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Business

Federal Relief Projected To Be One Third U.S. Net Farm Income In 2020

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Montana State University
Associate Professor Kate Fuller presents during a virtual conference hosted by the MSU Department of Agricultural Economics and Economics and MSU Extension on Nov. 13, 2020.

Agricultural economists project Montana’s farmers and ranchers will receive more than $535 million in government payments by the end of this year. That’s a 65 percent jump over 2019.

Kate Fuller is an associate professor in the Department of Agricultural Economics and Economics at Montana State University.

“The thing that I’m paying a lot of attention to is that in 2020, government payments are projected to be one third of U.S. net farm income,” Fuller said during a seminar on Nov. 13.

The U.S. Department of Agriculture estimates 2020 to be a record breaking year with nearly $40 billion worth of direct payments to producers across the country.

Fuller says government subsidies always play a role in Montana’s agriculture economy, “but this is very, very high.”

She says the spike is largely due to two programs funded through the CARES Act.

One is the Coronavirus Food Assistance Program or CFAP. It provides direct relief to producers who have faced price declines and additional marketing costs due to COVID-19.

The first round of CFAP paid nearly $10.4 billion to 651,099 applications across the U.S.

Over $175 million went to nearly 11,000 CFAP applicants in Montana during the first round of funding. A very large chunk of that, 85 percent, went to cattle producers.

MSU Associate professor Eric Belasco says the highest number of claims were along the Hi-Line while the highest claim amounts went to large ranches in places like Beaverhead County and southeast Montana.

“So larger ranches getting larger amounts per claim. I guess one thing I’ll note is that when we look at it nationally, even the largest claims in Montana are sort of very small in comparison to the rest of the country,” Belasco said.

The upper Great Plains, Midwest, California and Texas were the largest recipients of round one CFAP payments.

Round two of CFAP, which is ongoing, has already paid out $9.5 billion nationally, with nearly $200 million going to Montana producers, with more wheat growers benefiting.

Another federal coronavirus relief program that benefited the farm sector this year was the Paycheck Protection Program (PP), which offered forgivable loans to keep people on payroll during the pandemic. More than 1,600 PPP loans with direct ties to agriculture in Montana were approved through June. Over 70 percent of the loans were for less than $25,000.

“Over the last three years we can think of disaster aid as playing a pretty big role in the agricultural economy,” Belasco said.

That includes the $14 billion Market Facilitation Program during 2018 and 2019, which had some spillover payments through early July of this year. It provided direct payments to farmers and ranchers impacted by the trade wars between the U.S. and China, Europe and India.