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K-State Today

July 9, 2019

Farmers compensated unevenly by Market Facilitation Program

Submitted by Bradley Galka

K-State's Online Journal of Rural Research and Policy, in the Chapman Center for Rural Studies, edited by Bonnie Lynn-Sherow and Bradley Galka, published a new article, "State Level Revenue Analysis of the Market Facilitation Program," on June 25 that revealed some surprising results.

The article shows that corn and soybean producers disproportionately benefited from the federal government's Market Facilitation Plan, or MFP in 2018. The MFP is a federal initiative that seeks to compensate farmers for the financial losses they have incurred as a result of the ongoing trade war with China. The research team of six agricultural policy specialists determined, however, that government payments to farmers did not accurately reflect the true value of their crops.

The authors note that MFP payments were hurriedly based on production levels from the year 2018 alone. Most producers in that year experienced good weather and a better-than-average crop yield. As a result, the value of their crops appeared artificially higher than normal. The authors' efficiency analysis of the MFP payments shows that average producers in 12 out of 14 major corn and soybean producing states were overcompensated in comparison to their revenue from 2017. Conversely, an average producer in states that experienced drought in 2018 was under-compensated, with the value of their crops being based on the output of an unusually unproductive year.

The researchers concluded that had the government based the value of MFP payments on a three-year average of farmers' crop values, rather than basing payments on the single year of 2018, payments would have been more equitable and more representative of the value of farmers' crops. Further, the researchers recommended that policymakers "should internalize weather factors, such as drought and past revenues, if and when they have to come up with similar aid packages in the future."

"The research team acted very quickly to test the efficacy of this program and has revealed some significant weaknesses," Lynn-Sherow said. "This is the kind of timely research that collaborative effort can produce and we were happy to provide a ready platform." 

Indeed, as the authors noted, the government has already announced its intention to continue the MFP for another round in 2019. They expressed their hope that their research would enable policymakers to make future compensatory efforts much fairer and more efficient for American farmers.

Read the full article.