The administration recently announced details of a new $14 billion Coronavirus Food Assistance Program that will provide direct payments to farmers and ranchers to partially offset COVID-19-related losses for producers. It follows an estimated $10 billion in support provided to cattle, hog, dairy, non-specialty-crop, specialty-crop and other producers to offset COVID-19-related losses experienced through mid-April 2020. Registration for the new program runs through Dec. 11 through the U.S. Department of Agriculture’s Farm Service Agency county offices.

The new program’s payments will be broken into three categories – price-trigger commodities, flat-rate commodities and sales commodities.

  • In the price-trigger-commodity category, in order to qualify for a payment the commodity must have suffered a 5 percent or greater national-price decline based on a comparison of the average prices for the weeks of Jan. 13-17, 2020, and July 27-31, 2020.
  • Flat-rate crops either do not meet the national-price-decline trigger of 5 percent or greater or do not have data available to calculate a price change. Those row crops without price information will be eligible for a $15-per-acre base payment.
  • Sales commodities include specialty crops, aquaculture and other commodities not included in the price-trigger and flat-rate categories. For sales commodities, payment calculations will be based on a producer’s 2019 sales.

Of the $14 billion dollars in new support, the USDA’s cost-benefit analysis estimates how much producer categories are likely to receive.

  • Corn producers will receive $3.5 billion or 25 percent of the total resources.
  • Beef-cattle producers are expected to receive $2.8 billion or 20 percent of funding.
  • Dairy farmers are expected to receive $2 billion or 14 percent of the available support.
  • Hog producers are estimated to receive $1.7 billion or 12 percent of funding.
  • Soybean producers are estimated to receive $1.4 billion or 10 percent of the funds.
  • Wheat, flat-rate crops, eggs and other commodities are expected to receive $2.5 billion or 18 percent of the support.

Payments for crops detailed

Row crops eligible for the new payments include: alfalfa, amaranth grain, barley, buckwheat, canola, corn, extra-long staple cotton, upland cotton, crambe or 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, sorghum, soybeans, speltz, sugar beets, sugarcane, sunflowers, teff, triticale and all classes of wheat. Hay, except alfalfa, and crops intended for grazing are ineligible for the new payments.

Payments for eligible row crops included in the price-trigger payment category will be equal to the greater of

  • eligible acres of the crop multiplied by a rate of $15 per acre or
  • eligible acres of the crop multiplied by a nationwide crop-marketing percentage, multiplied by a crop-specific payment rate, and then by the producer’s weighted 2020 actual production history approved yield. If the actual production history is not available, 85 percent of the weighted 2019 Agriculture Risk Coverage-County-option benchmark yield for that crop will be used.

Crop Payment is calculated as Max (eligible acres x $15 per acre), (eligible acres x marketing percent x Commodity Credit Corporation rate x (2020 actual production history or 85 percent Agriculture Risk Coverage-County yield)).

Essentially there is a $15-per-acre floor for price-trigger row crops. Figure 2 highlights the effective payment rate for select row crops, defined as the crop-marketing percentage multiplied by the crop-specific payment rate.

Payments for eligible row crops included in the flat-rate-payment category will be equal to eligible acres of the crop multiplied by a rate of $15 per acre. Eligible acres include the producer’s share of the determined acres, or reported acres if determined acres are not present, excluding prevented-planting and experimental acres. Row crops eligible for new program in the flat-rate-payment category include alfalfa, amaranth grain, buckwheat, canola, extra-long staple cotton, crambe or 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.

Program detailed for livestock, dairy, poultry

Livestock eligible for new program include beef cattle, hogs and pigs, and lambs and sheep. Producers of those livestock are eligible for payments categorized as price-trigger commodities. Specialty livestock are also considered eligible for payments under the program, but under the sales-commodity category. All equine, animals raised for breeding stock, companion or comfort animals, pets, and animals raised for hunting or game purposes are ineligible for the program. Dairy producers are eligible for the program, with cow milk being classified as a price-trigger commodity and goat milk being classified as a sales-based commodity.

For beef cattle, hogs and pigs, and lambs and sheep, payments will be equal to the most-owned inventory of eligible livestock, excluding breeding stock, on a date selected by the eligible producer from April 16, 2020, through Aug. 31, 2020, multiplied by the Commodity Credit Corporation payment rate.

  • For beef cattle, payments will be equal to the producer’s maximum-owned inventory of eligible beef cattle on the selected date multiplied by the number of payment limitations for the producer, multiplied by the payment rate of $55 per head.
  • For hogs and pigs, payments will be equal to the producer’s maximum-owned inventory of eligible hogs and pigs on the selected date, multiplied by the number of payment limitations for the producer, multiplied by the payment rate of $23 per head.
  • For lambs and sheep, payments will be equal to the producer’s most-owned inventory of eligible lambs and sheep on the selected date multiplied by the payment rate of $27 per head.

Beef – Min (maximum eligible inventory on selected date, (4,546 head x payment limitations)) x $55 per head

Hogs and Pigs – Min (maximum eligible inventory on selected date, (10,870 head x payment limitations)) x $23 per head

Lambs and Sheep – maximum eligible inventory on selected date x $27 per head

Payments for cow milk will be equal to the sum of the producer’s total actual milk production from April 1, 2020, to Aug. 31, 2020, multiplied by the payment rate of $1.20 per hundredweight; and the producer’s estimated milk production from Sept. 1, 2020, to Dec. 31, 2020 – based on the daily average production from April 1, 2020, through Aug. 31, 2020, multiplied by 122 – multiplied by a payment rate of $1.20 per hundredweight. When simplified, the payment for milk producers is estimated at $2.16 per hundredweight multiplied by April through August milk production.

Milk – (actual production April through August x $1.20 per hundredweight) + (estimated production September through December x $1.20 per hundredweight

The new program payments are available for eligible producers of broilers and eggs, which are categorized as price-trigger commodities. Eggs eligible include dried, frozen, liquid and shell. As in the first Coronavirus Food Assistance Program, producers raising animals under contract for another entity are ineligible and will not receive a payment for the new program either. But if a grower retains price risk in the production of the commodity, they will be eligible for the new program.

  • For broilers, payments will be equal to 75 percent of the producer’s 2019 broiler production multiplied by the payment rate of $1.01 per head. Payments for broiler producers who began farming in 2020 and had no production in 2019 will be based on the producer’s actual 2020 broiler production as of the date the producer submits an application for payment.
  • Payments for eggs will be equal to 75 percent of the producer’s 2019 egg production multiplied by the CCC payment rate. Payments for egg producers who began farming in 2020 and had no production in 2019 will be based on the producer’s actual 2020 egg production as of the producer’s application date.

Broilers – (75 percent x 2019 production) x $1.01 per head

Shell Eggs – (75 percent x 2019 production) x $.05 per dozen

Liquid Eggs – (75 percent x 2019 production) x $.04 per pound

Dried Eggs – (75 percent x 2019 production) x $.14 per pound

Frozen Eggs – (75 percent x 2019 production) x $.05 per pound

Sales commodities detailed

Sales commodities include specialty crops, aquaculture, nursery crops and floriculture, and other commodities not included in the price-trigger and flat-rate categories such as tobacco, goat milk, mink, mohair, wool, and specialty livestock not included under the price trigger category that were grown for food, fiber, fur or feathers. Specialty livestock eligible for the new program’s payments consists of animals commercially raised for food, fur, fiber or feathers and includes alpacas, bison, buffalo, beefalo, deer, ducks, elk, emus, geese, goats, guinea pigs, llamas, mink including pelts, mohair, ostrich, pheasants, quail, rabbits, reindeer and turkey. Specialty livestock excludes all equine, breeding stock, companion or comfort animals, pets, and animals raised for hunting or game purposes.

Payment calculations will use a sales-based approach where producers are paid based on five different payment percentages associated with their 2019 sales. Payments for aquaculture eligible for the new program will be based on the producer’s 2019 sales of eligible commodities and will be equal to the amount of the producer’s eligible sales in calendar year 2019, multiplied by the payment rate for that range.

Other considerations detailed

Participation in the new program is subject to payment limitations of $250,000 per person or entity for all commodities combined. Applicants who are corporations, limited-liability companies or limited partnerships may qualify for additional payment limits when members actively provide personal labor or personal management for the farming operation. In addition the special payment-limitation provision has been expanded to include trusts and estates for both Coronavirus Food Assistance programs 1 and 2. Producers will also need to certify they meet the adjusted-gross-income limitation of $900,000 unless at least 75 percent or more of their income is derived from farming, ranching or forestry-related activities. Producers must also be in compliance with Highly Erodible Land and Wetland Conservation provisions. Commodities not included specifically in the new program can still petition to be included. The USDA indicated that if an agricultural operation has been impacted by the pandemic since April 2020, they are still encouraged to apply for Coronavirus Food Assistance Program 2.

Summary

The second round of the Coronavirus Food Assistance Program helps producers offset COVID-19-related price declines for livestock, dairy, and specialty and non-specialty crops. Registration for the $14 billion in direct support to farmers runs through Dec. 11. Producers interested in applying can do so at the USDA’s FSA county offices. Visit www.farmers.gov/cfap for more information. The program is an important down payment in helping farmers and ranchers deal with the unprecedented and unexpected economic fallout related to COVID-19, and is a step in the right direction to helping make farmers and ranchers whole again.

John Newton is the chief economist and Michael Nepveux is an economist with American Farm Bureau Federation Market Intel; visit www.fb.org/market-intel for more information.