Multibillion-dollar corn and soy payments possible due to coronavirus

Low market prices on this year's corn and soybean crops due to the coronavirus could trigger up to $7.2 billion in USDA subsidies to corn and soybean growers, said five university economists on Wednesday. "In estimating the damage that U.S. crop agriculture has suffered, it is important to take into account the payments made by existing farm safety net programs," wrote the economists on the farmdoc Daily blog.

Traditional farm subsidies have been overshadowed by the Trump administration's use of stopgap payments totaling $23 billion to farmers and ranchers to mitigate the impact of the trade war on 2018 and 2019 production. The $2 trillion coronavirus relief package included money for agriculture. Agriculture Secretary Sonny Perdue said producers would get $16 billion in cash through one-time programs. Unofficial reports say row-crop farmers would get $3.9 billion.

"Deepening concern exists over the demand destruction caused by the COVID-19 pandemic," said the economists, so they compared corn and soybean futures prices before and after the coronavirus became widespread. The crops would have generated some $101 billion in revenue before the coronavirus. At present, the two most widely grown U.S. crops would fetch $83 billion to $88 billion.

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Subsidies would range from $3.9 billion to $7.2 billion, the economists estimated, depending on the correlation between futures prices in May and cash prices when growers sell their crops. They cautioned that their estimates were tentative because the harvest is still months away. Yields will not become clear until September. "To make payments based on estimated damage before then is to incur substantial risk that payments will either be too large or too small."

The blog's authors were Carl Zulauf of Ohio State University and Gary Schnitkey, Nick Paulson, Krista Swanson, and Jonathan Coppess of the University of Illinois.