Just shy of a month ago, Congress passed the CARES Act to provide stimulus to the American economy and provide resources for individuals and businesses to weather the pandemic. Billions of dollars in farm aid were included in the package, and USDA was tasked with building out a program to keep farms viable, maintain the integrity of our food supply chain, and ensure every American continues to receive and have access to the food they need.
On April 17, the U.S. Secretary of Agriculture Sonny Perdue announced the new program, titled The Coronavirus Food Assistance Program (CFAP). CFAP will use the funding and authorities provided in the Coronavirus Aid, Relief, and Economic Security Act (CARES), the Families First Coronavirus Response Act (FFCRA), and other USDA existing authorities. The program includes two major elements to achieve these goals: direct support to farmers, and direct purchase and distribution of farm products. Let’s dig into what it provides for producers and consumers.
Direct Support to Farmers and Ranchers
The program will provide $16 billion in direct support based on actual losses for agricultural producers where prices and market supply chains have been impacted and will assist producers with additional adjustment and marketing costs resulting from lost demand and short-term oversupply for the 2020 marketing year caused by COVID-19. USDA will provide $16 billion in direct payments to farmers including:
- $9.6 billion for the livestock industry
- $5.1 billion for cattle
- $2.9 billion for dairy
- $1.6 billion for hogs
- $3.9 billion for row crop producers
- $2.1 billion for specialty crops producers
- $500 million for other crops
- USDA has yet to confirm this distribution of funding in terms of region, farm size, etc.
Producers will receive a single payment determined using two calculations:
- Price losses that occurred January 1 – April 15, 2020. Producers will be compensated for 85% of price loss during that period.
- The second part of the payment will be expected losses from April 15 through the next two quarters and will cover 30% of expected losses.
The payment limit is $125,000 per commodity, with an overall limit of $250,000 per individual or entity. Qualified commodities must have experienced a 5% price decrease between January and April 2020. USDA is expediting the rulemaking process for the direct payment program and expects to begin sign-up for the new program in early May and to get payments out to producers by the end of May or early-June.
Of particular note for Virginia, there is concern around coverage for aquaculture. The Commerce Department has been provided $300 million to support seafood and aquaculture; however, it is unclear to what extent this will cover domestic aquaculture as opposed to international fishing. USDA is expected to be in close communication with the Commerce Department regarding this issue.
Since the length of enforced social distancing remains to be seen, there will need to be self-certification of losses, so producers will need to save records and paperwork to demonstrate losses. This is particularly true for producers who are being forced to depopulate livestock or destroy their product (i.e., dumping milk, plowing under specialty crops) as CFAP payments are expected to help partially offset these losses. Additionally, USDA has indicated that CFAP may take into consideration other farm program benefits, which could limit some CFAP payments to prevent farmers from being paid more across multiple farm programs.
USDA Purchase and Distribution
USDA will partner with regional and local distributors, whose workforce has been significantly impacted by the closure of many restaurants, hotels, and other food service entities, to purchase $3 billion in fresh produce, dairy, and meat. USDA will begin with the procurement of an estimated $100 million per month in fresh fruits and vegetables; $100 million per month in a variety of dairy products; and $100 million per month in meat products. The distributors and wholesalers will then provide a pre-approved box of fresh produce, dairy, and meat products to food banks, community and faith-based organizations, and other non-profits serving Americans in need.
USDA will issue a solicitation in the next two weeks to invite proposals from offerors to supply commodity boxes to non-profit organizations, identified by the offeror, on a mutually agreeable, recurring schedule. USDA will award contracts for the purchase of the agricultural products, the assembly of commodity boxes, and delivery to identified non-profit organizations that can receive, store and distribute food items.
On Tuesday, April 21, USDA will host a webinar outlining how interested parties can submit proposals to help the agency purchase and distribute these agricultural products. The agency indicated it will be accepting proposals in the next two weeks. If you have specific questions for USDA please contact USDAFoodBoxDistributionProgram@usda.gov.
On top of the $3 billion mentioned above, USDA has other available funding sources to purchase and distribute food. USDA still has up to $873.3 million available in Section 32 (a depression-era program that holds funds from customs duties to be used for farm programs) funding to purchase a variety of agricultural products for distribution to food banks. USDA has indicated that the use of these funds will be determined by a mix of industry requests, USDA analysis, and food bank needs. Additionally, the Families First Coronavirus Response Act and the CARES Act provided another $850 million for food bank administrative costs and USDA procure, of which at least $600 million must be food purchases.
The CFAP will provide immediate support to farmers and agribusinesses struggling under the immense pressure of the COVID-19 pandemic. While the details of this package are still not fully known, the $19B in support will help to offset COVID-19-related losses and market disruptions.
The package was designed to be all-inclusive, but not all of the industries in Virginia damaged by this pandemic were directly identified for support. For example, livestock sectors such as poultry, sheep, and lamb, or horticultural producers were not directly referenced in the CFAP package. Rest assured, there will be an opportunity for specialty categories to demonstrate losses to AMS or FSA and receive CFAP support.
The program is an appreciated cash infusion helping to make agriculture whole from the unprecedented and unexpected economic fallout related to COVID-19. To that end, USDA will see the Commodity Credit Corporation replenished with $14B in July, but more funding will likely be needed as the full extent of the crisis becomes known.
Stay tuned for more updates from VAFB on this ever-changing and ever-compounding crisis.