By Max Fisher, Vice President of Economics and Government Relations
Secretary of Agriculture Sonny Perdue on May 19 announced details of the Coronavirus Food Assistance Program (CFAP), which will provide up to $16 billion in direct payments to farmers and ranchers and $3 billion in funds for the purchase and delivery of fresh produce, dairy, and meat and deliver boxes to Americans in need.
The U.S. Department of Agriculture’s Farm Service Agency (FSA) estimates that the $16 billion will be divided among the following commodity sectors:
- $3.5 billion to producers of field crops
- $2.4 billion to producers of specialty crops
- $2.77 billion to dairy producers
- $5.06 billion to cattle producers
- $1.6 billion to pork producers
- $0.67 billion to producers in other sectors
For producers of field and specialty crops with unpriced inventory, assistance will be provided for crops that experienced a 5 percent or greater commodity price decline between mid-January and mid-April 2020. Producers of specialty crops also will receive payments for spoilage losses. The price decline will be computed as the difference in the weekly average of the May contract futures prices (or weekly average of the cash prices, if futures prices are unavailable) between the average for the week of Jan. 13-17 and the average for the week of April 6-9.
Field crops eligible for CFAP payments include malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat, hard red spring wheat and wool. Producers will be paid based on self-certified unpriced inventory held as of Jan. 15, 2020. Unpriced inventory means any production that is not subject to an agreed-upon price in the future through a forward contract, agreement or similar binding document.
Documentation: While producers will self-certify their unpriced inventory, FSA’s rule states that it may request documentation to support the producer’s application and certification of inventory and production. Examples of supporting documentation include copies of receipts, ledgers of income, income statements of deposit slips, veterinarian records, register tapes, invoices for custom harvesting, and records to verify production costs, contemporaneous measurements, truck scale tickets or contemporaneous diaries that are determined acceptable by USDA.
As a result of producers asking grain elevator operators to provide documentation on the amount of unpriced inventory as of Jan. 15, 2020, grain elevator operators need to know how FSA plans to determine CFAP eligibility for grain contracted using various risk management tools, such as hedge-to-arrive contracts, basis contracts and deferred-price contracts. NGFA is consulting with FSA later today (May 22) asking that it provide further guidance on this and other CFAP implementation issues. When FSA determines the eligibility criteria for CFAP payments under various risk-management tools, NGFA will communicate that information to its membership in a future NGFA member alert.
A CFAP-implementation concern that NGFA has communicated to UISDA is that the program not disincentivize producers from making prudent grain marketing decisions or from utilizing available risk-management tools. In that latter regard, NGFA has expressed its concern to USDA if commodities either sold or contracted under various risk-management tools designed to reduce price risk to the producer ultimately are deemed by FSA to be ineligible for payments. Government programs should not discourage producers from utilizing prudent risk-management tools or from making good business decisions, NGFA has told FSA officials.
Payment Methodology: FSA’s rule states that CFAP payments will be made on 50 percent of producers’ 2019 total production or the 2019 unpriced inventory as of Jan. 15, whichever is smaller, multiplied by the commodity’s applicable payment rates. This means that producers are limited to CFAP payments on 50 percent of their 2019 production, even if they had more unpriced grain in storage.
Example 1: If a producer had 10,000 bushels of corn production in 2019 and 8,000 bushels of corn in unpriced inventory as of Jan. 15, the producer’s CFAP corn payment would be based on 5,000 bushels since 50 percent of the 10,000 bushels of 2019 production is less than the 8,000 bushels of unpriced inventory.
Example 2: If a producer had 10,000 bushels of corn production in 2019 and no unpriced corn in inventory as of Jan. 15, the producer would not receive a CFAP corn payment because the producer had zero bushels of unpriced corn.
CFAP payments for field crops will cover slightly more than 50 percent of the price decline between mid-January and mid-April. For example, the CFAP payment rate for unpriced corn in inventory is $0.335 per bushel, whereas the January to April price decline for corn was $0.63 per bushel. For soybeans, the CFAP payment rate for unpriced soybeans in inventory is $0.475 per bushel and the price decline was $0.90 per bushel.
FSA estimates that 25 percent of the 2019 field crop production was in inventory and unpriced as of Jan. 15. Based upon this estimate, 25 percent of the 2019 field crop production is potentially eligible for CFAP payments.
Below is a table of CFAP payment rates established by USDA for field crops:
|CFAP Payment Rates for Field Crops|
|Hard Red Spring Wheat||Bu.||$0.190|
Other Commodities: Livestock eligible for CFAP payments include cattle, lambs, yearlings and hogs. The total payment for livestock will be calculated using the sum of the producer’s number of livestock sold between Jan. 15 and April 15, multiplied by the payment rates per head, and the highest inventory number of livestock between April 16 and May 14, multiplied by the payment rate per head. Below is a table of livestock payment rates.
|CFAP Payment Rates for Livestock|
|Commodity||Unit||Payment Rate for Number of Livestock Sold between Jan. 15 and April 15, 2020||Payment Rate for Highest Inventory Number of Livestock between April 16 and May 14, 2020|
|Slaughter Cattle – mature cattle||Head||$92||$33|
|Slaughter Cattle – fed cattle||Head||$214||$33|
|Feeder Cattle less than 600 lbs.||Head||$102||$33|
|Feeder Cattle 600 or more lbs.||Head||$139||$33|
|All other Cattle||Head||$102||$33|
|Lambs and Yearlings||Head||$33||$7|
For dairy, the total payment will be calculated based upon a producer’s certification of milk production for the first quarter of calendar year 2020 multiplied by a national price decline ($4.71/hundredweight) during the same quarter. The second part of the payment is based upon a national adjustment ($1.47/hundredweight.) applied to each producer’s production in the first quarter.
For eligible specialty crops, the total payment will be based upon three factors: 1) the volume of production sold between Jan. 15 and April 15; 2) the volume of production shipped, but unpaid; and 3) the number of acres for which harvested production did not leave the farm or mature products destroyed or not harvested during that same time period, and which have not and will not be sold.
Eligible specialty crops include: apples, avocados, blueberries, cantaloupe, grapefruit, kiwifruit, lemons, oranges, papaya, peaches, pears, raspberries, strawberries, tangerines, tomatoes, watermelons, artichokes, asparagus, broccoli, cabbage, carrots, cauliflower, celery, sweet corn, cucumbers, eggplant, garlic, iceberg lettuce, romaine lettuce, dry onions, green onions, peppers, potatoes, rhubarb, spinach, squash, sweet potatoes, taro, almonds, pecans, walnuts, beans and mushrooms. Additional specialty crops may be deemed eligible at a later date, USDA said.
Payment Limitations: There is a payment limitation of $250,000 per person or entity for all commodities combined. Applicants that are corporations, limited liability companies or limited partnerships may qualify for additional payment limits if members actively provide personal labor or personal management for the farming operation. Producers also will be required to certify they meet the adjusted gross income limitation of $900,000 unless at least 75 percent or more of their income is derived from farming, ranching or forestry-related activities. Producers also are required to be in compliance with USDA’s highly erodible land and wetland conservation provisions.
To ensure the availability of funding throughout the application period, FSA said producers will receive 80 percent of their maximum total payment upon approval of their applications. The remaining portion of the payment, not to exceed the payment limit, will be made at a later date depending on funding availability.
Where and When to Apply: Producers may apply for assistance at their local FSA office beginning on May 26; applications will be accepted through Aug. 28. FSA said its staff will be working with producers by phone and using online tools whenever possible.
Additional information and application forms can be found at farmers.gov/cfap.