USDA must still go through an expedited rulemaking process before finalizing this initiative, but it is expected that CFAP’s $19 billion relief package will be divided between two programs. The first program provides direct support to farmers and ranchers, and the second program is a USDA purchase and distribution program.
Pillsbury is continuously monitoring the development of this program and will provide updates accordingly.
Direct Support to Farmers and Ranchers
USDA will dispense $16 billion in direct grants to farmers and ranchers who are suffering as a result of the COVID-19 pandemic. Support will be calculated based on agricultural producers’ actual losses where prices and market supply chains have been impacted by short-term oversupply caused by COVID-19. These payments will provide financial assistance to producers facing adjustment and marketing costs resulting from lost demand.
Of this $16 billion, it is expected that:
- $9.6 billion will be directed toward the livestock industry (including $5.1 billion for cattle, $2.9 billion for dairy, and $1.6 billion for hogs);
- $3.9 billion will be directed toward producers of row crops;
- $2.1 billion will be directed toward specialty crop producers; and
- $500 million will be directed toward producers of all other crops.
While the package was designed to be inclusive of the agricultural sectors hardest hit by the pandemic, not all of the damaged agricultural producers have been directly identified. For example, livestock sectors such as poultry and lamb have not yet been referenced in any provisions. That said, it is expected that producers of crops and livestock not specifically mentioned in CFAP’s provisions will have the opportunity to demonstrate losses to the Farm Service Agency (FSA) and Agricultural Marketing Service (AMS) on a case-by-case basis in order to receive CFAP support.
However, not all members of the agriculture sector will be able to receive support. One group that is currently excluded from this program is the ethanol industry. It is also unclear to what extent the program will cover aquaculture. The Commerce Department has been provided $300 million to support seafood and aquaculture, but it is unknown if this funding will be designated for domestic aquaculture or international fishing.
To qualify for a payment under CFAP, a commodity must have declined by at least 5% between January and April 2020. Payments will be limited to people or entities with an adjusted gross income of under $900,000, unless at least 75% of their income is derived from agriculture. For those who qualify, a single direct payment will be made based on the total of two calculations. Under the first calculation, producers will be relieved of 85% of the price loss experienced from January 1 to April 15, 2020.
The second payment calculation will total 30% of a producer’s expected losses for the two quarters after April 15, 2020. Payment limits are set at $125,000 per commodity with an overall limit of $250,000 per individual or entity. USDA has yet to decide if spouses will also be eligible for relief (creating a $500,000 limit per farm couple). USDA indicated that it may consider other farm program benefits in order to prevent farmers from receiving duplicative payments across multiple programs.
USDA Purchase and Distribution Program
USDA will partner with regional and local food distributors to purchase $3 billion in produce, dairy and meat. In allocating these funds, USDA will buy an estimated $100 million per month in fruits and vegetables, $100 million per month in dairy products, and $100 million per month in meat products. From this, USDA-partnered distributors will provide pre-approved boxes of produce, dairy, and meat products to food banks, community and faith-based organizations, and other nonprofits serving Americans in need.
Though final details for this program are still being worked out, USDA indicated that it will likely begin accepting proposals sometime in the next two weeks.
However, food banks are not wholly reliant on the $3 billion in CFAP relief. The FFCRA and the CARES Act cumulatively provided for at least $850 million for food bank administrative costs and USDA food purchases, of which a minimum of $600 million must be designated for food purchases. Further, $873.3 million remains available in USDA Section 32 funding to purchase agricultural products for distribution for food banks.
Given the significant impact on commodity prices resulting from social distancing and nonessential business closures, CFAP is one of several agriculture-focused stimulus initiatives rolling out in the coming months. Pillsbury’s Public Policy team will continue to monitor developments in governmental guidance and orders as they relate to agriculture in this ever-evolving landscape of COVID-19. For more information or assistance in applying to these programs, please reach out to Matthew Oresman, a partner in the Public Policy practice at Pillsbury Winthrop Shaw Pittman LLP.
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