Signed into law on March 27, the Coronavirus Aid, Relief & Economic Security (CARES) Act provides more than $2 trillion in economic stimulus, with $350 billion in dedicated funding to prevent layoffs and business closures to be allocated by the Small Business Administration (SBA).
Earlier this week, SBA posted information on its Economic Injury Disaster Loan (EIDL) program website stating that applicants do not qualify for loans if they are an agricultural enterprise (e.g., a farm), which has caused concern by agricultural industry groups.
A coalition of 31 agricultural groups sent a letter to SBA administrator Jovita Carranza asking SBA to issue guidance clarifying that agricultural businesses are eligible to participate in the EIDL program as modified by Congress in the CARES Act. A bipartisan letter of 86 House members also urged SBA to ensure that small farms can access immediate COVID-19 relief through the EIDL program.
While aquaculture enterprises, agricultural cooperatives and nurseries are eligible for SBA disaster assistance, farms are specifically excluded. The actual text of the CARES Act does not exclude agricultural producers and states that all businesses with fewer than 500 employees can participate in the program.
While $9.5 billion in funding has been committed for local food systems and specialty producers, there is no information about how or when this will be accessible. The Farm Service Agency has an existing loan program for farmers, but it is not sufficiently adapted to the current market situation of COVID-19.
Brian Kuehl, director of federal affairs for KCoe Isom, stated that for heavily affected agribusinesses, the ability to secure this type of financing will decide whether they can stay in business. “We think Congress clearly intended to include ag businesses in the emergency Economic Injury Disaster Loan program. The Small Business Administration should make that clear as soon as possible,” Kuehl said.
The letter from agricultural groups stated, “The notice on the website apparently is inconsistent with congressional intent. While agricultural enterprises had not previously been able to participate in the underlying EIDL program, there is every reason to believe Congress intended for agricultural producers to be able to participate during the COVID-19 emergency. The CARES Act does not exclude agricultural producers from this program and clearly states that all businesses with not more than 500 employees can participate in this program.
"Agricultural producers and businesses are critical elements of this nation's economy and food system. Prior to COVID-19, farmers and ranchers had already experienced a drastic 24% decline in net farm income from highs experienced just six years ago. With the further downturn in the economy, agricultural businesses are at risk of closure and may be required to lay off employees," the letter explained. "Many agricultural producers need access to this critical source of financing to help preserve their businesses and avoid further disruptions to our economy and food systems," the letter added.
Zippy Duvall, president of the American Farm Bureau Federation, which is among the organizations that signed the letter, said, “Farmers and ranchers are the critical first link in America’s food supply chain. The pandemic’s impact on agriculture is coming in waves due to dramatic changes in demand, falling commodity prices and supply challenges. Farmers must have access to the Economic Injury Disaster Loan program, as Congress intended, to ensure America continues to have access to healthy, affordable food.”
National Milk Producers Federation (NMPF) president and chief executive officer Jim Mulhern, added, “We must ensure that all essential agricultural businesses can continue operating during the coronavirus crisis, including those in dairy, which is critical to consumers. Congress was clear in the CARES Act that it intends for agriculture to be able to access EIDLs, and NMPF thanks members of Congress for their work to ensure dairy farmers can continue to provide wholesome, nutritious food to Americans as we navigate this pandemic. We now call on the Small Business Administration to implement the EIDL provisions in the CARES Act as intended by Congress, allowing dairy farmers to access the program."
"As part of the critical U.S. food supply infrastructure, U.S. pork producers are committed to keeping Americans and consumers around the world supplied with nutritious protein. To ensure a continued and uninterrupted supply of pork to America's kitchens, hog farmers must have access to necessary resources, including this vital economic disaster loan program," said National Pork Producers Council president Howard "A.V." Roth, a pork producer from Wauzeka, Wis. "We urge SBA to implement this program as intended by Congress, allowing pork producers to participate and remain committed to keeping consumers supplied with nutritious protein."
With the mounting closures of restaurants and farmers markets, many farm businesses serving these customers have seen their sales evaporate overnight.
“While the first priority in this unprecedented and challenging time is keeping people safe and well, we also need crisis management that doesn't sacrifice our future. If we can't show our independent farmers the same level of appreciation we do for a multimillion-dollar widget maker, we face the very real danger of losing these farms forever -- and, with them, the food security of this country,” said Andrew Gunther, executive director of A Greener World, an organization that identifies, audits, certifies and promotes practical, sustainable farming systems.
PPPL use for ag community
The CARES Act also provides another SBA program -- the Paycheck Protection Program Loan (PPPL) -- that may be of use to some farmers.
The PPPL is designed to help small businesses keep their employees paid through this difficult period. The program provides $349 billion in forgivable loans to small businesses so they can pay employees and keep them on the payroll. These loans are open to most businesses with fewer than 500 employees, including nonprofits, the self-employed, startups and cooperatives. While agricultural producers are eligible for the PPPL, it may be less useful to them than originally hoped, according to a recent Market Intel from the Farm Bureau.
While the headline eligibility defines a small business as one having 500 employees or fewer, the PPPL also stipulates that a small business must meets SBA's small business industry-specific standards. These standards are set using the North American Industry Classification System, which is a classification of business establishments by type of economic activity. Under the industry-specific standards, a small business classification is based on either the number of employees or annual receipts in millions of dollars, but not both.
Because of this, Farm Bureau economist Veronica Nigh expects that “most of production agriculture will be on the outside looking in on the benefits of this particular program.”