What’s in the new COVID-19 relief package for agriculture?
After months of negotiations, Congress on Monday passed a $900 billion COVID-19 stimulus package with much-needed financial relief for agricultural producers, funding for food assistance programs, enhancements to the Paycheck Protection Program and funding for enhanced broadband access, as well as additional financial resources for agricultural research and farmer stress assistance programs, among others.
The package provides an estimated $13 billion directly to agricultural programs, with $300 million allocated to the Commerce Department for assistance to fisheries. Today’s article highlights many of the direct agricultural provisions in the bill.
“We’re pleased that Congress understands the toll the pandemic continues to take on farmers, ranchers and rural Americans,” said AFBF President Zippy Duvall. “Farmers who were left out of previous aid packages or whose losses were far more devastating than recognized in initial aid are grateful that their families will be helped, too. We recognize the need is great across our entire economy and farm families will join the rest of America in our determination to recover from the hardships caused by the COVID-19 pandemic.”
Of the $900 billion in the recently passed COVID relief package, $13 billion was allocated to agricultural programs, representing approximately 1.4% of total spending in the bill. Of the $13 billion, $11.2 billion is allocated to the Office of the Agriculture Secretary, approximately $870 million is allocated for a supplemental Dairy Margin Coverage program as well as a dairy donation program, $300 million is provided to the Commerce Department to assist fisheries, and $20 million per year, or $200 million over 10 years, is to be used to address gaps in nutrition research. Specialty crop block grant programs and Local Agriculture Market programs are allocated $100 million each, farming opportunities training and outreach and the Gus Schumacher nutrition program receive $75 million each. Interstate shipment grants were allotted $60 million and $28 million was allocated for farm stress programs.
Assistance for Non-Specialty and Specialty Crops
Price Trigger and Flat Rate Crops—The bill provides approximately $11.2 billion of direct financial assistance to commodity producers. Producers of 2020 price trigger crops and flat-rate crops are eligible to receive a payment of $20 per eligible acre of the crop. Price trigger commodities, as defined in the second Coronavirus Food Assistance Program, are major commodities that meet a minimum 5% price decline over a specified period.
These crops include barley, corn, sorghum, soybeans, sunflowers, upland cotton and all classes of wheat. For example, with 91 million acres of corn planted in 2020, and based on a $20 per acre payment, corn producers would be expected to receive $1.8 billion in financial support. Across these seven crops alone, 240 million acres were planted, representing $4.8 billion in COVID-19 stimulus. Additionally, the bill allows the Agriculture Secretary to extend the term of marketing loans by three months, providing producers additional time to repay.
Flat-rate crops, as described in CFAP 2, either do not meet the 5% price decline trigger or do not have data available to calculate a price change. Flat-rate crops include alfalfa, amaranth grain, buckwheat, canola, extra long staple (ELS) cotton, crambe (colewort), einkorn, emmer, flax, guar, hemp, indigo, industrial rice, kenaf, khorasan, millet, mustard, oats, peanuts, quinoa, rapeseed, rice, sweet rice, wild rice, rye, safflower, sesame, speltz, sugar beets, sugarcane, teff, and triticale. These commodities will also receive a payment of $20 per acre.
The bill includes a provision allowing for the adjustment of direct support payments to account for price differentiation among commodities. This may include specialized varieties, local markets and farm practices such as certified organic.
For specialty crop producers, the bill modified the sales-based rules from CFAP 2 to allow specialty crop producers to include crop insurance indemnities and disaster payments in their 2019 sales, which was the basis for determining the amount of support under CFAP 2, or by substituting 2018 sales. Additionally, the bill makes available an additional $100 million in Specialty Crop Block Grants that are administered through each state’s Department of Agriculture and an additional $100 million available for the Local Agriculture Market Program.
Assistance for Processors
The bill requires that a portion of the appropriated money to be used to make payments to domestic users of upland cotton and extra long staple cotton between March 1, 2020, and December 31, 2020. The payment rate is calculated by multiplying 6 cents per pound by the average monthly consumption of the domestic user from January 1, 2017, through December 31, 2019, then multiplying it by 10, e.g., cotton payment = $0.60 x (avg. monthly consumption Jan 1, 2017-Dec 31, 2019).
Moreover, one of the consequences of COVID-19 precautions and stay-at-home orders was a significant decrease in fuel consumption, and along with it was a slash to biofuel demand. Since the beginning of the year, and through mid-December, the cumulative decline in ethanol production is nearly 2 billion gallons. The bill allows for payments to producers of advanced biofuel, biomass-based diesel, cellulosic biofuel, conventional biofuel, or renewable fuel due to unexpected market losses as a result of COVID-19.
Fisheries and timber assistance
For offshore aquaculture producers, there is an additional $300 million in Fisheries Disaster Assistance available until September 30, 2021, for the Sec. 12005 CARES Act assistance program. For timber harvesting and timber hauling businesses, $200 million is allocated for relief to those that experienced a loss of at least 10% of gross revenue between January 1, 2020, through December 1, 2020, compared to the gross revenue earned in the same period in 2019.
Livestock and Dairy Provisions
Support to Contract Growers of Livestock and Poultry
Poultry, in particular, was left out of the CARES Act, largely due to the structure of the industry and how the relationship between the farmer and integrator historically has operated. Under the CARES Act, to be eligible for assistance, the farmer had to directly own the commodity. This worked well for MOST cattle and hog producers, but not for broiler farmers.
Typically, a broiler farmer raises and cares for the birds, but does not directly own the birds; the integrator maintains ownership of the animals. However, these producers saw their income significantly reduced as many of their barns (which they financed the construction of and still were required to service the debt) remained empty due to supply chain disruptions earlier in the pandemic. The new bill addresses losses faced by many in the poultry industry (and other livestock sectors as well) by providing $1 billion for contract growers of livestock and poultry to cover up to 80% of losses.
Support for Losses Due to Depopulation of Animals
The livestock supply chain was significantly disrupted, especially at processing facilities, where labor shortages and worker protection measures slowed throughput and even caused some facilities to shut down. As a result, some producers were forced into the heart-wrenching position of having to euthanize their animals. This is the last resort, as farmers do everything they can to avoid this outcome, but in such a tightly coupled delivery system they were threatened with going out of business having raised animals they could no longer sell. This bill directs the Agriculture Secretary to make payments to producers for losses incurred due to the depopulation of livestock and poultry due to insufficient processing access. These payments will be up to 80% of the fair market value of the depopulated animals, and for the costs of depopulation.
Livestock Dealer Statutory Trust—The bill ensures that livestock producers are paid for their animals by requiring dealer trusts. In the current system, dealers frequently buy and resell livestock, often grouping them to meet the volume and type needs of their customers. Dealers are allowed to take possession of livestock and pay for them later, and dealers do not maintain a trust account to guarantee payment.
Other Livestock Provisions
This bill included a one-year authorization to livestock mandatory reporting, extending the law that requires buyers and sellers of meat and livestock to report the price and volume of certain commodities. The bill also aims to assist meat and poultry processing facilities in making improvements to allow for interstate shipment. While doing this, it would require a study on programs for meat and poultry processing and slaughtering facilities.
This bill also includes additional inventory-based direct payments for cattle producers based on the difference between the CARES Act inventory payment rate, the Commodity Credit Corporation payment rate and the CFAP 2 payment rate multiplied by a percentage factor. For example, fed cattle had a CARES Act inventory payment rate of $214 per head, and the CCC payment rate and the CFAP 2 payment rate were $33 per head and $55 per head, respectively. When subtracting the CCC and CFAP 2 payment rates, and then multiplying by 50%, the plus-up payment for fed cattle is $63 per head.
Supplemental Coverage for Dairy Margin Coverage Program
The bill would provide necessary cash flow assistance to small and midsized dairies by establishing supplemental dairy margin coverage based on 75% of the difference between recent actual production (based on 2019 marketings) and the established production history currently used by DMC. Program payments under this supplemental program would be based on the additional 2019 production and the elected DMC coverage level.
Many small and midsized dairies have grown their operations since their production history was established and locked in in previous farm bills (based on 2011 through 2013 milk marketings). This legislation would allow those operations to qualify for additional coverage for 75% of any increases in milk production up to 5 million pounds. This bill would not reopen registration for DMC for 2020, but producers who sign up for DMC in subsequent years would also be allowed this option for higher milk production coverage.
Dairy Donation Program and Food and Agricultural Product Purchase Program
Following up on USDA’s Farmers to Families Food Box program, the bill includes two donation-style programs. The first is a dairy donation program that will pay milk processors the full value of milk used to produce and donate dairy products into food assistance channels. The $400 million dairy donation program is also retroactive, meaning milk processors may be eligible to receive financial payments for milk previously processed and donated during 2020.
In addition to the dairy-only donation program, the bill would provide $1.5 billion for the Agriculture Secretary to purchase food and agricultural products and distribute these products through nonprofit organizations. This support would include fresh dairy, produce, meat and seafood products. It would also provide grants and loans to small and midsized food processors and distributors, seafood processing facilities and processing vessels, farmers markets, producers and other organizations to respond to COVID-19 and protect their workers.
The recently passed COVID-19 stimulus package provides $13 billion, approximately 1.4% of the $900 billion package, in financial assistance to help livestock, poultry, dairy, non-specialty and specialty crop producers continue to recover from COVID-19 disruptions. In addition to the direct support for agriculture, the bill includes other agriculture-related provisions including improvements to and additional funding for the Paycheck Protection Program, an extension to livestock mandatory reporting, several tax extender provisions, such as a $1.01 per gallon credit for the production of second-generation biofuels and a $0.50 per gallon excise tax credit for alternative fuel and alternative fuel mixtures, as well as $7 billion to increase broadband access.
John Newton, Michael Nepveux and Shelby Myers are economists for the American Farm Bureau Federation