University research shows ad hoc payments result in farmers holding more grain in storage. Published by the University of Illinois’ FarmdocDAILY, the research estimated the impact of the unprecedented surge in ad hoc farm payments from 2018 to 2020 on grain inventories held by farmers.
Under the Market Facilitation Program, U.S. farmers received approximately $23 billion during the 2018-19 and 2019-20 marketing years. While USDA designed MFP to avoid distorting farmer planting and production decisions, these payments may still have affected farm decision-making, in particular, the decision to store production after harvest. However, the research estimates the impact of MFP payments on the market-level inventories was modest. Even in the case of soybeans in December 2018, the market and quarter where with the largest impact, U.S. soybean stocks were only 226 million bushels or six percent higher than they would have been in the absence of MFP payments.
The conclusion: MFP did impact outcomes relevant to commodity price levels, though any potential market distortion was likely small.