.
USDA is required to report to Appropriations Committees on progress of implementation within 120 days of enactment and quarterly until all payments are made. We will be pushing with the new Administration at USDA to get the FSA back on track with a quick and clear implementation that treats a loss as a loss regardless of the gender or race of the producer. Federal courts will also be ensuring this.
Economic Loss Assistance
For economic loss assistance for the 2024 crop year, the measure provides $10 billion in relief.
The program is not as robust as the Rep. Trent Kelly (R-MISS.) bill (the “FARM Act”) that was introduced this fall and spread in popularity like wildfire. But it is still generous, and we hope that when coupled with disaster relief it will go a long way in helping producers until Congress reauthorizes a new Farm Bill next year with a strong, meaningful safety net.
The measure uses the Kelly model, with a 26% factor to keep overall costs within budget, and another factor (8% of reference price) that creates minimums that improve the payment rates for certain crops (barley, rice, peanuts, minor crops).
Eligible commodities are commodities eligible for a marketing loan, except wool, mohair, and honey.
Under the program, if the Secretary determines that the expected gross return per acre for an eligible commodity is less than the expected cost of production per acre for that eligible commodity, the Secretary shall make a 1-time economic assistance payment to each producer of that commodity within 90 days of enactment of the supplemental.
The expected gross return per acre for an eligible commodity is equal to the following:
For wheat, corn, grain sorghum, barley, oats, cotton, rice, and soybeans, [the projected average farm price for the commodity for the 2024–2025 marketing year contained in the most recent World Agricultural Supply and Demand Estimates published before the date of enactment of the Supplemental by the World Agricultural Outlook Board] X [the national average harvested yield per acre for the commodity for the most recent 10 crop years, as determined by the Secretary].
For other loan eligible commodities, a comparable estimate of gross returns, as determined by the Secretary.
The expected cost of production per acre for an eligible commodity is equal to—
For wheat, corn, grain sorghum, barley, oats, cotton, rice, and soybeans, the total costs listed for the 2024 crop year with respect to the commodity contained in the most recent data product entitled “national average cost-of-production forecasts for major U.S. field crops” published by the Economic Research Service.
For other loan eligible commodities, a comparable total estimated cost-of-production, as determined by the Secretary.
The amount of an economic assistance payment to a producer for a commodity is equal to [the economic loss for the commodity] X [the eligible acres of the commodity on the farm] X [26%].
The economic loss for a commodity is equal to the difference between the expected cost of production per acre for the commodity and the expected gross return per acre for the commodity.
Eligible acres of a commodity on a farm is equal to the sum of the acreage planted on the farm to the commodity for harvest, grazing, haying, silage, or other similar purposes for the 2024 crop year and an amount equal to 50% of the acreage on the farm that was prevented from being planted during the 2024 crop year to the commodity because of drought, flood, or other natural disaster, or other condition beyond the control of the producers on the farm, as determined by the Secretary.
The Secretary shall consider acreage planted to include any land devoted to planted acres for accepted skip-row planting patterns, as determined by the Secretary.
In determining the payment rate for a crop for which there is no sufficient available data, the Secretary shall use the data related to a similarly situated crop to establish a comparable rate.
In no case shall the amount of an economic assistance payment to a producer for an eligible commodity be equal to less than [8% of the PLC/ARC reference price for the commodity] X [the national average payment yield for the eligible commodity] X [the number of eligible acres for the commodity].
As for pay limits and means tests, the total amount of payments received, directly or indirectly, by a person or legal entity (except a joint venture or general partnership) under this section may not exceed —
(A) $125,000, if less than 75% of the average gross income of the person or legal entity for the 2020, 2021, and 2022 tax years is derived from farming, ranching, or silviculture activities; and
(B) $250,000, if not less than 75% of the average gross income of the person or legal entity for the 2020, 2021, and 2022 tax years is derived from farming, ranching, or silviculture activities.
Please note the “average” is different from “adjusted.” Recall the scenario where a farmer grosses $1 million on the farm but had expenses that exceeded this, so his AGI (adjusted gross income) was negative. He or his wife also had a job teaching history and science at the local school creating a situation where his non-farm income was more than 75% of his AGI and he was therefore not eligible for the higher limit to address the losses. Using “average” gross is meant to correct that problem.
The pay limits for economic assistance are separate from the pay limits for crop loss assistance described above. And, just like the crop loss portions, this economic assistance is not subject to the AGI means test to determine eligibility that traditional farm bill benefits are subject to.
We are sure that you have seen estimated payment rates floated in various publications. These are certainly within the range, but it is important to note that final numbers have not yet been determined.
Beyond Crop Loss/Economic Assistance
Besides the aforementioned economic and disaster aid, the CR/Supplemental also includes other priorities for agriculture, including year-round E15.
The package also extends the current authorities in the farm bill for one year; makes investments in the FFAR research program; provides scholarships to 1890 universities; and addresses problems with fraudulent skimming of food stamp benefits from EBT cards.