Farmers in the US are on track to collect the largest amount of government aid since 2005 after a growing season roiled by trade uncertainty and historic flooding.
Federal aid and direct farm payments this year will total $22.4bn, the highest in 14 years, accounting for nearly one-quarter of total farmer income, according to the US Department of Agriculture (USDA).
The burgeoning share of federal assistance will help drive US farmer income to an estimated six-year high of $92.5bn in 2019, even as gross income declines because of the US trade dispute with China and spring floods that reduced corn and soybean production.
Farmers impacted by this year's floods were able to collect various disaster assistance payments that rose to an estimated $1.75bn, a four-year high. But funds from President Donald Trump's trade relief package accounts for more than two-thirds of total federal aid disbursed to farmers this year.
The Trump administration earmarked $28bn in trade aid relief for farmers during the last two years to mitigate losses from the trade dispute with China. Farmers this year are estimated to receive about 75pc of the $14.5bn of direct cash payments issued under this season's Market Facilitation Program (MFP) as a part of Trump's relief package, according to the USDA.
"The magnitude and the sheer size of the payments, especially the government payments, is unusual," USDA senior economist Carrie Litkowski said.
But federal aid has not been enough to keep farms afloat in 2019 as growers amass more debt amid relatively stagnant cash receipts. Chapter 12 bankruptcy filings — a form of reorganization specifically for farmers — climbed for the fourth-consecutive fiscal year, according to US federal courts data. Farmers' ability to pay down debt continues to become increasingly difficult, and farm lenders have taken notice.
Bankers have signaled they will limit the amount of credit extended to farmers next season, said Arlan Suderman, chief commodities economist at New York-based firm INTL FCStone. Restricted credit would encourage farmers to limit costs — such as fertilizer and pesticides — and plant more soybeans instead of corn in 2020, Suderman said.
Nevertheless, farmers have become increasingly optimistic about their long-term prospects on expectations of a favorable trade agreement with China and industry expectations MFP payments will continue through next year.
"We are anticipating that the Trump administration will do all it can to keep the ag sector as healthy as it can," Suderman said.
By Connor Hyde
