April 28, 2020
For most farmers, spring planting is well underway, according to production plans and seed orders placed months ago before most folks ever heard of COVID-19. Now, months later, farmers are taking a leap of faith – following through with planting decisions in hopes that there will be a market to sell their crops when harvest time comes later this year.
Earlier this month, Congress passed its third massive coronavirus relief package, The CARES Act, which included some initial relief to farmers who are already seeing their markets impacted by the ongoing pandemic. Our nation’s farmers have been eagerly awaiting details from the U.S. Department of Agriculture (USDA) on how billions in relief funds will be distributed.
And late on a Friday night, three weeks after Congress authorized this relief, USDA gave a ‘press only’ announcement with almost no details on how the government will distribute $19 billion in aid to farmers through the new Coronovirus Food Assistance Program (CFAP). In short, there are now more questions than answers – raising serious concerns about which farmers will actually be able to receive aid.
In this post, we summarize what we know so far, what questions remain, and what every farmer can do to ensure they receive the aid they need to keep their farms in business through this unprecedented crisis.
The Coronavirus Food Assistance Program (CFAP), the centerpiece of USDA’s relief plan, will consist of two components: $16 billion in direct payments for commodity growers, specialty crop farmers, and livestock and dairy producers; and $3 billion in direct purchases of meat, dairy and specialty crops. For more details on the latter, check out our recent blog post on the Farmers to Families Food Box Program.
For the direct aid portion of CFAP, USDA plans to distribute payments to farmers based on actual losses where prices, markets, and supply chains have been impacted by the COVID-19 pandemic. Initial reports indicate that USDA plans to allocate funding by commodity – including livestock, dairy, row crops, and “other crops.” While it seems most producers will be eligible for funding (so long as they can demonstrate an actual loss), it is unclear how funding will be divided and how diversified producers and farmers selling into local and regional markets will be able to apply for aid. More on that below.
USDA has indicated that farmers will receive no more than $125,000 per commodity, with an overall limit of $250,000 per individual or entity – which is the same limit established in the farm bill for other farm subsidies. In addition, to be eligible for a payment, a commodity must have experienced at least a 5 percent decline in price since January.
USDA hopes to begin accepting applications for aid as soon as early May, with the goal of getting checks out to farmers by late May or early June.
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). It’s unclear how the two agencies will coordinate in administering the program, and which agency farmers will be required to contact to apply for funding or demonstrate a loss.
USDA has indicated that additional details will be released in a formal rulemaking that is forthcoming on the new aid program. Timing for when those details are released remains uncertain, but could be as soon as next week.
In addition to the $19 billion in direct aid to farmers through CFAP, USDA expects to issue additional payments later this summer, when the Department’s borrowing authority through the Commodity Credit Corporation (CCC) is replenished.
Many key details of the farmer focused aid program either aren’t known yet or haven’t been confirmed by the Department. Since last week’s announcement, many farmers and those who serve them, have raised important questions regarding how aid will be distributed and which farmers will actually benefit. Below we summarize some of the key issues NSAC will be tracking closely as more information becomes available.
How will funding be divided?
Congress included very few details in the CARES Act to direct USDA in distributing the available aid funding. The only requirement was that the funding support producers impacted by the coronavirus, including “producers of specialty crops, producers that supply local food systems, including farmers markets, restaurants, and schools, and livestock producers, including dairy producers.”
While USDA has provided few details on how the funding will be divided, the following estimates have been widely reported (including by Senator John Hoeven, Chair of the Senate Agriculture Appropriations Subcommittee):
Demonstrating losses is much easier for larger livestock, dairy, and commodity producers who can rely on futures markets, spot prices, or forward contracts to establish a price. That is not an option for many specialty crop growers and proving their price is more complicated. USDA has suggested that contracts covered under the Perishable Agricultural Commodity Act (PACA) would be the basis for compensating specialty crop farmers. However, it’s unclear how this option would work for the many small diversified farmers that rely on direct sales to their customers – transactions that aren’t covered by PACA.
While these numbers have not been confirmed by USDA, it is clear that the Department is focusing on a commodity-specific approach that may exclude or prove overly complicated for many diversified growers.
Will producers selling to local markets be eligible?
Despite the clear direction from Congress, USDA has not addressed publicly whether or not there will be any dedicated funding set aside for farmers selling into local and regional markets, or how they will be incorporated into commodity specific programs. In fact, USDA included no mention whatsoever of how CFAP would apply to these farmers explicitly outlined by Congress.
NSAC and nearly 750 other farm and food organizations across the country recently wrote to the Secretary of Agriculture, urging USDA to provide emergency relief to local and regional producers that is commensurate with their expected losses of more than $1 billion.
While USDA has indicated that all producers who are able to demonstrate an actual loss will be eligible for CFAP funding, the Department has provided no reassurance to these farmers that their operations, markets, and prices will be factored into designing any payment program and application process. We have seen countless examples of so-called “non-traditional” farmers who don’t quite fit the mold of the conventional, commodity farmer struggle to access USDA programs that weren’t designed with their operations in mind.
One of the biggest concerns about USDA’s commodity-specific approach is how payments will be calculated for farmers that not only produce and sell many different commodities, but that often sell their products through different market channels that often command a price premium. For example, the prices that farmers receive for goods sold in local and regional markets (i.e. farmers markets, CSAs, restaurants, food hubs) are often higher than the price a conventional producer can receive selling products to wholesale or commodity markets (i.e. terminal markets, export markets, or national distribution channels). Further, prices for local and regional markets often vary significantly by region and by product (i.e. organic, grassfed, heirloom, etc). It’s unclear what prices USDA will use to calculate “actual losses” and what documentation will be required for farmers who claim losses based on prices other than commodity or wholesale prices.
How will payments be calculated?
While USDA has not released details about how payments will be calculated, it has been reported that USDA plans to prioritize payments to compensate for losses that were incurred from January – April. For example, Sen. Hoeven stated in his initial press release that losses from January 1 through April 15 would be compensated at 85 percent, and losses after April 15 would be compensated at 30 percent. This payment structure would obviously skew payments towards livestock and dairy producers, and Southern farmers who already had crops in the ground, leaving most growers selling into local and regional markets uncompensated.
Further, USDA’s plan to only compensate farmers for actual losses leaves farmers who have incurred additional costs in order to adjust to changes in markets, out in the cold. For example, many farmers selling into local and regional markets have incurred additional expenses to continue to sell to farmers markets and directly to consumers, including online sales software, increased packing and transportation costs associated with home delivery, and increased food safety measures.
While USDA has confirmed that they plan to use the Farm Bill’s payment limits of $125,000 per commodity, the Department is already under pressure to drop those limits to ensure larger operations are made whole. If eliminated, this would allow larger producers to apply for larger payments which could, given that funds are limited and much less than anticipated demand, likely exclude smaller and diversified farmers from the program as they struggle to document their losses or if they are unable to apply for aid as quickly as more well-resourced producers.
What documentation will be required?
USDA has made it clear that farmers will be required to document actual losses “where prices and market supply chains have been impacted… resulting from lost demand and short-term oversupply for the 2020 marketing year caused by COVID-19.” What is less clear is what specific documentation farmers will be required to provide in order to be eligible for a payment under CFAP.
It’s possible that farmers may be able to “self-certify” their losses up-front in order to apply, but would likely be required to provide documentation before receiving any payment. NSAC is urging USDA to permit simple and flexible documentation that reflects the nature of local food producers.
How will USDA get the word out to farmers?
We expect that once USDA announces sign-up for these emergency payments, we will see a virtual cattle call from producers all across the country as they race to USDA to apply for relief funding. Unfortunately, some of the producers most directly impacted by the ongoing crisis and most in need of relief are some of the same producers who are also most unfamiliar with USDA programs or who have experienced difficulty or discrimination in past efforts to access federal support. Many local food producers, for example, may not be enrolled in any USDA farm program and may not even have a Farm Service Agency farm number (which USDA requires to apply for most programs).
It will therefore be essential that outreach is both targeted to these underserved producers and that USDA is explicit to FSA county and field staff that local food producers are eligible for funding.
NSAC will continue to urge USDA to employ a robust outreach strategy that reaches farmers who may have limited engagement with USDA including very small farmers, limited resource farmers, farmers with limited English proficiency, urban farmers, and farmers of color. Further, we will be urging USDA to reserve funding for these farmers who may require additional time to both become aware of the program and submit required documentation.
We need answers from USDA before they distribute nearly $16 billion in direct aid to farmers and ranchers who have experienced financial losses due to the COVID-19 pandemic, because we have serious concerns that the program will leave out thousands of farmers.
Right now, the program isn’t set up to account for farmers who sell into local/regional markets, diversified farmers, or organic farmers. It doesn’t have a thorough outreach plan or reserved funding for underserved producers (including farmers of color). It doesn’t reflect realistic timelines for farmers’ losses or their increased expenses in addition to their losses. And it does not focus aid on independent, family-scale livestock producers who need help (instead of large corporate operations). In short, we have many questions, and we need answers to ensure this program reaches all farmers impacted by the current crisis.
This crisis is unprecedented and USDA must respond in a manner that matches the urgency of the moment.
Now is the time to urge USDA to answer your questions and create an accessible, equitable program so aid can get to all who are in need. USDA is still working on the program, and we have an opportunity to reach them before the program rules are finalized.
What we can do:
Visit our Take Action page to learn more on how you can help make sure this program works for all farmers.