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Relief package has $13 billion for agriculture
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Relief package has $13 billion for agriculture

After months of negotiations Congress approved Dec. 28 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. It also included 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.

Agricultural provisions outlined

Of the $900 billion in the recently passed COVID-relief package, $13 billion was allocated to agricultural programs, representing about 1.4 percent of total spending in the bill.

  • $11.2 billion is allocated to the Office of the Agriculture Secretary.
  • $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.
  • $20 million per year, or $200 million across 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.
  • $28 million was allocated for farm-stress programs.

Price-trigger, flat-rate crops detailed

The bill provides about $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 percent price decline during a specified period. Those 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 those 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 the second Coronavirus Food Assistance Program, either don’t meet the 5 percent price-decline trigger or don’t have data available to calculate a price change. Flat-rate crops 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. Those commodities will 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. That may include specialized varieties, local markets and farm practices such as certified organic.

Specialty-crop rules modified

For specialty-crop producers, the new bill modified the sales-based rules from the second Coronavirus Food Assistance Program 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 the second Coronavirus Food Assistance Program, 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 included for processors

The bill requires that a portion of the appropriated money be used to make payments to domestic users of upland cotton and extra-long staple cotton between March 1, 2020, and Dec. 31, 2020. The payment rate is calculated by multiplying 6 cents per pound by the average monthly consumption of the domestic user from Jan. 1, 2017, through Dec. 31, 2019, then multiplying it by 10. For example a cotton payment = $0.60 x (avg. monthly consumption Jan. 1, 2017-Dec. 31, 2019).

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 2020 and through mid-December, the cumulative decline in ethanol production is almost 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 disaster assistance added

For offshore aquaculture producers there’s an additional $300 million in Fisheries Disaster Assistance available until Sept. 30, 2021, for the Sec. 12005 Coronavirus Aid, Relief and Economic Security Act assistance program. In the CARES Act an initial $300 million in direct assistance was provided to fisheries that were negatively impacted by COVID-19, including commercial fishing businesses, charter or for-hire fishing businesses, qualified aquaculture operations, processors and other fishery-related businesses. The provisions for distributing the money among eligible states are specifically outlined in Sec. 12005 of the CARES Act and are updated by the Commerce Department’s National Oceanic and Atmospheric Administration. The additional money in the new legislation will be appropriated to eligible states, tribes or territories. It limits the amount each government entity can receive based on the total annual average revenue generated to the state from commercial fishing operations, aquaculture firms, the seafood supply chain and charter-fishing businesses.

Timber harvesting, hauling included

For timber-harvesting and timber-hauling businesses, $200 million is allocated for relief to those who experienced a loss of at least 10 percent of gross revenue from Jan. 1, 2020, through Dec. 1, 2020, compared to the gross revenue earned in the same period in 2019.

Livestock, dairy provisions detailed

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 needed to directly own the commodity. That worked well for most cattle and hog producers, but not for broiler farmers. Typically a broiler farmer raises and cares for the bird, but doesn’t directly own the birds; the integrator maintains ownership of the animals. But those 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 of – 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 as much as 80 percent of losses.

Support included for animal depopulation

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 close. As a result some producers were forced into the heart-wrenching position of needing to euthanize their animals. That’s a last resort because farmers do everything they can to avoid that 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. The new 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. Those payments will be for as much as 80 percent of the fair market value of the depopulated animals, and for the costs of depopulation.

Livestock-dealer trust required

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 don’t maintain a trust account to guarantee payment.

Other livestock provisions detailed

The new bill includes 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. The 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 second-Coronavirus Food Assistance Program payment rate, multiplied by a percentage factor. For example fed cattle had a CARES Act inventory payment rate of $214 per head. The Commodity Credit Corporation payment rate and the second-Coronavirus Food Assistance Program payment rate were $33 per head and $55 per head, respectively. When subtracting the Commodity Credit Corporation and the second-Coronavirus Food Assistance Program payment rates, and then multiplying by 50 percent, the plus-up payment for fed cattle is $63 per head.

Coverage added to margin program

The bill would provide necessary cash-flow assistance to small and midsized dairies by establishing supplemental dairy-margin coverage based on 75 percent of the difference between recent actual production – based on 2019 marketings – and the established production history currently used by the Dairy Margin Coverage program. Program payments under the supplemental program would be based on the additional 2019 production and the elected the Dairy Margin Coverage-program coverage level. Many small and midsized dairies have grown their operations since their production history was established and locked in during previous farm bills – based on 2011 through 2013 milk marketings. The new legislation would allow those operations to qualify for additional coverage for 75 percent of any increases in milk production, to as much as 5 million pounds. The bill would not reopen registration for the Dairy Margin Coverage program for 2020, but producers who register for the program in subsequent years would also be allowed the option for increased milk-production coverage.

Dairy benefits from new initiatives

Following the U.S. Department of Agriculture’s Farmers to Families Food Box program, the bill includes two new 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 those products through nonprofit organizations. The 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.

Summary

The recently passed COVID-19 stimulus package provides $13 billion, about 1.4 percent of the $900 billion package, in financial assistance to help livestock, poultry, dairy, non-specialty- and specialty-crop producers who continue to recover from COVID-19 disruptions. In addition to the direct support for agriculture, the bill includes other agricultural-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 – and $7 billion to increase broadband access.

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

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