May 22, 2020
This week, the U.S. Department of Agriculture announced much anticipated details of the new Coronavirus Food Assistance Program (CFAP) which will begin accepting applications from farmers on May 26, 2020. CFAP will provide $16 billion in aid to farmers who suffered economic losses due to the coronavirus pandemic, making it by far, the largest single payment in history to our nation’s farmers.
And while NSAC is glad to see much-needed relief begin to flow to farmers, many of whom have been on the frontlines, continuing their work to feed their communities in this time of crisis, there are several shortcomings in the program that will make it more difficult for some farmers to seek relief.
In short, we expect the program to work best for those operations with the simplest production systems who can demonstrate a loss in price or sales this year, and who sell into commodity and wholesale markets. Unfortunately, like many USDA programs, CFAP will prove more difficult for diversified farms, those that sell into local and regional markets, and value-added producers (organic, grassfed, etc).
While NSAC will continue to keep pressure on the Administration and Congress to #dobetterUSDA to provide targeted relief to producers left out, we will also be closely monitoring the rollout of this new program and ensuring farmers have the information they need to make informed decisions on whether this program is a fit for their farm.
In this blog, we break down what farmers need to know about USDA’s new Coronavirus Food Assistance Program:
Last month, Congress approved nearly $24 billion in relief to farmers who have seen their markets impacted by the ongoing pandemic. This funding, included as part of The CARES Act, was split into two separate pots of money: $9.5 billion to directly assist farmers impacted by the ongoing pandemic (including producers selling into local markets); and $14 billion to replenish the Commodity Credit Corporation’s (CCC) borrowing limit.
The newly unveiled CFAP relief program will draw its funding from both pots and will issue a total of $16 billion in direct payments to farmers impacted by the crisis over the next few months. However, it’s quite possible that USDA will tap additional CCC funds later this summer once funding is exhausted.
USDA plans to distribute CFAP payments to farmers that will partially compensate for losses where prices, markets, and supply chains have been impacted by the COVID-19 pandemic. To be eligible for a payment, a commodity must have experienced at least a 5 percent decline in price since January.
USDA will begin accepting applications for aid on May 26th with the goal of getting checks out to farmers within 7-10 days.
USDA’s Farm Service Agency (FSA) will be responsible for issuing checks to farmers, with support from the Agricultural Marketing Service (AMS) on payments to specialty crop farmers (i.e fruits, vegetables, nuts).
To be eligible for a CFAP payment, a farmer must:
Contract growers who do not own livestock but whose contract allows them to have risk in the livestock are also eligible for CFAP payments.
Privately owned aquaculture businesses growing freshwater and saltwater products in controlled environments, including raceways, ponds, tanks, and recirculating systems, extending to all farmed shrimp and salmonids (trout and salmon) are also eligible.
Eligibility Restrictions – Federal, state, and local governments are prohibited from participating in CFAP. 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 percent 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.
Most crops and livestock grown and raised in the U.S. are eligible for CFAP relief payments. However, USDA does not differentiate between commodities sold through different market channels (i.e. local vs. wholesale) or at different price premiums (i.e. organic, grass-fed). More on that in the next section.
To be eligible for a payment, a commodity must have suffered a 5-percent-or-greater price loss over a specified time resulting from the COVID-19 outbreak or face additional significant marketing costs for inventories.
There is no requirement for a commodity to be covered under crop insurance or be enrolled for coverage under the Noninsured Crop Disaster Program (NAP) to be eligible for CFAP.
Eligible commodities are organized into the following categories:
Specialty crops – Producers who grow fruits, vegetables, and nuts may be eligible for CFAP if they had any crops that meet the following conditions:
For a complete list of all fruits, vegetables, and nuts eligible for CFAP relief, click here.
Non-specialty crops – Most row crop farmers are eligible for CFAP payments if they can demonstrate they suffered at least a 5 percent price loss as a result of the COVID-19 pandemic. This includes barley, corn, soybeans, cotton, oats, and wheat. For a complete list of all row crops eligible for CFAP relief, click here.
Livestock – Cattle, hog, and sheep producers are eligible to receive CFAP payments if they can demonstrate they have suffered at least a five percent price decline as a result of the pandemic and face additional costs in marketing their livestock due to unexpected surplus and disrupted markets. However, livestock producers who raise animals under contract are only eligible if their contract allows for the producer to share in the production risk. For more information on livestock payments, click here.
Dairy – All dairy producers who had any production this year are eligible for CFAP, including those who were forced to dump milk because of disrupted supply chains. However, the prices that USDA will use to calculate payments will be based on conventional dairy prices and does not reflect any organic or local price premiums. For more information on dairy payments, click here.
Wool – Wool producers are eligible to receive CFAP payments if they can demonstrate they have suffered at least a five percent price decline because of the pandemic. For more information on wool payments, click here
And while most farmers will produce at least some crops or animals that are eligible, there are some notable omissions – including poultry and eggs, as well as hemp and winter wheat. For a list of ineligible commodities, click here.
USDA is currently seeking feedback on what additional commodities should be eligible for CFAP relief. While it’s likely that USDA will expand assistance to also include aquaculture and nursery crops, it remains to be seen whether they will allow for additional commodities based on price and market differentiation (i.e. local apples, organic broccoli, grass-fed beef, etc). For more information on the opportunity to provide input to USDA on what additional commodities should be included, see the CFAP Notice of Funding Availability.
Contrary to how USDA has messaged this program up until now, the CFAP payment program will not be based on a farmer’s actual losses. Instead payments are determined by a formula that accounts for the volume and fate of an eligible commodity, multiplied by a USDA determined price based on national wholesale prices. There are no premiums factored in for products sold through direct market channels (i.e. local vs. wholesale) or at different price premiums (i.e. organic, grass-fed). In fact, there is no option for farmers to demonstrate actual losses (even if they can provide the documentation to prove lost sales), rather than those calculated by the USDA formulas.
In addition, loss is calculated by commodity rather than by operation which is likely to present a challenge for highly diversified growers who can grow upwards of a 50 crops at any given time.
Specialty crops – There are currently 44 specialty crops for which a farmer is eligible to receive CFAP payments, but the rate of payment depends on the volume and fate of the crop:
For a complete list of all eligible fruits, vegetables, and nuts and payment rates, click here.
Non-specialty crops – There are currently 11 row crops for which a farmer is eligible to receive CFAP payments. Payments are based on the quantity of the commodity held in inventory but not sold as of January 15, 2020, not to exceed 50 percent of 2019 total production.
These two payment rates differ only slightly but were established because USDA is using two separate funding sources to make a single payment to farmers. For a complete list of all row crops eligible for CFAP relief, click here.
Livestock – Farmers are eligible to receive payments for cattle, hogs, and sheep sold between January 15 and April 15, 2020 or held in inventory from April 16 to May 14, 2020.
These two payment rates can differ significantly depending on the type and size of animal. USDA is using two separate funding sources to make a single payment to farmers. For a complete list of all row crops eligible for CFAP relief, click here.
Dairy – Dairy producers are eligible to receive payments for their production during the first quarter of the year.
The CARES Act payment rate is intended to reflect an 80 percent of the decline in milk price during the quarter. The CCC payment rate is intended to reflect a 25 percent decline in milk price during the quarter. The multiplier of 1.104 is intended to account for increased production in the second quarter of the year. There is no requirement that milk be covered under the Dairy Margin Coverage Program or other insurance programs to be eligible for payment.
Wool – Wool producers are eligible to receive a single payment for their inventory held on January 15, 2020, not to exceed 50 percent of 2019 total production.
Payment Limits – 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 payment as part of a corporate farm operation.
There are adjusted gross income (AGI) restrictions on CFAP payments and they are discussed in the Eligibility Restrictions above.
To complete the CFAP application, producers will need to compile and enter the following information in the CFAP Payment Calculator:
A farmer need only to submit one application regardless of how many eligible products they produced and will receive a single payment from USDA.
Farmers can submit any required documentation to substantiate losses up to 60 days after they submit their application; however payments will not be made until all documentation is received.
USDA may request additional documentation from farmers to verify losses – including production and inventory records such as receipts, income ledgers, deposit slips, or invoices. When requested, producers must provide supporting documentation, which USDA’s Agricultural Marketing Service will use to substantiate claims on a case-by-case basis
Livestock producers can substantiate loss and inventory with 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.
Specialty crop producers can substantiate loss with bills of sale for products that were sold, or documentation, such as a letter from the buyer, explaining non-payment or other record validating non-payment for products that were shipped from the farm. FSA will send some applications to AMS to be spot-checked prior to payment. AMS will review the applications and provide payment recommendations to FSA
Records used for application to the CFAP program must be retained by the farmer for 3 years.
Given the documentation requirements, commodity pricing structure, and other limitations outlined above, we encourage all farmers to first assess whether this program is a fit for your operation before applying. 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.
Below are a few questions we encourage farmers to think through to help determine whether or not CFAP is a fit for your operation:
For farmers that decide CFAP is a fit for their operations, they will be able to download the CFAP application and payment calculator from USDA’s CFAP website beginning on May 26th. Farmers can also call their local FSA office and request a paper application. After completing their application, farmers can submit it to any USDA Service Center by mail, e-mail, fax, or in-person. Farmers are encouraged to first call their FSA county office before sending applications electronically.
To find your local FSA office, click here.
While technically producers can submit their applications anytime before August 28, funding is likely to go quickly – especially with the increased per farm payment limitations. Farmers who think they could benefit should apply as soon as possible.
When applying, farmers will need to complete the following forms:
*Farmers who have already participated in any FSA or NRCS program or registered their farm with FSA will likely already have completed most of these forms.
To download fillable PDFs of any of these required forms, click here.
At this time, it is uncertain whether or not USDA will require a farm number. None of the forms listed above require this information, however USDA has stated that a farm number may not be needed immediately. For farmers who don’t have a farm number, and are interested in obtaining one, contact your local FSA office to do so.