USDA’s New Program Offers Financial Assistance To Farmers And Ranchers: The Coronavirus Food Assistance Program


May 28, 2020

The U.S. Department of Agriculture (USDA) recently published a final rule to implement the Coronavirus Food Assistance Program (CFAP), a new federal program that provides payments to farmers, ranchers and other agricultural producers impacted by the COVID–19 outbreak. The USDA’s final rule contains information regarding the CFAP eligibility requirements, calculation of the payments and the application process. Key information about this new federal program is summarized below. Additional details, including the required application forms and a list of FAQs, can be found on the USDA’s website.

The Farm Service Agency (FSA) began accepting CFAP applications on May 26, 2020. Because applications are processed on a “first come, first served” basis (like the recent Paycheck Protection Program), agricultural producers should consider applying as soon as possible.

Eligibility Requirements

Generally, in order to be eligible for a CFAP payment, the applicant (individual or legal entity) must have suffered a 5%-or-greater price loss between mid-January 2020 and mid-April 2020, or have faced “additional significant marketing costs” due to an unexpected surplus or market disruptions relating to COVID-19. Agricultural processors who do not share in the risk of producing a crop or livestock are ineligible for CFAP payments.

An additional eligibility requirement is that the applicant’s Adjusted Gross Income (AGI) for federal income tax purposes (using the average of the 2016, 2017 and 2018 tax years) cannot exceed $900,000. However, this AGI limit does not apply if at least 75% of the applicant’s AGI comes from farming, ranching or forestry-related activities.

Participation in other USDA programs is not a prerequisite to eligibility. Also note that participation in the Paycheck Protection Program or Economic Injury Disaster Loan program does not impact an applicant’s eligibility for the CFAP or any USDA farm program.

Calculation of Payments

CFAP payments are intended to provide agricultural producers with financial assistance to help offset lost profits and increased marketing costs associated with the COVID-19 pandemic. Payments are determined by the type of agricultural commodity, as described below.

Livestock

Eligible livestock include cattle, sheep (lambs and yearlings only) and hogs. Total payments are calculated using the sum of the producer’s number of livestock sold between January 15 and April 15, 2020, multiplied by the payment rate per head, plus the highest inventory number of livestock between April 16 and May 14, 2020, multiplied by the payment rate per head found on the USDA website.

Dairy

Dairy payments equal the first quarter production of calendar year 2020, multiplied by the payment rate found on the USDA website. Dairy production for the second quarter is calculated from the first quarter production; second quarter calculated production is then multiplied by the applicable payment rate.

Non-Specialty Crops

For eligible non-specialty crops, producers will be paid based on inventory subject to price risk held as of January 15, 2020, not to exceed 50% of 2019 total production, multiplied by the commodity’s applicable payment rate found on the USDA website. Eligible non-specialty crops include malting barley, canola, corn, upland cotton, millet, oats, sorghum, soybeans, sunflowers, durum wheat and hard red spring wheat and wool.

Specialty Crops

For eligible specialty crops, the total payment will be based on the sum of three different loss categories. For specialty crops that were sold between January 15, 2020, and April 15, 2020, the quantity sold is multiplied by the payment rate. For specialty crops harvested and shipped but subsequently spoiled or unpaid due to loss of marketing channels between January 15, 2020 and April 15, 2020, the harvested and shipped quantity that spoiled or were unpaid is multiplied by a different payment rate. For unpriced specialty crops that did not leave the farm or were mature crops that remained unharvested between January 15, 2020 and April 15, 2020 due to loss of marketing channel, the sum of the quantity of crops that did not leave the farm and the quantity of mature crops that remained unharvested is multiplied by a different payment rate.

Eligible specialty crops include almonds, apples, artichokes, asparagus, avocados, beans, blueberries, broccoli, cabbage, cantaloupe, carrots, cauliflower, celery, sweet corn, cucumbers, eggplant, garlic, grapefruit, kiwifruit, lemons, iceberg lettuce, romaine lettuce, mushrooms, dry onions, green onions, oranges, papayas, peaches, pears, pecans, bell type peppers, other peppers, potatoes, raspberries, rhubarb, spinach, squash, strawberries, sweet potatoes, tangerines, taro, tomatoes, walnuts and watermelons.

Ineligible Commodities

Commodities that did not suffer a 5% or greater price decline from mid-January to mid-April 2020 are not eligible for the CFAP. Specifically, this includes sheep more than two years old, eggs/layers, soft red winter wheat, hard red winter wheat, white wheat, rice, flax, rye, peanuts, feed barley, Extra Long Staple (ELS) cotton, alfalfa, forage crops, hemp and tobacco. The USDA may consider the excluded commodities at a later date if credible evidence is provided that supports a 5% price decline.

Overall Payment Limits

There is a payment limit of $250,000 per person or entity for all commodities combined. However, applicants that are corporations, LLCs or limited partnerships may qualify for an increased payment limit where the owners provided at least 400 hours active personal labor or active personal management for the agricultural operation, up to $250,000 per owner (not to exceed three) for a maximum limit of $750,000.

Application Process

The USDA will accept CFAP applications from May 26, 2020 through August 28, 2020. Since there is a limited amount of funds appropriated for this program, early action is strongly encouraged. The application form and several supplemental forms required for the application (CCC-901, CCC-941, CCC-942, AD-1026, AD-2047, and SF-3881) can be downloaded from the CFAP webpage. Producers are also encouraged to call their local FSA office and make an appointment to discuss their application.

The USDA has announced that it will make an initial payment of 80% of the total calculated maximum payment for a producer once the producer’s CFAP application has been approved. The remaining 20% of the calculated maximum payment will be made after the initial round of funding closes, provided that additional funds remain available.

If you have any questions about this alert, please contact one of the members of our COVID-19 Response Team.

Tax:

Jon Grob
jgrob@mcgrathnorth.com
(402) 633-9560

Courtney Foltz
cfoltz@mcgrathnorth.com
(402) 633-9572

Austin Bradley
abradley@mcgrathnorth.com
(402) 633-6880

Contact information for the complete McGrath North’s COVID-19 Response Team can be found here.

For information regarding additional business-related concerns centered around COVID-19, please visit our COVID-19 Resource Guide here.

Share Button