Pace of coronavirus payments to farmers slows, reasons unclear

When its coronavirus relief program went into operation, the USDA was sending $1 billion a week to farmers and ranchers. A relatively small $400 million was paid last week and $300 million in the week before that, a pace so slow that there are questions whether the $16 billion earmarked for agriculture will be needed.

Some $6.55 billion has been disbursed since the USDA began accepting applications in late May, slightly more than 40% of the money. USDA officials were not immediately available on Tuesday to discuss why demand for aid seemed to be smaller than expected.

In 29 town hall meetings this month, "nobody ever said they had trouble applying for it," said Iowa Sen. Chuck Grassley during a teleconference. "Maybe [USDA] could have set a higher figure to go out."

The USDA has prorated payments to 80% of the amount producers qualify to get, with a second payment to come later this year based on how much money is left over. The approach, set when high demand was forecast, was intended so that everybody got something.

Economists Pat Westhoff of the University of Missouri and John Newton of the American Farm Bureau Federation said the structure of the program may be a factor. "Besides issues related to getting paperwork filed, it's possible that some people are not eligible because of AGI (adjusted gross income) rules or are seeing their payments limited by other rules," said Westhoff, head of the FAPRI think tank. "I do expect a lot of additional payments to be made in the weeks ahead. However, I'm no longer convinced the full $16 billion will be spent."

Hog farmers have collected $416 million, according to USDA, a quarter of the $1.6 billion that was expected to go to them. Specialty crop growers have received $228 million, a fraction of the $2.1 billion that was estimated as their share of coronavirus aid, said Newton, the AFBF chief economist. On the other hand, cattle producers have taken more than half of their portion; row-crop and dairy farmers have taken slightly more than 40% of their estimated payments.

"There may be some challenges with sales windows and inventory," said Newton. "With $6.5 billion going out, it's pretty clear it (the payment rate) has slowed dramatically." The USDA may have overestimated the amount of crops and livestock on the farm early this year when it apportioned funds among the commodities eligible for aid, he said.

The USDA set different payment formulas for row crops, livestock, dairy, and specialty crops but all are tied to sales from January 15 to April 15, as the coronavirus began to spread across the country and market prices for most agricultural products plunged. For row crops such as corn and cotton, for example, coronavirus payments are based on the smaller of half of a farmer's 2019 production or the amount of the crop that was unsold as of January 15. For cattle and hogs, payments are based on the number of animals sold from January 15 to April 15 and on-farm inventory from April 16 to May 14.

The Midwest dominates coronavirus payments at present. The top five states for payments are Iowa, with $679 million; Nebraska, $484 million; Minnesota, $420 million; Wisconsin, $384 million; and Texas, $356 million.