COVID-19 & Agriculture Issues Update

CARES Act Summary

Congress passed the CARES Act on March 27, which offers numerous programs to help agriculture, small businesses and taxpayers. The funding for agriculture is focused in three main areas:

  • Nutrition ($25.6 Billion)
  • Livestock and Specialty Crop Support ($9.5 Billion)
  • CCC Replenishment ($14 Billion)

The bill authorized USDA to spend money on each of these programs and provides some guidelines; however, it will be up to the USDA to develop rules and administer many of these programs.

  • The $9.5 billion to the Office of the Secretary will go towards development of a new disaster program, specifically allocated to livestock and specialty crop producers. 
  • $14 billion went to replenish CCC funds. The USDA had requested $22 - $23 billion to fully replenish CCC funding, which is used to fund PLC, ARC, MFP and other farm programs. The USDA will now have to develop a new program in the coming weeks to distribute these funds.

 

Coronavirus Food Assistance Program (CFAP)

Three weeks after the passage of the CARES Act, USDA released the broad overview of the CFAP program on Friday, April 17, which is targeted primarily at perishable products: Livestock, Dairy, and Specialty Crops

Program Summary

The program is for a total of $19 billion.

  • $16 billion in direct payments
  • $3 billion in Commodity purchases   

Eligibility

As long as producers are under $900,000 AGI, they would qualify for eligible losses. If they have an AGI over $900,000 then FSA will look to determine if 75% or more of their income was from the farming operation. If the AGI is over $900,000 and the applicant does NOT make 75% or more of their income from the farming operation, they are ineligible to participate.  If they have an AGI over $900,000 and DO make 75% or more from the farming operation, they would still qualify for CFAP funding. This will be taken from 2016 - 2018 average.

Program Design

This program is a look back program regarding what was sold in early 2020 and produced in 2019 as well as what is scheduled to be sold through the third quarter of 2020.

Two parts to the program

  1. 1st quarter sales in 2020 – payment for 85% of loss based on AMS pricing
  2. April 15 – October – payment based on 30% of projected losses

This will be a standalone program; producers’ insurance, PPP, or other programs will not impact eligibility for payments from this program USDA will not subtract Insurance, PPP, ARC, PLC or any other payment from this programs payment limit: $125,000/commodity with a $250,000 max

Commodity Programs

Cattle

USDA will likely use AMS reports to estimate prices for program, actual producer prices are unlikely to be used.

Poultry and Pork

This program is not structured to support contract growers of pork or poultry

Row Crops

Specific row crop eligibility is not known at this time; however, USDA has indicated there will be certain loss criteria that commodities have to meet.  This is for product produced in 2019, and sold in 2020, this is not for the 2020 crop.

Specialty Crops

There are few details for the specialty crop program, this will be for product sold in 2020.  

Expected Rollout of the Program

USDA has sent rules to Office of Management and Budget (OMB) for approval.  This means programs will likely be made public in mid to late May. 

Meat Processors

AFBF estimates that at times over the previous few weeks, pork processing capacity has been reduced by as much as 20% and beef processing capacity has been reduced by as much as 10%.

  • These estimates are derived from publicly available information and company announcements about packing plants and further processing facility closures, it is not factoring in reductions in capacity due to slowing throughout and reduced line speeds at these facilities. 

While it is difficult to fully quantify COVID-19’s impact on the animal protein supply chain, we can piece together a picture showing a significant disruption in the supply chain, with a roughly 30% reduction in weekly cattle and hog slaughter, and a 40% increase in the cutout value since March 15. 

President Trump used the Defense Production Act to ensure that Americans have a reliable supply of products like beef, pork, and poultry.

  • Under the order, USDA is directed to ensure America’s meat and poultry processors continue operations uninterrupted to the maximum extent possible.
    • To ensure worker safety, these processors will continue to follow the latest guidelines from the Centers for Disease Control and Prevention (CDC) and the Occupational Safety and Health Administration (OSHA). 

In an effort to protect employees, processing companies are implementing new policies (such as installing Plexiglas barriers between workers, spacing employees further apart, etc.) and incorporating more social distancing in their facilities.

  • These changes require operations to slow the flow of product through their lines, essentially reducing the country’s processing capacity.

SBA Programs

Congress approved $310 billion in additional funds for the Paycheck Protection Program (PPP) and also made agriculture enterprises eligible for Economic Injury Disaster Loans (EIDL)

  • PPP – administered through local bank, or Farm Bureau Bank for members. 
    • This program ran out of the $350 Billion on Thursday April 16 after just 14 days. 
      • SBA did not create a queue for this program, meaning applicants who were not approved would have to reapply
      • Current funding is expected to fulfill remaining demand.
      • H-2A workers cannot be considered employees for the purpose of this program
      • Money flowing slower in Round 2 as daily limits have been placed on banks to help ensure small local banks are able to participate.
  • EIDL – A loan provided direct from SBA, with a small grant component. Producers must go online and apply through SBA; this is not done at local bank.
    •  Businesses will receive a grant of $1,000/employee up to $10,000 per company.  (For 5 employees you get $5,000 in dollars or for 20 employees you get $10,000)
    • SBA continued to take applications for EIDL (which ag enterprises were not eligible), creating a queue. Now that funding has been replenished, SBA has resume processing EIDL Loan and Advance applications that are already in the queue on a first come, first-served basis.
      • Based on their website, they intend to work through the queued applications BEFORE opening the portal for new applications.
      • Currently, SBA’s site says the following: “We will provide further information on the availability of the EIDL portal to receive new applications (including those from agricultural enterprises) as soon as possible.”

Ag Labor

  • On April 22, 2020, President Trump issued an Executive Order Suspending Entry of Immigrants into the United States. Within the Executive Order, exemptions are provided and H2A visa holders will continue to be allowed to enter the U.S. to fulfill their contractual obligations. 
  • Additionally, in late March, the State Department expand the categories of H-2A visa applicants to allow individuals whose previous visas expired in the last 48 months and who did not require a waiver of ineligibility the last time they applied, to no longer be interviewed in-person.
  • Individual Consulates:
    • South Africa: On March 24, the South African government initiated lockdown, meaning all visa processing was suspended. The lockdown is supposed to end April 30, 2020.
    • Mexico: Currently, there is a bilateral border closure between the United States and Mexico; however, because H-2A workers are exempt, the Monterrey Consulate is continuing to process these visas on a priority basis.

Farm Corps

Representative Rick Crawford reached out to ArFB to help facilitate this program. Essentially, this program was designed address long-standing labor issues in production agriculture. The program connects National Guard and Reserve soldiers, who are currently out of work as a result of COVID-19, with ag producers who need reliable workers. To date, a handful of service members have been hired.