Farmers and Their Bankers Are Frustrated by Lack of Information Surrounding COVID-19 Relief Package

If any farmer can navigate disaster relief paperwork, you’d think it would be Craig Schaunaman. Why? Because the Aberdeen crop and cattle farmer is a former Farm Service Agency (FSA) Director for the state of South Dakota.

But instead, like many other South Dakota producers and bankers, the fourth-generation farmer isn’t able to get clear answers as to how much of the relief his family farm qualifies for.

“It is typical complexities of disaster funding,” says Schaunaman, who farms with his brother, Kirk, a nephew and a fulltime employee. For the sake of the state’s family farmers and ranchers, Schaunaman hopes the COVID-19 relief package for agriculture producers is similar to the 2019 Market Facilitation Program – rolled out quickly with relatively little paperwork.

“We’re all looking for answers. What is the cow/calf producer going to get in the fall,” Schaunaman asks? “What about the guy who has market-ready hogs?”

And answers are necessary, not only for producers, but for the bankers who are trying to support them. “It is tough for a bank to commit to a certain amount without any indication of what the farmer or rancher will be able to pay back. Banks have fiscal responsibility and the FDIC makes sure we follow guidelines,” explains Hank Wonnenberg, associate vice president and head of appraisal services for First Fidelity Bank in Burke.

Wonnenberg is also a fourth-generation Dallas, South Dakota cattle producer. And like the farm families First Fidelity serves, he is anxious because each day the cattle markets plummet, bring his family closer to the date they sell their cattle. At weaning in early November, they sell about half their calf crop. The rest the family backgrounds to about 650-pounds, putting the sale date for their backgrounded cattle sometime mid-January 2021.

The only producers who believe they have an idea how much relief they will receive, are those who sold between January 1 and April 15. Based on news reports, they will be compensated 85 percent of their losses. Those who have yet to sell, or who sold after April 15 are hearing they will receive 30 percent of losses. USDA has not confirmed this information.

This percentage confuses Frederick cattle producer Eric Sumption because the cattle markets have continued to decline since April 15.

“There are so many variables right now,” explains Eric Sumption, who farms with his dad, John, four brothers and a nephew. The Sumptions market their finished cattle in May and June. “Without knowing if we will receive more than 30 percent of losses, how are we supposed to plan for next year? What are we supposed to tell our bankers?”

2021 planning begins soon for the Sumptions, who like many cattle producers are making plans to breed cows for next season’s calf crop.

Not knowing how much relief they will receive is frustrating. But what really gets Sumption is the price of beef at the meat counter. “What’s really discouraging is the price I see at the grocery store. It’s absolutely crazy what the packers are charging the grocery stores for boxed beef.”

Sumption says the last time he saw boxed beef prices where they are today, instead of losing hundreds of dollars a head, he and other cattle producers were earning about $2,500 a head on finished cattle.

Today, the packer is earning 55 percent more on sales of boxed beef than what they are paying the cattle producer. This price discrepancy was not overlooked by South Dakota’s Congressional leaders, all of whom have joined with leaders from other states calling for the Department of Justice to investigate meat packers for price fixing.

“I hope they get things straightened out with the packers,” says Union Center cow/calf producer Steve Harwood. Like many western South Dakota ranchers, Harwood will be selling his steer calves to a feeder in October. “Something needs to happen or there will be a lot of cattle producers going out of business this fall.”

South Dakota’s leaders understand the frustration of not knowing what the relief will be, or how they will qualify. Even Senator Thune, who along with Sen. Rounds and Rep. Johnson, worked tirelessly to ensure cattle producers were included in the CARES Act disaster relief package has not been given any answers by the USDA other than the fact that the act will provide an expected $5.1 billion in direct assistance to cattle producers based on 85 percent of losses prior to April 15 and 30 percent on sales after.

“We have tried to attach a sense of urgency to the USDA as they do this, that we just got to get these out there as quickly as possible for the producers’ benefit. Many of whom are in a world of hurt economically right now. But also, as they try and go in and get the plans put together with their lenders, to make sure that they can get through another year,” Senator Thune says. “That’s really what this is all about – getting hopefully though the worst of this. And let’s hope there are some better days ahead.”

Doug Sombke, President of South Dakota Farmers Union agrees. “Markets need to improve. Our nation’s food security, the future of our family farmers and ranchers depend upon this,” Sombke says. To learn more about how SD Farmers Union works to support South Dakota’s family farmers, ranchers and their rural communities, visit www.sdfu.org.