MFP Deja Vu

Secretary of Agriculture Sonny Perdue is on a MFP payment denial tour. Wherever he speaks these days he is usually asked whether there will be another round of MFP payments this year. His stock answer is that it’s not in the plan “ at the moment”. Unfortunately for the Secretary, he has a bit of a credibility problem. For several reasons people are skeptical. One reason is we have heard this before. Just last year we heard USDA officials repeatedly say farmers should plant for the market and not government payments. They said they did not want to influence planting decisions. How did that turn out? Payments were made and planting decisions were, at least in some cases, influenced. Now we are hearing the same words repeated. After last year those words lose much of their impact. Another reason people are skeptical is the messenger. Nothing against Secretary Perdue but we have learned that he often is not the one we need to hear from. When it comes to trade, we’ve learned to wait to hear from Larry Kudlow. When it comes to biofuels we wait to hear from Andrew Wheeler at EPA. Even as Secretary Perdue downplays the chances of more payments, his boss, President Trump has made it known he’s considering it. That brings us to the biggest reason people are skeptical. It is an election year. The coronavirus has created even more questions about the timing of China’s purchases under the Phase 1 trade deal. This certainly gives the Administration cover to grant another round of payments. I’ve felt all along the best indicator of whether or not MFP payments will be made this year are the polls. The tighter the political polls are as we get closer to the election then the greater the chances of payments being made. There’s no question the payments that have already been made have been needed and have helped a lot of producers. There’s also no question the payments will be scrutinized for years to come. They have probably led to a tighter basis in many parts of the country as producers have not felt the urgency to sell grain in storage. They have created some grumbling among farmers about the formula used to determine what parts of the country and which commodities get the most money. There’s no way the government can pay out such large sums of money, needed or not, without drawing some criticism. President Trump of course is no stranger to criticism and has repeatedly shown that it won’t keep him from doing something he wants to do. I’d say there is a good chance more payments are coming but the best advice I’ve heard given is don’t center your marketing plan for 2020 around them. Better to be pleasantly surprised than bitterly disappointed even if it’s not that big of a surprise.