Just two months after passage by Congress, the U.S. Department of Agriculture detailed Tuesday how it would distribute the $16 billion Coronavirus Food Assistance Program (CFAP) to farmers who have suffered price losses due to the pandemic.
Payments will go directly to farmers who have suffered a 5% or greater price loss and who are facing significant marketing costs due to the COVID-19 pandemic. Eligible commodities include cattle, hogs, dairy, specialty crops and row crops. Payments will be limited to $250,000 per person.
In a call with media Tuesday afternoon, USDA undersecretary for farm production and conservation Bill Northey said during this time of crisis, the Administration recognized the challenges the agriculture sector is facing and worked to develop the CFAP from the ground up.
“We recognize we’re in unique times, and the impact is broad,” Northey said, adding that the resources available will help deliver as much help as possible with those funds.
USDA chief economist Robert Johansson added that USDA worked as quickly as possible to distribute the resources authorized, including the $9.5 billion from the Coronavirus Aid, Relief & Economic Stability (CARES) Act and $6.5 billion from the remaining funds in the Commodity Credit Corp. Charter Act. He acknowledged that the pandemic has significantly affected agricultural production and prices and that the support laid out in the first installment of CFAP “certainly will not rise to the level of damages expected to be seen by agricultural producers as a result of coronavirus.”
By mid-April, hog futures prices fell 53%, live cattle futures fell 25%, cotton futures fell 25% and ethanol futures fell 33%, the American Farm Bureau Federation noted.
Johansson said many of the CFAP payments will require producers to self-certify their inventory as of Jan. 15 and then the price or impact of that inventory as of April. Eligible farmers will receive 80% of the total payment, up to the payment limit, upon approval of the application; the remaining 20% will be paid at a later date as funds are available.
Although poultry broilers are not specifically mentioned as covered by CFAP, Johansson noted that they could still apply for CFAP funds. In a follow-up from USDA's Office of the Chief Economist, the agency clarified: "There are a lot of commodities that are not specifically mentioned. Producers of those commodities will need to send in information as part of the [notice of funding availability] process -- a 30 day period -- demonstrating that they would qualify for a 5% price decline between Jan. 15 and April 15. After that, [the Farm Service Agency] will develop payment rates for eligible commodities."
Beginning May 26, Farm Service Agency offices will be accepting applications from agricultural producers who have suffered losses. Applications will be accepted through Aug. 28, 2020. Once the application process opens, Northey also said there will be forms and payment calculators on USDA’s website -- www.farmers.gov/cfap -- to offer additional details for producers.
Livestock eligible for CFAP include cattle, lambs, yearlings and hogs. Johansson anticipates that the cattle sector could receive the largest amount of the allocated funds based on USDA’s calculations, at roughly $5 billion.
The total payment will be calculated using the sum of the producer’s number of livestock sold between Jan. 15 and April 15, 2020, multiplied by the payment rates per head, and the highest inventory number of livestock between April 16 and May 14, 2020, multiplied by the payment rate per head.
Producers must provide the following information for CFAP:
- Total sales of eligible livestock, by species and by class, between Jan. 15 and April 15, 2020, of inventory owned as of Jan. 15, 2020, including any offspring of that inventory, and
- The highest inventory of eligible livestock, by species and by class, between April 16 and May 14, 2020.
According to the payment rate breakdown online, producers will receive a split rate for the CARES Act payment rate and a CCC payment rate. For instance, payment rates for feeder cattle weighing less than 600 lb. will receive $102 per head for the CARES portion which is the total sales from Jan. 15 until April 15, and $33 per head for the CCC portion which is for the highest inventory.
For pigs weighing less than 120 lb., the payment rate is set at $28 for the CARES Act and $17 for CCC, and for hogs over 120 lb., the rates are $18 and $17, respectively. Lambs and yearlings under two years old would receive a $33 per head payment for the CARES Act and $7 for the CCC payment.
The National Cattlemen’s Beef Assn. welcomed the action but said more needs to be done for other segments of the cattle sector. “We will continue to push Capitol Hill for additional resources for cow/calf producers, backgrounders and all other segments of the industry who may not sufficiently benefit from the program in its current form,” president Marty Smith said.
Danielle Beck, NCBA executive director of government affairs, added that one potential problem in the CFAP rule centers on how slaughter cattle are defined as having an average weight in excess of 1,400 lb., yielding average carcass weights in excess of 800 lb. Beck explained that slaughter weights in Texas, Oklahoma and New Mexico region last week averaged 1,346 lb., thereby potentially making cattle fed and marketed in this region between Jan. 15 and April 15 ineligible for the $214-per-head CFAP funding. "This will have a similar effect in Kansas and maybe other states," she said.
Beck added that stockers and backgrounders are operationally better equipped to hold back cattle and wait out a better market environment (per-head, per-day costs are lower to wait out the market when grass is the primary input). "When prices tanked after COVID, several held cattle back to try to wait for prices to trend back to more seasonal norms," she said. Because many of these producers didn’t sell within the Jan. 15 to April 15 window, they won’t be eligible for the full payment value, just the $33-per-head rate for the inventory held within the April 16 to May 14 window.
For dairy, a single payment will be made based on a producer’s certification of milk production for the first quarter of calendar year 2020, multiplied by $4.71/cwt. The second part of the payment is based a national adjustment to each producer’s production in the first quarter, multiplied by $1.47/cwt.
A single payment for dairy will be made calculated from two funding sources. Those include:
- CARES Act – The payment will compensate producers for price losses during the first quarter of 2020, and
- CCC funds – The payment will compensate for marketing channel and demand disruptions for the second quarter of 2020 – April, May and June – due to COVID-19.
The National Milk Producers Federation (NMPF) said current aid levels will be insufficient to meet the needs of milk producers and other agriculture sectors facing massive disruption from the coronavirus crisis. NMPF added that it will continue to work with Administration officials and members of Congress to achieve adequate aid for all dairy producers, whose projected losses of $8.2 billion, based on USDA data, place them among the hardest-hit U.S. agricultural commodities.
Non-specialty crops eligible for CFAP payments include malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat and hard red spring wheat. Wool is also eligible. Producers will be paid based on inventory subject to price risk held as of Jan. 15, 2020. A payment will be made based 50% of a producer’s 2019 total production or the 2019 inventory as of Jan. 15, 2020, whichever is smaller, multiplied by the commodity’s applicable payment rates.
Producers must provide the following information for CFAP:
- Total 2019 production for the commodity that suffered a 5% or greater price decline, and
- Total 2019 production that was not sold as of Jan. 15, 2020.
Northey said producers will self-certify their inventory on Jan. 15 and will receive payments on 50% of the 2019 production levels for that crop. For instance, if a grower produced 100,000 bu. of corn in 2019 and had 75,000 bu. left as of Jan. 15, he or she would be eligible for payments on 50,000 bu. However, if only 25,000 bu. were in inventory, he or she would be eligible for the payment on only 25,000 bu.
The payment rate for corn is 32 cents for the CARES Act and 35 cents for the CCC rate. Soybeans offers a rate of 45 cents and 50 cents, respectively. Durum wheat would receive a rate of 19 cents for the CARES Act and 20 cents for CCC, and hard red spring wheat is at 18 cents and 20 cents, respectively.
National Association of Wheat Growers (NAWG) president and Cass City, Mich., wheat farmer Dave Milligan said it is unfortunate that the program fails to take into consideration all six classes of wheat.
“USDA’s methodology behind CFAP neglects to incorporate price drops during the January-to-April time frame, when wheat farmers were marketing their crop or that local cash prices that farmers were receiving were less than futures prices in many areas of the country. As a result, most wheat growers won’t qualify for CFAP despite being impacted,” he said.
For additional detail rates for row crops, visit www.farmers.gov/cfap/non-specialty.
USDA will provide up to $2.1 billion in direct payments to specialty crops producers. The payments will be based on losses where prices and market supply chains have been affected and will help producers facing additional adjustment and marketing costs resulting from lost demand and short-term oversupply for the 2020 marketing year as a result of COVID-19.
Producers who fall into one of the following categories may be eligible to receive a direct payment:
- Sales with a price loss of 5% or more between Jan. 15 and April 15, 2020. Almonds, artichokes, beans, broccoli, cabbage, carrots, cauliflower, sweet corn, cucumbers, eggplants, lemons, iceberg and Romaine lettuce, dry onions, peaches, pears, pecans, bell and other types of peppers, rhubarb, spinach, squash, strawberries and tomatoes are eligible.
- Shipments that left the farm by April 15 and spoiled due to no market or for which no payment was received. All specialty crops are eligible.
- Shipments that have not left the farm or mature crops that remained unharvested by April 15. All specialty crops are eligible.
During the last month, many livestock commodity groups sought changes to the anticipated payment limitations. USDA said there is a payment limitation of $250,000 per individual as well as a $900,000 adjusted gross income limit for individuals who do not derive 75% or more of their income from farming.
Corporations with up to three individuals actively engaged in farming contributing at least 400 hours per year will be eligible to receive up to three payment limits, Northey explained.
Jim Mulhern, president and CEO of NMPF, appreciated the department’s adjustments to payment limits -- an issue NMPF raised prior to USDA finalizing this package.
“Even so, we believe more flexibility in payment limits and some changes to payment calculations will be needed in future rounds of funding to meet the unprecedented challenges faced by producers of all sizes, in dairy and throughout agriculture. We look forward to working with federal officials and lawmakers on additional assistance,” Mulhern said.