June 27, 2019
Heavy, consistent rain and flooding so far this year have significantly obstructed planting for farmers in the Midwest and throughout the country. For farmers who cannot plant, there are a variety of options (including planting cover crops), but in some cases the details remain murky – complicating farmers’ planting decisions. This blog briefly discusses those options and provides resources for farmers facing the hard decisions of to plant or not to plant, and whether to put in a cover crop. Final planting dates have now passed for most crops, making the issue and decisions particularly urgent. Unfortunately, a great deal of policy uncertainty still remains. Though one key point – the timing on haying and grazing of cover crops – was clarified and improved last week, other basic decisions have remained hidden by the U.S. Department of Agriculture (USDA). Here, in a nutshell, is what we know.
For farmers with crop insurance policies, the basic option available is prevented planting coverage. Prevent plant coverage, as it is often called, gives a farmer a payment at a percentage of the initial revenue guarantee for the crop using the projected price. The percentage varies by commodity, but it is generally between 50 and 60 percent. In order to receive a prevent plant payment, a minimum of 20 acres or 20 percent of the unit must be affected by an insured cause of loss general to the surrounding area and that prevents other producers in the area from planting (i.e. flooding, drought).
Farmers must be unable to plant past the final planting date for that crop in their state, which is set by the Risk Management Agency (RMA), and refrain from planting during the late planting period, which is 25 days after the final planting date. Planting in the late planting period reduces the crop insurance coverage by one percent for each day in the 25-day late planting period. Farmers must notify their crop insurance agent of their inability to plant within 72 hours after the end of the late planting period.
Farmers may plant cover crops on prevent plant acres before, during, or after the late plant period. Farmers need to pay close attention to any residual herbicides that may inhibit the growth of the cover crop. For more detailed information, see the Practical Farmers of Iowa webpage.
USDA amended a major drawback on the cover crop option – penalties against haying or grazing the cover crop prior to November 1 – earlier this week. Using their administrative discretion, USDA set September 1 as the new date for when haying and grazing can begin without the penalty of a lower prevent plant payment. The new date applies, at least for the time being, only to the current crop year.
Therefore, a cover crop can be planted and full prevent plant payment received (50-60 percent of the initial revenue guarantee), as long as the cover crop is not hayed or grazed before September 1. If hayed or grazed before September 1, the crop insurance indemnity payment is reduced down to 35 percent of the guarantee. Given significant regional differences in climate and soil conditions, the old November 1 date has presented challenges for farmers interested in planting and grazing cover crops on their prevent plant acres.
RMA noted that the one-year change is intended to support the dual goals of supporting stewardship efforts on the land through cover crop adoption while simultaneously providing an opportunity to ensure forage is available for livestock this fall. The update allows producers to hay, graze, or cut cover crops for silage, haylage, or baleage on prevented plant acres on or after September 1, while still maintaining eligibility for their full 2019 prevented planting indemnity. To support the adoption of cover crops on these acres, RMA also announced that USDA’s Natural Resources Conservation Service (NRCS) is now holding special sign-ups through the Environmental Quality Incentives Program to support cover crop adoption on eligible lands.
One unsettled issue with respect to cover crops that can now be harvested after September 1 is how cover crops will be defined and what it will include. RMA and NRCS have yet to announce consistent details, with the highest degree of uncertainty being whether commodity crops planted for silage will count or not.
Related Congressional Activity
Prior to RMA’s announcement, eight midwestern Senators – John Thune (R-SD), Dick Durbin (D-IL), Joni Ernst (R-IA), Debbie Stabenow (D-MI), Deb Fischer (R-NE), Sherrod Brown (D-OH), John Hoeven (R-ND), and Tina Smith (D-MN) – sent a letter to USDA Under Secretary Bill Northey asking that USDA ease the restrictions on haying and grazing of cover crops on prevent plant acres, explaining that cover crops are an important soil building and risk management tool on crop acres prevented from being planted due to the wet spring planting season. The letter went on to argue that the November 1 haying and grazing date discourages the utilization of cover crops and requested that USDA modify the date to provide additional flexibility. The group also requested that USDA quickly move forward with implementing the farm bill revisions to cover crop termination guidelines. An announcement on that implementation decision is expected next week.
On the House side, members have also voiced concern and are taking action to reduce barriers to cover crop adoption on prevent plant acres. Representatives Dusty Johnson (R-SD) and Angie Craig (D-MN) introduced the Feed Emergency Enhancement During Disasters (FEEDD) Act (H.R. 3183) to provide emergency flexibility for haying and grazing cover crops in years of excessive moisture, flooding and drought. Similar to the Senate letter’s request, the FEEDD Act would allow farmers to plant a cover crop on prevent plant acres and hay or graze before the November 1 date. The National Sustainable Agriculture Coalition (NSAC) has endorsed the FEEDD Act and thank the co-sponsors for working to increase the use of cover crops on prevent plant acres, prevent soil erosion, and enhance soil health.
Market Facilitation Payments (MFP) are part of the bailout program created by the Trump Administration to help alleviate some of the negative effects of the ongoing tariff and trade conflicts on farmers and commodity and crop prices. The first round of MFP, launched in September 2018 and run by USDA’s Farm Service Agency, distributed over $9 billion to producers of corn, cotton, sorghum, soybean, wheat, dairy, hog, shelled almonds, and fresh sweet cherries.
The second round of trade aid payments includes $14.5 billion for the Market Facilitation Payments (MFP2), to be distributed in three payments in summer 2019, November 2019, and early 2020. In addition to the crops under the first MFP, MFP2 includes producers of alfalfa hay, barley, canola, crambe, dry peas, extra-long staple cotton, and more. A full list can be found in the USDA announcement. The payments will be set by multiplying a single county rate, which has yet to be determined, by a farm’s total plantings of those crops in the aggregate in 2019.
There was speculation that the Administration might use a portion of MFP2 to make enhanced prevent plant payments to farmers. However, Secretary of Agriculture Sonny Perdue announced on June 10, 2019, that MFP2 will not be used to compensate for prevent plant acres because the USDA Office of General Counsel determined that it would violate the legal boundaries of the program. Producers must have planted an eligible MFP2 crop in order to receive a MFP2 payment, according to the Department.
That legal reasoning is difficult to follow because the Department created MFP2, so could therefore amend it, and they are using the Commodity Credit Corporation (CCC) to pay for it. The CCC Charter Act allows, as its number one statutory purpose, to “support the prices of agricultural commodities through loans, purchases, payments, and other operations.” That clearly would apply to the current situation. Dubious as the USDA’s legal reasoning is, it appears the decision is final. By forcing farmers to plant in order to receive MFP2 payments, Secretary Perdue’s decision tipped the balance toward incentivizing planting, overproduction, and lower prices.
At the same time, however, Secretary Perdue announced that there is a possibility of a “minimal per acre” MFP2 payment to farmers that plant a cover crop on their prevent plant acres that is an eligible MFP2 crop. He updated that statement on June 26, saying there would be a payment amount announced soon, once the details of the plan go through the interagency clearance process. Hence, as of today, farmers are left with having to guess what the compensation rate might ultimately be.
One further complication for MFP2 is the fact that the CCC currently has $7 billion left in spending authority, an amount smaller than the $14.5 billion promised, especially when also accounting for normal CCC expenditures for the farm bill’s commodity and conservation programs. Congress routinely replenishes the CCC, but that normally occurs in the annual agriculture appropriations bill, which is unlikely to become law until late this year.
In response to the wide variety of disasters that hit the U.S. in the last year and a half, from volcanic eruptions in Hawaii to hurricanes in Florida, Texas, and North Carolina to wildfires in California, Congress passed and President Trump signed the $19.1 billion Additional Supplemental Appropriations for Disaster Relief Act of 2019, also known as the disaster bill. The bill includes $3 billion specifically for expenses related to crop loss, including enhanced prevented planting payments.
USDA is still in the process of implementing the disaster assistance authorized by Congress. With only $3 billion for a plethora of different disasters and types of assistance, it is unclear what proportion of the funding will be used for prevent plant type payments. To date, no details have been announced on that score, adding to the uncertainty for those farmers with millions of unplanted acres. Based on Secretary Perdue’s June 26 comments, we suspect those details will be announced in the coming weeks, along with the MFP2 details.
NSAC and our member organizations understand the difficulty that many producers face in not only making planting decisions this season, but also charting a viable path forward and holding onto their farms. We recognize that farmers across the country are struggling from the compounded impacts of a depressed farm economy, recent disasters and extreme weather events, and retaliatory trade tariffs which have shut down many markets that farmers rely on to stay in business. While many of these impacts are hitting hardest for commodity producers, the most recent flooding events are impacting specialty crop producers and farmers selling to local markets as well – many of whom are weeks behind on their planting schedules and will soon face similar financial and production challenges.
It is in moments like these, that federal policy plays a huge role in whether or not our country’s farm safety net will actually catch farmers in times of stress. While NSAC is hopeful that the recent policy improvements announced by the Administration will help some, it is clear that more needs to be done to not only strengthen the farm safety net (and make sure it works for all farmers) but also level the playing field for small and mid-scale producers who are particularly vulnerable and face additional barriers in withstanding financial stress. NSAC stands with our members and the farmers they work with day in and day out who are facing some very difficult decisions this season, and will continue to monitor and report on this important, emerging policy issue as more details become available.
At this late point in the planting season, farmers are facing several different scenarios: taking a prevent plant payment; planting in spite of the adverse conditions, either to try to salvage a crop or qualify for MFP2; or planting a cover crop, which will likely be eligible for some limited MFP2 payment, pending further details from USDA in coming weeks.
Here are several resources to aid farmers in making that decision:
Categories: Commodity, Crop Insurance & Credit Programs, Conservation, Energy & Environment