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FSA provides program flexibility to help farmers cope during pandemic

Dan Hansen
Correspondent
The U.S. Department of Agriculture has a wide variety of programs to assist farmers and the agricultural community, which are especially important during times of economic hardship.

MADISON – The U.S. Department of Agriculture has a wide variety of programs to assist farmers and the agricultural community, which are especially important during times of economic hardship.

Currently, the U.S. Farm Service Agency (FSA) is in the forefront of administering new and existing programs, providing greater flexibility to help farmers meet the challenges of the current coronavirus pandemic.

Recently, State FSA Executive Director Sandy Chalmers, and State FSA Loan Chief Tom Brandt, participated in an online seminar to provide an overview of the programs and flexible options to help farmers navigate this difficult financial time.

“FSA currently has tools available that will allow you to inject a little more certainty into your farming operation,” Chalmers began.

Although FSA was considered a part of the national security apparatus of the federal government that is there to support food production, which is critical to national security, many staff members spent weeks working from home with limited numbers in offices at any given time.

While more employees are moving back to their offices, Chalmers says the best way to contact FSA is by phone or email. “We’ve done a lot to add flexibility to programs by eliminating a lot of the paperwork. We now accept either faxed or scanned signatures for most documents,” she added.

CARES Act

Chalmers reported that the CARES Act passed at the end of March contained $48.9 billion for responses to COVID-19 including emergency food assistance. “For producers, Congress included $9.5 billion in direct assistance and the act specifically includes local food growers, speciality crops and livestock, including dairy.”

While the Act provided funding and directed FSA to provide the assistance, it didn’t include a program for FSA to implement. “That’s been developing ever since the bill was passed and signed into law,” she stated.

Sandy Chalmers

The CARES Act also provided $14 billion to replenish Commodity Credit Corporation (CCC) funding, “which is basically a line of credit that FSA draws from to make farm program payments,” Chalmers explained.

“The framework for the direct payments to producers, called the coronavirus food assistance program, contains two components – $16 billion in direct assistance to farmers and ranchers and then $3 billion in USDA food purchases,” she noted.

The $16 billion includes the $9.5 billion from the CARES Act and the remaining balance is CCC funding, which is the money FSA has currently available. “This is going to be a direct payment to producers based on actual losses from Jan. 1 to April 15, along with additional adjustments and marketing costs through the end of the second quarter for commodities impacted by COVID-19,” said Chalmers.

Farms are eligible regardless of size and market outlet. “So whether you’re a dairy that sells to a processor or ships to a co-op, or a local food grower, whether you raise feeder or fat cattle, you’re going to be eligible for this program. It’s very broad and inclusive,” Chalmers stressed.

However, to be eligible a farmer must have suffered at least a 5% loss and have an adjusted gross income of less than $900,000. “If the AGI is more than $900,000, at least 75% of income must has to be derived from farming,” Chalmers stated. 

Food assistance

Congress also approved $3 billion for USDA food purchases. “This is a pretty innovative program specifically for the current situation,” said Chalmers. 

“We’re working with the food distributors who were out of work due to the restaurant industry shutdown. They are making the purchases and boxing them and distributing the boxes to food banks and other non profits that will be used as distribution centers. It helps the farmers by reducing excess supply, puts the food distributors to work and helps the food banks by reduced their need for volunteers.”

Recently USDA purchased $470 million of food, including $120 million in dairy and $50 million in potatoes.

CARES Act includes another $850 million for emergency food assistance, and the trade assistance package also includes $573 million for ongoing food purchases. “USDA is working hard to clear the market of that surplus food, and also get it into the hands of the people who really need it,” said Chalmers.

Loan programs

“Marketing assistance loans, or commodity loans, is a program we’ve seen a lot of interest in lately,” said Chalmers. “Commodity loans allow producers to take out a loan on their harvested grain using the commodity as collateral. It solves a couple of issues for producers: It frees up some cash, helps with cash flow, and also allows some extra time for marketing, so farmers can wait for more favorable prices.”

The commodity loan rates were increased in the recent Farm Bill, and vary by county, but are currently around 1%.

The CARES Act extended the loan terms from 9 to 12 months. “Producers have use of that cash for an additional 3 months, so any loan out there will be automatically extended, and any new loan will automatically receive the 12-month maturity. 

“The additional 3 months allows producers more flexibility in marketing, and also gives them options for using the cash,” said Chalmers.

Farm storage facility loans is another program that has seen an uptick in interest, according to Chalmers. 

“The Farm Bill has created incentives for producers to build facilities for on-farm storage, with very favorable terms,” she emphasized. “The program includes grain bins but also extends to cold storage for potatoes, bulk milk tanks, and tanks for maple syrup. Drying and handling equipment is also eligible for the program, including storage and handling trucks. The equipment can be new or used, permanently affixed or portable.” 

The maximum loan amount is $500,000, and the maximum amount for storage and handling trucks in $100,000. Interest rates are set monthly, and the interest rate that applies is the rate that’s in effect when the loan is approved.

Sign up is ongoing for WHIP-plus, that stands for Wildfires, Hurricanes Indemnity Program, but the plus covers tornadoes, snowstorms, flooding and excessive moisture. 

“With the excessive moisture we had in 2019, I know there are a lot of producers eligible for this program. Eligible commodities are those covered by crop insurance, or insurance through FSA, and the payments are based on the difference between the expected value and the actual value of the crop,” said Chalmers. “This program is a little more complex than some others, so I would recommend that you reach out to your county office and get the sign-up process started.”

The Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC), the FSA safety-net program, has a June 30 sign-up deadline. “The election you made, by farm, in 2019 will carry over to 2020 but you do need to make sure you’re enrolled,” stressed Chalmers.

Loan flexibility

“If you’re a farmer who’s currently struggling to obtain credit elsewhere, you may be able to get some financing through FSA,” remarked State FSA Loan Chief Tom Brandt.

Tom Brandt

“We offer two different types of loans. We have direct loans, where you work directly with an FSA loan officer. FSA makes and services that loan. Funds come from the U.S. Treasury and are allocated by Congress each year. Generally, they are at lower interest rates, and have more favorable terms than what you get from a conventional lender,” he related.

“We offer farm ownership loans, which are used to purchase or improve a farm, with a current maximum amount of $600,000. Those limits were raised in the 2018 Farm Bill,” he explained 

“We also have direct farm operating loans with a maximum of $400,000,” he noted. “We have them for one-year terms for purchasing crop inputs and paying feed bills, and up to a 7-year term for the purchase of cattle, machinery and other operating equipment for the farm. The loan money also can be used for minor real estate improvements.”

Guaranteed loans are made by a local ag lender where the applicant may fall short of some of their lending standards. “In those cases, the lender will come to FSA requesting a guarantee to provide them some extra backing and enable them to make loans they wouldn’t be able to do without it,” Brandt said.

The guaranteed loan is a combined loan between the farm ownership loan and the operating loan, and can be up to $1,776,000. “Using a mix of direct and guaranteed financing can increase the loan maximum to $2.376 million,” Brandt explained.

“We’re also providing some flexibility in scheduling loan repayments,” said Brandt. “If someone wants a loan that would normally have a 12-month maturity for their crop inputs, because of the prices that are out there now, maybe we’re going to extend that to 18 months to give them a little more time to market their crop at a better price. It’s the same with term loans. Maybe we’ll put a balloon at the end of that instead of requiring regular payments.”

Loan officials are doing more video conferencing with customers to complete loan documents and even to close loans. “We’re also delaying some of the regular visits to farms. And we’ve told our contracted appraisers not to enter buildings, and maybe ask the loan applicants to provide some pictures instead.”

Deadlines for restructuring loans also have been extended. “If someone is looking to have a loan restructured, we’re allowing extra time to get the paperwork in for that, and we’re using longer-term price projections for commodity loans rather than current prices.

“We recently sent letters to all of our guaranteed lending partners notifying them of the servicing options available, and encouraging them to be as flexible as possible with their customers,” Brandt emphasized.