September 22, 2020
Seven months into one of the largest disruptions in the history of our global economy, nearly every sector, every community, and every household has felt the impacts of the COVID-19 pandemic. For many of our nation’s farmers, sorely needed emergency relief never came because the programs intended to serve them were targeted to the largest and wealthiest farms. To date, farm relief programs have proven unworkable for most small-scale, diverse, and value-added producers (e.g. organic, local, grassfed).
This week, the U.S. Department of Agriculture (USDA) is launching a second round of COVID-19 relief payments that will hopefully reach more farmers who were left out of previous aid programs. In this blog, we break down what farmers need to know about USDA’s revamped Coronavirus Food Assistance Program (CFAP-2):
Last week, USDA began releasing details of a new version of the Coronavirus Food Assistance Program (CFAP-2) that will provide $13.21 billion in aid to farmers over the next few months. USDA plans to distribute CFAP-2 payments this fall to farmers to partially compensate for losses experienced from April 1, 2020 – August 31, 2020 (or from April 16th for livestock) where prices, markets, and supply chains have been impacted by the COVID-19 pandemic. Unlike CFAP-1, a commodity need not have experienced at least a 5% decline in price to be eligible for a payment.
This second iteration of CFAP is a separate program but retains most of the elements of CFAP-1 that closed on September 11, 2020. However, CFAP-2 also includes significant improvements that are certain to benefit many farmers who weren’t eligible for or compensated fairly by the original program. The key revisions in CFAP-2 include an additional round of price loss based payments for commodity crops covered under CFAP-1, a new fixed $15/acre payment for many grain, oilseed, and hemp crops that were not previously eligible, and a modest, revenue based payment program for specialty crop and other producers that greatly expands eligibility to include nearly all crops and many types of livestock. Funding for CFAP-2 is from existing Commodity Credit Corporation (CCC) funds and does not require Congressional approval to implement.
The application window for CFAP-2 is from September 21, 2020 – December 11, 2020 and checks are expected to be mailed to farmers within a week or two of approved application.
USDA’s Farm Service Agency (FSA) will be responsible for issuing checks to farmers.
Most farmers are eligible for payments under the new CFAP-2 program; however there are some producers and some crops that are still ineligible for payments (detailed below).
To be eligible for a payment, a producer must:
Federal, state, and local governments are prohibited from participating in CFAP-2. An individual or entity with an average adjusted gross income (AGI) of more than $900,000 – based on the average gross incomes for 2016, 2017, and 2018 tax years – is also ineligible unless they derive at least 75% of their income from farming, ranching, or forestry related activities, in which case there is no AGI restriction. There is no AGI limit for joint ventures or general partnerships. This AGI threshold is significantly less strict than in previous USDA support payment programs which means that large, complicated operations may be eligible for an even greater proportion of available aid.
Contract growers who do not have price risk in the crops or livestock they produce remain ineligible for CFAP payments.
There are maximum payment limits for the CFAP program at the individual and farm level:
A person must ‘provide at least 400 hours of active personal management or personal active labor’ to be eligible for a CFAP-2 payment as part of a corporate farm operation.
Nearly all crops and many types of livestock may be eligible for payment under CFAP-2 but unlike CFAP-1, different commodities are eligible for very different types of payments. Farmers may be eligible for up to three different types of payments under the new CFAP-2 program depending on what they grow and market.
Farmers can receive payments for:
Price Trigger Commodities
A farmer who grew or sold specific commodities between April 1, 2020 – August 31, 2020 is eligible to receive a payment similar to the payment for which they were eligible under CFAP-1 triggered by a 5% decline in price and proportional to the decline in price. These are known as “price trigger commodities” under CFAP-2.
Unfortunately, payments to all row crop, livestock, poultry and dairy producers will be calculated based on conventional, wholesale, commodity prices and will not factor in any price premiums such as organic, grass-fed, pastured, free-range, etc. This is a major shortcoming of this new program and may hamper participation from and benefit to sustainable commodity, livestock, poultry, and dairy producers.
Flat-Rate Crops (new)
A farmer who grew or sold specific commodity crops between April 1 – August 31 may be eligible to receive a new, flat, per acre payment even though there may be insufficient data to demonstrate the decline in price (flat rate crops).
Sales Commodities (new)
Many commodities that are not eligible for either ‘price trigger’ or ‘flat rate’ payments may be eligible for payments based on a producer’s historic revenue. This is an important new program component that was absent from CFAP-1. While the reimbursement rate is modest and it is uncertain what type of documentation will be necessary to show revenue, this payment option will make CFAP-2 open to many more farmers than the program it replaces.
Payment Rates for Sales Commodities 2019 Sales Range Percent Payment Factor
|2019 Sales||CFAP Payment Percentage|
|Up to $49,999||10.6%|
|$50,000 – $99,999||9.9%|
|$100,000 – $499,999||9.7%|
|$500,000 – $999,999||9.0%|
|All sales over $1 million||8.8%|
Example: A producer’s 2019 sales of eligible commodities totaled $75,000. The payment is calculated as ($49,999 times 10.6%) plus ($25,001 times 9.9%) equals a total payment of $7,775.
Producers can apply for assistance beginning September 21, 2020. Applications will be accepted through December 11, 2020. Application materials are available at farmers.gov/cfap/apply. Farmers who applied for CFAP-1 will likely already have many required forms on file with FSA. Farmers should check with their FSA county offices to see if any forms need to be updated.
USDA recommends that farmers new to FSA or CFAP first call the CFAP hotline, (877) 508-8364, for one on one support before contacting their county office.
Farmers will have several options in applying for CFAP-2, including applying online or in person at their local FSA county office. The CFAP Application Portal and Application Generator and Payment Calculator are now available online.
Required forms are similar to CFAP-1:
In order to calculate payments, producers will need to verify sales and inventory, but will not be required to submit this documentation to FSA along with their application. However, producers should keep this information on file, as FSA may require it at a later point. Examples of supporting documentation include: 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.
CFAP-2 is a better program than CFAP-1. It is available to more farmers, covers more farm products, and contains a payment option based on a farmer’s historic revenue. However, it is far from perfect: the implementation of the new flat rate and sales commodity payment programs may be more complicated than necessary, the payment rates are very modest; contract growers are still excluded from participation; and it is uncertain if USDA will improve outreach efforts to reach farmers who have experienced difficulty accessing services through FSA. It is also likely that CFAP-2 payments will exhaust nearly all available CCC funding, which will make it difficult for USDA to provide scheduled commodity and conservation payments to farmers later this year. While the application is short, it may take some time for producers to compile the necessary records to fill it out. This is especially true for diversified operations and those who sell into marketing channels that command a price premium.