Gro Analysis Shows How Much Relief US Bailout Will Bring

01 August 2019

Plummeting corn yields in many Midwestern states will cut deeply into farm revenues this year. The Trump administration’s farm relief strategy will ease some of that pain.

But the complexities of the government payout will impact growers to different degrees from state to state. A Gro Intelligence analysis of economic circumstances shows how the so-called Market Facilitation Program (MFP) affects corn revenues in some key growing areas.

In Ohio and Illinois, for example, MFP payments will offset about one-third of anticipated corn revenue declines for 2019. By contrast, Kansas will see a near doubling of that state’s expected revenue gains, thanks to MFP funds.

The USDA recently announced details of the farm support package. The program, which was initially launched in 2018 and renewed in May, is designed to assist agricultural producers impacted by fallout from the continuing US/China trade battle. The payments also come as many farms were hurt by heavy rains and flooding this spring. In addition, US farm income has been hit hard in recent years, falling by almost a third from 2013 to 2018.

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The maps above compare US state-level corn yields in 2018 and 2019. On the left is 2018 final yield according to USDA’s NASS. On the right is the latest reading from Gro’s corn yield model for the 2019 crop. Most key producing states are expected to see a substantial fall in corn yields this year. Click on the image to go to an interactive map on the Gro web app.

The MFP totals $14.5 billion. It covers a variety of products, including major grains, such as corn and soybeans, and specialty crops, like almonds and cranberries. In a change from 2018, MFP payments will be disbursed at a single per-acre rate for each county and won’t depend on the type of crop produced. For example, producers of corn, soybeans, and wheat in a given county will receive the same per-acre payment, regardless of what crop is planted.

Our analysis of MFP’s impact on farm revenues relies on Gro’s US Corn Yield Model, which is currently forecasting widely varied outcomes for different Midwestern states. We then factor in current cash prices to estimate 2019 revenue for each corn-producing county and aggregate that up to the state level. And we find the difference from last year’s revenue, when corn prices were lower. We calculate the 2018 number using the average price received by the farmer and NASS county corn yields.

Finally, we take the expected MFP payment for each county to determine how the farm support package will affect corn revenues in each region this year. Results are presented here totaled to the state level.

In Ohio, corn yields are forecast to decline to 125 bushels per acre this year from 187 bushels last year, pushing average revenues down by 30%. MFP payments will offer some relief, leading to an overall decline in corn revenues of 20%.

It’s a similar picture in Illinois, where falling yields are expected to reduce average corn revenues by 25%. But MFP payments will narrow the loss to a 16% decline. Corn yields in Illinois are expected to fall to 155 bushels per acre this year from a state record of 210 bushels per acre last year.

Kansas, less affected by the spring flooding, promises to fare better. Average corn revenues should increase by 13% based on higher prices and a forecast yield rise of 9% to 141 bushels per acre. Adding MFP payments leads to an overall increase in average corn revenues of 25% for Kansas farmers.

The MFP program will make payments in three tranches, with the majority of the funds coming in August. If conditions warrant, additional payments will be made in November and January. Acreage eligible for MFP payments cannot exceed 2018 planted acreage.

Cash corn prices have risen in recent months, driven by supply uncertainty following heavy rains and flooding in the Midwest this Spring. Click on the following link to go to an interactive display on the Gro Intelligence web app.

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