About This Episode
Paul Neiffer joins Chris Barron the day the continuing resolution passed both chambers, with $30.78 billion of aid for agriculture. Roughly $18 to $19 billion is disaster aid split between the 2023 and 2024 crops, about $8 to $9 billion each, plus $2 billion set aside for livestock. Growers who collected crop insurance get topped up the way 2020 and 2021 ERP worked, so an 80 percent policy is recalculated as though it were 95 percent.
The economic assistance piece is about $10 billion. Neiffer calls it Farm Act part two: the October version paid 60 percent of calculated damage, this one pays 26 percent, but adds a minimum payment worth 8 percent of the 2014 reference price times the 2024 PLC yield. Corn works out to $43.80 an acre against a $42.35 minimum, soybeans $30.61, wheat $31.80, cotton $84.70, sorghum $41.85, oats $78.40, barley $21.76 and peanuts $76.30.
Payment acres are 2024 planted acres plus half of confirmed prevent plant, so a 2,000 acre corn and soybean farm collects roughly $60,000. The limit is $125,000, doubling to $250,000 if farm gross receipts, before expenses, exceed 75 percent of total gross receipts, and each program carries its own separate limit. USDA has 90 days from signing, around March 20, to pay. Barron notes that historically a farmer keeps about 30 percent of ad hoc payments; the rest flows through to inputs, rent and equipment.
“There's $30.78 billion of both disaster aid and economic assistance that's going to be provided for ag.”
— Paul Neiffer
Key Takeaways
The bill provides $30.78 billion: about $10 billion of economic assistance, roughly $18 to $19 billion of disaster aid, and $2 billion for livestock.
Economic assistance pays 26 percent of calculated damage, down from 60 percent in the October Farm Act, but adds a minimum payment floor.
Estimated per-acre payments: corn $43.80, soybeans $30.61, wheat $31.80, cotton $84.70, sorghum $41.85, oats $78.40, barley $21.76, peanuts $76.30.
Payment acres equal 2024 planted acres plus 50 percent of confirmed prevent plant, so 2,000 acres of corn and beans is roughly $60,000.
The $125,000 limit doubles to $250,000 when farm gross receipts exceed 75 percent of total gross receipts, and disaster and economic aid carry separate limits.
Disaster aid tops crop insurance up toward a 95 percent equivalent, and de minimis uninsured acres no longer drop a farm to the 70 percent payment level.
Full Transcript
Chris
Barron: Welcome everybody to another episode of the Ag View Pitch. This is going to be a quick one, but we do have some breaking news. We have with us today Paul Niefer. Paul, how's it going?
Paul
Neiffer: Doing great. Getting ready to go play some pickleball, so hopefully I don't get injured.
Chris
Barron: So yeah, awesome. Well, typically we don't jump in with, with stuff, but there's some kind of big news. Talk a little bit about what, what the listeners need to pay attention to right now.
Paul
Neiffer: Yeah, so the, both the House and the Senate, as we tape this, both the House and the Senate have passed the continuing resolution. We know that President Biden is going to go ahead and sign it. So, so this is the law. There's $30.78 billion of both disaster aid and economic assistance that's going to be provided for ag. On the economic assistance, it's about $10 billion. And then the remainder would be disaster aid. Now, We'll spend most of the time talking about the economic assistance today, but over on the disaster aid, they allocated about $18 to $19 billion for what I call '23 and '24 disasters.
So like Chris, you and I know in our '23 crop that we had, we had some drought, you know, that, that likely under the ERP provisions, which we think is what USDA will implement, that, you know, for us personally, because 'cause I know in Washington I had drought, in Missouri I had a windstorm, and in Iowa I had a drought. So I would qualify for that disaster aid for '23. Now '24, I had good crops, so I'm probably not gonna get anything, but it's gonna be similar to 2020 and '21 ERP. Now the benefit too is some farmers were getting penalized on the '22 ERP because they weren't able to insure all their acres. You know, they might have had 3 acres that for whatever reasons they couldn't be insured. So they got penalized. They couldn't get a payment at the 90% level. They got it at the 70% level. This continuing resolution has a provision that says you can have de minimis acres.
Now, USDA is going to calculate what is de minimis, but you can have de minimis acres that are not covered by insurance and you're still going to get paid at that 90% level or up to the 90% level. So, so that part is good on on the aid. Now, specifically, there is $2 billion that's set aside for livestock. So, you know, the livestock-type disaster aid is going to be there too. So, you got $2 billion for livestock. There's another couple billion that's for various programs, you know, just refunding, replenishing those programs. There's also for small states. I think it's like Delaware, Connecticut, Rhode Island, that USDA will provide about $250 billion of aid to them, and then the state will actually come up with their program.
But the key one for, you know, our farmers that are listening on here, on the disaster aid side, there's about $20 billion that over the next few months is going to be sent out to farmers. Before I go on the economic side, anything you wanted to ask me on that, on that, Chris?
Chris
Barron: Yeah, I do. So From the disaster, I mean, obviously, like you said, there was— we had quite a few clients last year that were in a drought zone in '23. So you, you pretty confident that there's going to be some sort of compensation there then for those that were in that drought zone?
Paul
Neiffer: Yeah, I think for those that collected crop insurance, you know, they'll get topped up like they did on the 2020 and '21 ERP. So instead of being a calculate— so let's say they had 80% insurance, they'll— USDA will recalculate as if they had 95%, you know, so you get that extra 15%.
Chris
Barron: And if they were 85% and does that go off just the regular revenue protection, that doesn't include any of the other buyups or anything?
Paul
Neiffer: As far as I know, it's just on the revenue protection. I don't know if SCO and ECOs are included. My memory is it was more just based on the original, the original RP, the regular RP. Now also there is— I'm not sure— there was $30 million that was set aside for reimbursement of crop insurance. Now, I wasn't sure if that's— I think that may be more related to the crop insurance provider than it is for the farmers. So I think also they'll get their crop insurance premiums reimbursed too.
Chris
Barron: So, and those who had excellent crops in '23 don't plan on disaster, right?
Paul
Neiffer: But if they had a, you know, so like southern Minnesota in '24, northwest Iowa, you know, they got rained out and you had crappy yields and so on, you know, like '24, that'd be disaster for the '24 crop, right? But remember, you're going to get about $8 to $9 billion for '23 and $8 to $9 billion for '24. So this is a '23 and a '24, uh, disaster aid relief. So, uh, so, you know, you— this is the— not the first time because we had '20 and '21, but you're going to get both '23 or '24 depending on your situation. And many farmers will qualify for both and several farmers won't qualify for anything because they had good crops on, on both years.
Chris
Barron: Right. Okay. So I think that kind of for now at least, you know, gives us a pretty good idea on the disaster side. Talk a little bit about the economic side, the $10 billion that's been talked about a lot.
Paul
Neiffer: Yeah. So again, I'm a CPA, I'm a number nerd. So this is, this is actually the fun stuff for me. So it's, I basically call it the Farm Act Part 2. Remember back in October I think it was October 18th, we had the Farm Act, the original Farm Act that was introduced, and that payment was based on a 60%. So you calculated the damage and then you got 60%. This payment is now calculated based on 26%. So it's dropped about in half. However, on top of it, they added in a minimum payment. And that minimum payment is, is essentially 8% of the reference price from 2014. So like in corn, $3.70 times 8%. What would that be like? $0.30 roughly times the current 2024 PLC yield. So like on corn, I think that minimum was like $42.35. The actual calculated payment amount— again, this could change a little bit because USDA still has to go through the formulas— is $43.80.
So I think what I'll do is I'll go through just, you know, go through some of the major crops as far as the payments that we know. Corn, you're going to get $4,380 per acre. Now, this doesn't matter if your APH is 250 or your APH is 50, you're going to get $4,380 per acre. And I already know some people are saying, hey, my APH is 250, why aren't I getting a larger payment? Well, You know, you have a higher payment. I mean, you have a higher APH, so you might be making more money than that farmer with 50, you know, so they didn't, didn't reallocate based on APH. Now soybeans is at $30.61. Wheat is at $31.80. Cotton is at $84.70. Rice for long and medium is at $71.37. Sorghum is at $41.85. Oats is $78.40. Barley is $21.76. And then peanuts is $76.30. We sort of know those numbers right now, plus or minus a few cents for, for the final numbers.
Now barley, interesting, when you went through the calculation that was in the law, they would get no payment, but because of this minimum, they get the $21.76. Now, the other Title I, and this is only for Title I, so it's not for fruits and vegetables, this economic assistance is strictly for Title I. So, you know, you have dry peas, lentils, chickpeas, rapeseed, canola, safflower, and so on. Those minimum payments, the lowest sesame at $5 an acre, but most of those payments are going to be between $15 and $25 per acre minimum. The actual calculated amount, because USDA has to go through and calculate those payments, might be higher. So I think most farmers that grow Title I crops are, you know, what we were talking about. Now, the acres that you get is the acres that you planted in 2024 and plus 50% of any confirmed prevent planted acres.
So if you planted 2,000 acres and you're a corn and soybean, 50/50 corn and soybean farmer, yeah, 2,000 acres, you're going to get about $60,000. Of aid. So I'll just hesitate. We'll go into the payment limits and some of that stuff here in a second.
Chris
Barron: So I have a question on the payment limits, which is I'm going to jump to right away. Okay. Getting a disaster payment that amounts to a fairly sizable number and then you're getting this other payment.
Paul
Neiffer: Separate payment limits. So you're not going to be curtailed. It's a completely separate payment limit. So economic aid will have its own payment limit. '23, I'm going to call '23 ERP own payment limit, '24 ERP own payment limit.
Chris
Barron: So, so you could— so, so an entity could get up to $125,000 on the— on this economic, you know, well, technically they could get up to $250,000.
Paul
Neiffer: So let's cover that right now.
Chris
Barron: Okay.
Paul
Neiffer: So the regular payment limit, if your farm gross receipts not AGI, you know, not after expenses. So before expenses, your gross receipt, if it exceeds 75% of total gross receipts, then your payment limit goes up to $250,000. So but if you're under, you know, that 75% level, then you only get the $125,000. So for most farmers that are Schedule F farmer or general partnership, LLC, S corporation, in my opinion, probably likely going to be pretty easy to meet that double payment limit. Now, you're not going to get a double payment. I've already had that question multiple times. Well, if I qualify, I'm going to get twice the payments. No, you just have a higher payment limit. So if your calculated payment is under $25,000, this is irrelevant. Don't, don't worry about it. But if you're over that number, then it's important.
Now, C-corps are typically pretty easy to meet that payment limit, but then you got to look at each of the owners. Likely you have to look at the owners and and then you have to determine whether they are a farmer or not. So the wages that get paid from that C corporation, that qualifies as farm income. So that's helpful. But a lot of them have spouses that work outside the farm. You know, they work for a hospital or a school district. That income is not going to be farm income. So they may or may not qualify for that full extra payment limit.
Chris
Barron: Mm-hmm. Okay. So what else do we need to know, I guess, as far as limits or any other details?
Paul
Neiffer: Yeah, I think I think that's the key. You know, obviously, we know what the estimated amounts are, the final amounts are going to be determined by USDA. So don't hang your hat on that these are the actual, actual numbers. But based on what we know, I think we're pretty close. You know, USDA is required to pay this within 90 days of signing of the act. So that's they have to have it paid by around March 20th. You know, some people are saying, well, is it going to be paid in '24? No, there's no way the USDA in the next 10 days can get all the details worked out on this. I mean, they still have to go through and calculate the actual payment calculation for all these other Title I's that are not in the, in the actual CR as far as the formula. So they still have to do that. So, so I think You know, we're going to get an extra $10 billion of economic assistance. Is it enough?
Well, you know, I don't want to sound like a Debbie Downer, but I mean, farmers definitely made a whole lot of extra money in '22 just because of the Ukraine crisis. I mean, you know, I'll go back to the Bible. We have 7 lean years followed by— or 7 good years followed by 7 lean years. You know, we maybe should have known that this was coming. Maybe not to the degree it's come, but we need to, you know, that's a, that's a whole different podcast.
Chris
Barron: Yeah, right. So yeah, yeah. And I think this will soften the blow a little bit for a lot of operations. I think I would agree wholeheartedly that it's not a fix, but it— no, no, but it, you know, and the other frustrating thing, this is another podcast too, but is that, you know, we can, we can take these funds, and we need to, but a fair amount of those dollars go right through the producer's hand, right into everybody else's hand in the industry, you know. So I mean, I think typically what we've seen, at least over the years, whenever those funds, those ad hoc payments, uh, show up, usually the farmer keeps somewhere in the— to the tune of about 30% of it, and the other 70% flows right through the system. Yeah, all the other categories, whether it's interest rates or land rents and inputs and equipment.
Paul
Neiffer: Yeah, equipment.
Chris
Barron: So, yeah. So I, you know, I think it's a good, good thing to an extent, but it's, it's, you know, it's one of those catch-22 deals, you know, and, but I think you're right. You know, when we have good times, we got to make sure we're preparing for the, for the difficult ones for sure. Yeah. Give you the last word here and we'll wrap this up.
Paul
Neiffer: I think the last word is that Congress is dysfunctional. We're going to see, you know, in the next 6 months, a lot of things that need to be done. And it's going to be interesting to see if it's— how well it's done. Oh, I guess the one last word, and I think you'll put it in the show notes and so on, but I am providing a free webinar on my blog site, farmcpareport.com. So just go to farmcpareport.com. That will be posted early Monday morning. It is a free webinar. It's about a 20-minute webinar. And I provide a slideshow that goes into more details than we covered on this. But for those that would like to take a look at that, I would certainly suggest that they go over to my blog, farmcpareport.com, and take a look at it there.
Chris
Barron: Awesome. Will do. And we'll put that link in the— I'll have Mac put that in the show notes there too. But Hey, Paul, as usual, you're on it, man. Really appreciate it. You do a huge service to producers. And just on behalf of the producers, thank you for all you do because it's a big deal.
Paul
Neiffer: So, well, and I wish everyone out there a Merry Christmas and, you know, hopefully have a happy, good New Year. This will maybe be a little bit of a start on it.
Chris
Barron: So, yeah, yeah, I think it's a Christmas present probably for a lot of producers and it'll It'll definitely help and it's going to ease the lenders' minds a little bit. Yeah. Yeah.
Paul
Neiffer: I'm going to— this is more of a Christmas present for the lenders maybe than the producers.
Chris
Barron: Yeah, I think it's peace of mind a little bit for them. But I, I am definitely going to get a, get a couple of lenders' opinions on here next week on this topic because the question I have is, is this is, you know, this is income that is going to come in in '25. Do you show that on the balance sheet as a receivable or or not, you know. Yeah, yeah.
Paul
Neiffer: Not that that's— I think technically since it was passed in '24, I mean, at year end you probably could be showing it as a receivable. But I would be interested to see how lenders— I know lenders, I've talked to some lenders or seen comments on many lenders that they've taken the farm number and sort of factored that in as far as their renewal. So now you're going to have to tweak that down by about 50%. So we'll see how that affects some of those renewals.
Chris
Barron: Yeah, it'll be interesting to get some opinions on— get 2 or 3 lenders on here and let them arm wrestle or something. Yeah, exactly. Sounds good. All right. Well, hey, again, Paul, thank you very much. You need to go play pickleball, so have fun.
Paul
Neiffer: I will. Thanks, Chris.
Chris
Barron: See you later.
Paul
Neiffer: See you.