On Tuesday, May 19, 2020, the United States Department of Agriculture (“USDA”) released additional details regarding the Coronavirus Food Assistance Program (“CFAP”), which will provide up to $16 billion in direct payments to producers of agricultural commodities who have suffered a five-percent-or-greater price decline or who had losses due to market supply chain disruptions as a result of the COVID-19 pandemic.
To be eligible for a payment, an individual or entity must have an average adjusted gross income of less than $900,000 for tax years 2016, 2017, and 2018. However, this limit does not apply if 75 percent of the producer’s adjusted gross income comes from farming, ranching, or forestry. The payment calculations and additional eligibility requirements vary by commodity and are discussed briefly below. Eligible producers will receive their payment in two installments, with 80 percent being paid upon approval of the application and the remaining 20 percent payable at a later date as funds remain available.
Non-specialty Crops & Wool
Producers of non-specialty crops and wool are eligible for CFAP payments if they have suffered a five-percent-or-greater price decline from mid-January to mid-April 2020 and have faced increased marketing costs for inventories. Producers will be paid on inventory subject to price risk held as of January 15, 2020. Payment will be made based on 50 percent of either the producer’s 2019 total production or the 2019 inventory as of January 15, 2020, whichever is smaller, multiplied by 50 percent of the applicable payment rates, which can be found here for commodities and here for wool. Non-specialty crop and wool producers will need to provide the following information when applying for payment: (i) their total 2019 production for the commodity that suffered a five-percent-or-greater price decline and (ii) total 2019 production that was not sold as of January 15, 2020.
Non-specialty crops include malting barley, canola, corn, upload cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat, and hard red spring wheat. Crops intended for grazing are not eligible.
Cattle, Hogs, and Sheep
Livestock producers are eligible for CFAP payments if they have an ownership interest in eligible livestock that have suffered a five-percent-or-greater price decline from mid-January to mid-April 2020 and have faced increased marketing costs for inventories due to unexpected surplus and disrupted markets. Eligible livestock consist of: (i) pigs less than 120 pounds and hogs over 120 pounds; (ii) lambs and yearlings less than two years of age; and (iii) feeder cattle, slaughter cattle, and all other cattle, not including livestock used, or intended for, dairy production. Payment to livestock producers will be calculated using the sum of (i) the producer’s number of livestock sold between January 15 and April 15, 2020, multiplied by the payment rates per head, and (ii) the highest inventory number of livestock between April 16 and May 14, 2020, multiplied by the payment rate per head. Applicable payment rates can be found here. Livestock producers will need to provide the following information when applying for payment: (i) total sales of eligible livestock, by species and class, between January 15, 2020, to April 15, 2020, of owned inventory as of January 15, 2020, including any offspring from that inventory, and (ii) the highest inventory of eligible livestock, by species and class, between April 16, 2020, and May 14, 2020.
Dairy
CFAP payments are available to all dairy operations with milk production in January, February, and/or March 2020, including any dumped milk production during those months. Any milk production priced under a forward contract for any time during those months is ineligible. The payment to dairy producers will be calculated in two parts. The first portion will be based on the producer’s certified milk production for the first quarter of calendar year 2020 multiplied by $4.71 per hundred-pound weight, which represents 80 percent of the national price decline during that quarter. The second portion will be determined by multiplying the producer’s milk production in the first quarter by 1.014 (to account for increased production in the second quarter) multiplied by $1.47 per hundred weight, which represents 25 percent of the national price decline during the first quarter. Dairy producers will need to provide their self-certified milk production during the first quarter of 2020 when applying for payment.
Specialty Crops
Specialty crop producers may receive a CFAP payment for eligible specialty crop production that is not subject to an agreed-upon price through a forward contract or similar binding agreement. The total payment will be based on: (i) crops that suffered a five-percent-or-greater price decline in sales price between January 15, 2020, and April 15, 2020; (ii) shipped produce that left the farm by April 15, 2020, but which subsequently spoiled due to no market and for which no payment was received; and (iii) harvested produce that did not leave the farm by April 15, 2020, or mature crops that were unharvested (or plowed under) by April 15, 2020, due to lack of buyers and which have not been, nor will be, sold. Specialty crop producers will need to provide the following when applying for payment, as applicable: (i) records, such as bills of sale, documenting the price received for produce sold during January through April; (ii) documentation, such as a letter from a buyer, evidencing that the producer did not receive payment; and (iii) documentation regarding the amount of any produce that went unharvested or that was harvested but not shipped. A full list of eligible specialty crops and their respective payment rates can be found here.
Payment Limitations
CFAP payments are limited to $250,000 per individual or entity. Additionally, special limitation rules apply to corporations, limited liability companies, and limited partnerships. These entities may receive $250,000 per shareholder (not to exceed three) who contribute at least 400 hours of active personal management or active personal labor, for a maximum payment amount of $750,000.
Applying for Payment
Eligible producers can begin applying for direct payments on Tuesday, May 26, 2020, on which date the application form and a payment calculator will become available. Producers must work with their local Farm Service Agency to file their application. Producers can begin preparing for the application by gathering the necessary documentation discussed in the appropriate producer section above and the information needed for the following required forms:
- CCC-901 – Identifies members of a farm or ranch that is a legal entity.
- CCC-941 – Reports your average adjusted gross income for programs where income restrictions apply.
- CCC-942 – If applicable, this certification reports income from farming, ranching, and forestry, for those exceeding the adjusted gross income limitation.
- AD-1026 – Ensures compliance with highly erodible land conservation and wetland conservation.
- AD-2047 – Provides basic customer contact information.
- SF-3881 – Collects your banking information to allow USDA to make payments to you via direct deposit.
The Agriculture and Agribusiness attorneys at Dvorak Law Group have the knowledge and experience to efficiently assist our clients with financing needs. Please contact Dvorak Law Group for specific questions and recommendations regarding your business.
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