The Second MFP - How Much Will You Not Collect?
May 23, 2019
The USDA today announced a second round of "Market Facilitation Program" payments based on the 2019 crops. Payments for non-specialty crops such as corn, soybeans, wheat, etc. will no longer be based on farmer's actual production but will be a per acre payment based on the county where the farm is located. This should help prevent changes to planting intentions.
However, it does appear that farmers will actually need to plant crops in order to participate in the payments. This could affect some decisions on prevented planting.
The primary focus of this post is whether farmer's will be able to collect all of the payments that they qualify for. The previous MFP program last year had the typical $125,000 payment limit per entity and the $900,000 AGI limit. We are not sure if those same payment and AGI limits will apply this year.
If so, many larger farmers structured as an LLC or other type of limited entity will only qualify for a maximum $125,000 payment. Whereas, a general partnership or joint venture will qualify for payments based on the number of partners in the partnership (or joint venture).
For example, assume you are cherry grower in Washington state and you operate as an S corporation. Based on your production, you qualify for a payment of $500,000, however, since you are an S corporation you only can receive $125,000. Now if you were a general partnership with four equal partners you could qualify for the full $500,000 (subject to the AGI limitations for each partner).
There likely will be many farmers in this situation assuming the limits are the same as last year's MFP. We will keep you posted.