Special report: MFP

Chris: And it all comes down to this. 2 on, 2 out, bottom of the 9th.

Paul

Neiffer: The Farmers lead by 1.

Chris: Full count. Here comes the play at the plate. And it's the Ag View Pitch! Welcome everybody to the Ag View Pitch. And today you've got Chris Barron and Paul Niefer, and we're gonna have a little conversation about the MFP payment. But before we get started on that, Paul, I know you do a ton of traveling in the this time of year. Two things: give us a little introduction of yourself again for some of those that might not know you, because I know everybody across the country almost probably knows you, but give us a little introduction and then a little bit of what you're seeing in your travels across the country this summer.

Paul

Neiffer: Yeah, just a quick introduction again. Paul Niefer, I'm a CPA principal with CliftonLarsonAllen, which is a top 10 professional service CPA firm in the US. I write a column for Top Producer magazine called the Farm CPA, and then also have a blog that's called farmcpatoday.com that you can easily subscribe to. Every time we do a post, it just sends an email out. And then, you know, I'm on Ag Day and U.S. Farm Report and RFD-TV and so on. So I think by now most everybody that would be on this podcast will probably know who I am.

Chris: Man, you are famous.

Paul

Neiffer: Yeah, I don't know, or infamous depending on who you talk to. And then, uh, yeah, so far, you know, I haven't— I'm really coming up on my really big, uh, tour through the Midwest. I got a lot of speaking engagements coming up in the month of August. I was in Omaha, or went to Omaha about a month ago, flying from Minneapolis to Omaha. And I think I tweeted out once or twice how I never seen so many fields from the air where you couldn't tell if it was corn or soybeans. You know, by that time, middle of June, you know, normally the corn would be up, maybe the soybeans wouldn't be up too much, but you just couldn't tell. So I know there's lots of immature crops out there. And I think certainly, you know, if we go another month and similar to what you and I were talking about, I have heard some parts of the country now are complaining about a lack of water, not too much water.

But a lack of water. I'm starting to hear more and more of that, not just in your area, but certainly I think I've heard that from 6 or 7 different farmers slash bankers across the Midwest.

Chris: You bet. So, so I guess let's get to the topic of the day here. The MFP payment information is out now, and you probably study that segment of what's going on probably as much or more than anybody I know. And so I thought it'd be great to just have a little conversation with you on kind of your— what you're seeing, what, what information you think is important for us as producers to be aware of. And so let's kind of get started with that. Give us an overview and we'll kind of get started with the conversation.

Paul

Neiffer: Yeah, so there's really 3 separate types payments. There's what I call the non-specific or specialty crop, the non-specialty crop, which is I think most of your listeners— corn, soybeans, wheat, alfalfa, hay, barley. I mean, you name a grain crop, peanuts, etc. That's all what they call the non-specialty crop. And that's going to get paid a per acre amount. And we'll go into that here in a few minutes. And then we have the hog farmers and the milk producers, they have a separate payment schedule. And we'll go through those rules too. And then finally, and probably not too many on your call where these would apply to, but you have what I call the specialty crops: sweet cherries, ginseng, cranberries, those type of crops. And there's a couple more I'll go through here in a second. They have their own separate limitation, but let's go through them, what I would call the major one.

So for those farmers that typically would plant corn, soybeans, wheat, For the amount of payments that you planted this year, you're going to have what's called a county payment. So for example, I'm actually going to look up right now as we talk Buchanan County, which is where Chris is at, Buchanan County, Iowa. And I probably should have had this up quicker. Hold on a second here. I got it right here. I just got to get down to Iowa. You might want to edit that out, but as far as the delay, but Buchanan County.

Chris: We've had people ask for that. We don't do that. We let you go through it in pain.

Paul

Neiffer: Okay. So Buchanan County, Iowa is $56 per acre. And what I've seen for Indiana, Iowa, Illinois, Missouri, Minnesota, Nebraska, you know, it seems like the range I'm seeing on the low side is, is low 50s, high 40s. So Buchanan County is actually a little bit on the low side, up to about the mid-80s.

Chris: Let me ask you, cause this would be relative to other growers probably too. So, say they farm in one county, well, say they farm in four counties, so they're in that middle county and there's some adjoining counties. For example, pull up Benton County.

Paul

Neiffer: Benton County is at $72. So like you say, Buchanan County is $56. But if you happen to be in Benton County, you're $72. And my understanding is you're going to be paid on the acres in each county.. It isn't where the, um, it isn't where you have the administrative function, but it's going to be based on the actual acres that are in that county. So, uh, so if you're farming in both Benton and Buchanan, and I'm not sure what the other counties, Cedar, et cetera, you'll, you'll go ahead and, and get paid based on the acres that are actually in that specific county.

Chris: Right. What about, um, what, what about the payment distribution? So let's say, you know, I know they were talking a third a third and a third. Can you talk about that?

Paul

Neiffer: Yes, so I was going to come to that. So what will happen is you're going to get the greater of $15 per acre or 50% of that payment rate. So let's take Buchanan County, it's $56. So if we take $56 times 50%, that's $28. $28 is greater than $15, so you're going to go ahead and and be paid $28. And the sign-up period starts next Monday, the 29th. You have all the way until December 6th to go ahead and sign up for it, but I think everybody would probably go ahead and sign up for it right away. There's no reason to delay. And then the actual payment will be—

Chris: Is that pretty simple? Let me ask, is that pretty simple to sign up for, or is there going to be huge lines at the FSA offices on Monday morning?

Paul

Neiffer: I have a feeling, well, I'm not sure if you can sign up for it online. I'm not aware of that, or at least I didn't get that far on the details, but I would say Monday morning there might be a little bit of a line. So that'd just be a warning that certainly there may be some lines related to that. That would be something you might have to watch out for. Okay, and then the payment is, is again based on the number of acres that you planted. If you had prevent planted acres and you were able to plant a qualified cover crop, which I think a lot of farmers out there, if they had prevent plant, they probably did plant some type of COVID crop, but as long as they planted a cover crop, you're going to qualify for $15 per acre on those acres.

So that's, that's not a bad deal because a lot of the counties across the United States, like every county I think listed in Montana, is only getting $15. So, you know, if you had your prevent plant, as long as you have a cover crop, you're going to get the $15. But that cover crop had to be planted by August 1st, which is going to be next Thursday if my memory's right. It's, uh, I know it's— you got about 5 days left in order to— or 6 days to to get that planted if you haven't done it yet.

Chris: So, um, can I ask a question on that one then? So if, for example, we've got, um, quite a few growers in counties that have planted, say for example, corn that's going to go to feed, uh, to say dairy and that kind of thing for, for that, so their, their limit, they're going to get 15 It's not, it's not, uh, if it's prevent plant, planted corn, and they're gonna— that, that feed's gonna go to a dairy, let's say, the most they can get is $15 on that first payment.

Paul

Neiffer: That would— well, I'm just reading the actual verbiage that we got from the USDA on this. So, um, file claims. So did they file a claim? They filed a preventive planting claim, is that correct? Yes. And then they planted an MFP eligible cover crop, which—

Chris: Correct. Yes. Which is corn in a lot of counties.

Paul

Neiffer: Right. So in that case, yes, they're only going to qualify for the $15 payment even though that county might have had a $56 payment like Buchanan. Once they filed that prevented planting claim and then planted a cover crop, which in your case, like you say, is corn, probably for silage or something. That, that's going to go ahead and they're only going to qualify for the $15.

Chris: So what, what's the cap on that for those counties then?

Paul

Neiffer: Well, I guess I'm not sure what do you mean by cap on that.

Chris: So if they get $15 an acre on that first payment, is there a second and a third payment or what's—

Paul

Neiffer: Well, for the, are you talking about the COVID crop or are you talking about the other? Yeah, they're just going to get $15 in August and they're done, just like any other, any other county in the US that had a $15 rate. They'll get their $15 in August and they won't get anything in November and they won't get anything in January. So that's, that's how it works.

Chris: Yep, so just for clarity, $15 per acre on a prevented planted acres with an approved cover crop are going to max out at 15 one-time payment.

Paul

Neiffer: Yep, exactly.

Chris: Okay, just for clarity.

Paul

Neiffer: Yep. No, that's, that's good. And then I think, uh, let me jump into milk and hogs, and then we can jump back to some of the other stuff. So milk is going to get paid 20 cents per hundredweight based on your production history, and I'm fairly certain that's going to be a 1-year production history, though they didn't really say from what date to another date, or at least I don't remember seeing that, but I'm pretty sure it'll be on their annual history. And then hogs are going to be paid $11 per head. They get to pick any date between April 1st and May 15th to do their counts. So if they do a count on, on, let's say April 15th, they did a count May 1st and May 15th, whatever date has the highest number, they get to use that date. So they get to pick any date between April 1st and May 15th. And that's for all the pigs.

So doesn't matter if it's a sow, boar, a gilt, you know, a little piglet, it's any, any pig that's alive. So they'll get paid $11. And my reading of this is that's the payment they're going to get. It isn't— they didn't really clarify that well in the update as to— I don't think, you know, like on the non-specialty, it's $15 or 50%. And then the remainders in November and January, it looks like for the milk and the hog guys, they get all the payment up front and they don't get any extra payment later in the year. That's the way I read it. Now, maybe I read it wrong, but that, that's the way I read it. So, and then we have our specialty crops, which I think most of your readers aren't going to be there, but nuts are going to get $146 per acre. Cranberries get paid $641 per acre. You know, a ginseng farmer, now they don't grow very many acres, but they get $5,700 per acre.

Sweet cherries get $1,555, and then table grapes get $625. Now the other thing that's positive is under the old MFP, you were limited to $125,000 payment per entity slash per person. This actually doubled it, so for the corn, soybean, wheat growers, the typical grain growers, uh, each entity, you know, corporation, LLC, LLP, not a general partnership— there's no limit on a general partnership— that then drops down to the individual. The payment limit for those is going to be $250,000. And then on the milk and the hog farmers, they have a $250,000 payment limit. And then the specialty crops, again, cranberries and so on, they have a $250,000 payment limit, but the overall payment limit is $500,000.

So, you know, if you got hogs and, hogs and, you know, milk and you also have grain and you have multiple entities, then as you drop down to that one person, let's say that they, you got 3 people that own all these entities, you know, each entity may qualify for the $500,000, so to speak. But then you got to drop down to the 3 individual owners. So in that case, if it's 3 individual owners, the maximum payment they're going to have, if they don't have any livestock or any milk, is going to be $750,000. If they have livestock and milk, then it'd be $1.5 million. Even though the entities might qualify for $5 million, you ultimately drop down to the individual. And there is a one change that the disaster bill made a change, and that's Under the old rules, you were still subject to the $900,000 AGI, adjusted gross income limit.

Uh, now, as long as at least 75% of your income, your gross income is from farming, you can make $5 million, $50 million, $100 million, and you're going to qualify for the payment. Now, likely anybody making that amount of money, it's not going to be 75% for from farming, but it could be. So those are, I think, I'm just looking here at my blog post. I did a blog post earlier today when it first came out, and after I reviewed it, I think I pretty well have covered most of the rules for you, Chris.

Chris: Okay, um, so just for, uh, reference, let's say, you know, early in the discussion here we talked about a, say for example, a county at $56 an acre, that would be— a producer is going to be up against the limit then on about 4,800 acres of corn, soybeans, you know, whatever fits that non-specialty crop.

Paul

Neiffer: Yeah, yeah, because they're going to be able to go to 250, right? Exactly, exactly.

Chris: Okay, okay.

Paul

Neiffer: Now, if— but let's say that's assuming you're a corporation or an LLC or an LLP. Let's assume that you're a general partnership and you're farming, let's say, 10,000 acres and you have 2 owners, you know, they'll qualify for $500,000 because there's no payment limit at the partnership level, whereas there is a payment limit at the corporation or at the LLC level.

Chris: Okay.

Paul

Neiffer: Like you say, you'd need quite a few acres. You're going to need 4,000 to 5,000 acres before you're going to hit the payment limit for any NIT.

Chris: Yeah, it gives a lot of room for a majority of the producers then to—

Paul

Neiffer: Right. To feel adequately covered.

Chris: And stuff, so.

Paul

Neiffer: And we know, you know, you're gonna have those environmental groups, they're gonna be issuing a listing of every single farmer that collected more than 250,000. We know that's coming.

Chris: Yeah, and that was my next question, and I'll go ahead and still pose it, is that, you know, do you have any ideas or any thoughts? I mean, we've seen this in a few areas already, from last year's MFP payment going out where people will post, you know, the links to the county payments and you open them up and, and, you know, it's a lot of the, you know, growers, the sophisticated growers that are probably listening to this podcast, you know, their margins are tight. They're trying to keep their operation in business. They're doing the right things. You know, are there any things that we can be doing to do a better job of communicating with some of these people that are really having an issue with, with these payments?

Because, you know, when you look at the other side of this, you know, when we have these trade challenges and everything, and we're trying to just make it so the majority of these farm operations can survive, you know, what's your— do you have any thoughts on that, on anything?

Paul

Neiffer: I think, you know, about 2 weeks ago, if my memory's right, you know, there was an article, an AP article, And when I first saw the headline, I thought, oh, this is really slanted against the farmer. But actually, it was fairly unbiased. And they also were communicating with Bernard Peterson, who happened to be, you know, Peterson Brothers was a top producer of the year about 4 or 5 years ago. And he did a very good job, I thought, at least the quotes that were in there explaining, hey, yes, these are large payments, but we suffered a loss of at least $2 or whatever per bushel. This is just partially providing a repayment back to us based on our losses.

So I think as long as the people out there understand, hey, we're losing, you know, $2 because of these tariffs, and we're being paid back maybe $1 of that or 50 cents of that or whatever the number might be, if we can come up with some good numbers that are based in reality, I think people understand that. I mean, I, I think it's just a matter of getting our, our information out there. So I was actually happy to see that article in the AP. I mean, it could have been a whole lot worse. I mean, I'd rather not have an article, but if you're going to have an article, at least it's nice that it was not, you know, slanted directly toward the environmental side.

Chris: Yeah, because to the average consumer, a $250,000 payout looks like a ton of money, but You know, if you look at the amount of revenue given up and the amount of expense to put a crop in and take a crop out, um, like you said, you know, it's maybe 50 cents on the dollar on the, on the high end.

Paul

Neiffer: So yeah, and I think that's what you need to communicate. If somebody's talking to you, you can say, yeah, we got a $250,000 payment, but by our calculations, we lost at least $750,000 or a million just because of the, you know, the tariffs which are beyond our control. So I think when people understand that, I think that that's how I would go.

Chris: Okay, any other—

Paul

Neiffer: you don't want to get defensive about the payment, you just want to explain, hey, this payment is just really partially reimbursing us for the cost of the tariffs.

Chris: Yeah, one of the things I've tried to do with some folks, um, in, in leadership roles that communicate to a lot of people on the consumer side of things is just to show them, you know, sort of what our costs really look like and really how tight the margins are. I still don't think a lot of people clearly understand the amount of throughput in terms of dollars and cents that go on, on a typical farm. It's just not understood.

Paul

Neiffer: I, I think You are starting to see more articles. For example, the Wall Street Journal, I've noticed lately, I'm a subscriber to the journal, I've seen more articles in the last 3 or 4 months about the stress on farmers. So I think, you know, as that information gets out there, I think the consumer is starting to understand, you know, that the farmers are not getting rich. You know, I think back in 2008, '09, '10, '11, '12, '13, '14, I think the perception by the consumer is the farmer was making a lot of money. Whether that was the reality or not really doesn't matter. The perception is the key. I think now the perception is that farmers definitely are not doing as good as, as everybody thought a few years back, and they know that. And I think a lot of people have neighbors that they see are suffering. So I think that's helping the dialogue.

Chris: Anything else that we haven't discussed on the MFP payment or any other observations, comments you want to make as we get close to wrapping up here?

Paul

Neiffer: No, I think, I think like I said, we've covered, you know, the— there is, if you go to the website, well, if you go to farmcpatoday.com, the very first sentence you can click on there in the, in the post that I just posted actually goes through, it takes you over to the government's website. It's farmers.gov/manage/MFP. But if you go to our website farmcpatoday.com, it automatically takes you there. So I think I've covered everything in the blog. I've covered everything on, on the talk here. And, and if there's something else that comes up, I'll definitely send you a text or give you a call.

Chris: That would be great. And if people want to get a hold of you, they can just reach you through that farmcpatoday.com.

Paul

Neiffer: How do they get a hold of you? Yeah, because right on there you can click on it, it'll send an email to me. So, uh, or they can, uh, you know, give me a call. I don't mind sharing my cell phone number, it's 509-961-9739.

Chris: Great. Hey, uh, thanks a lot. You're kind of the MFP expert here today, and, and, uh, For a lot of those that know that out there, you're the, you're the CPA expert too on the farm side of things, and we appreciate your time and your information. You do a great job, and, and everybody really appreciates all you do for the industry, Paul. So thanks a lot.

Paul

Neiffer: You're welcome. Thanks, Chris.

Chris: You bet. Well, thanks everybody for joining us on this edition of the Ag View Pitch, and we will catch you next time.

Paul

Neiffer: Thanks for joining us on today's episode of the EggView Pitch. As always, you can reach out to us at cbarron@agviewsolutions.com or duanel@netins.net. We'll catch you next time on the EggView Pitch.