Details of Covid Aid Package, Including Some Big Changes for Ag Sector

Posted on 12/20/2020 10:51 PM

Livestock, dairy, poultry, cotton aid | $20/acre for CFAP price trigger and flat rate crops

 


Washington Focus


 

 

Congress on Monday is expected to pass a $908 billion Covid aid package. The measure will be added to a $1.4 trillion spending bill and combined with other measures, including previously stalled legislation to extend tax breaks, authorize water projects, and address the problem of surprise sky-high medical bills for out-of-network procedures. House Majority Leader Steny Hoyer (D-Md.) put out a notice saying the chamber would vote on a one-day continuing resolution (H J Res 110) to provide more time to finalize the text and let lawmakers read it before voting Monday. Congress on Friday approved a 48-hour extension of government funding to give negotiators more time to finish the coronavirus relief package.

 

     Congressional negotiators cleared the last major obstacle for pandemic relief legislation with a compromise in a dispute over the future of Federal Reserve emergency lending programs. Sen. Pat Toomey (R-Pa.) sought to limit emergency Fed lending programs that were established as part of the March CARES Act. Democrats objected to the language he proposed, saying it would constrain the Fed and the incoming Biden administration from responding to any future economic calamity. The compromise was negotiated between Toomey and Senate Minority Leader Chuck Schumer (D-N.Y.). Under the deal, the remaining $429 billion in the disputed emergency facilities would be used to offset the latest relief bill. The facilities would be closed and couldn’t be duplicated without congressional approval. A Democratic aide said the deal wouldn’t prohibit establishing such emergency facilities in the future. The Fed will retain more flexibility over restarting the Term Asset-Backed Securities Loan Facility (TALF), which will be closed but can be restarted in the future. The TALF was little used this year, lending about $3.6 billion out of up to $100 billion in loan authority, according to Fed data. But it was considered an effective tool during the Great Recession in getting consumer credit flowing again and lowering borrowing costs. Republicans said they always intended the special lending authorities to expire by the end of this year. They feared the incoming Biden administration would be able to interpret the CARES Act in a way to prolong special lending authority and possibly use it to fund their priorities, such as addressing climate change or shoring up state and local budget shortfalls.

 

     The legislation (one-third the size of what Democrats originally proposed last May) includes $600 in payments for adults and children, meaning a family of four would receive $2,400 up to a certain income — they would begin to be reduced at $75,000 a year income level, similar to the last round of stimulus checks, and disappear altogether for those who earned more than $99,000. The package also includes $300 per week in supplemental unemployment payments and cover up to 11 weeks of unemployment, at least through March 14. The package includes help for small businesses. But it omits significant aid to state and local governments (an item Democrats wanted) as well as legal protections for businesses (which Republicans wanted) worried about liability in spreading the virus.

 

     The legislation includes a package of extensions of expiring tax provisions.

 

     The White House has been pushing to reinstate tariffs on certain goods manufactured in foreign-trade zones near border ports of entry that were left out of the U.S.-Mexico-Canada trade pact. Critics like Cornyn say the provision will force employers in Texas and elsewhere to pay some $2 billion in extra tariffs.

 

Details of the around $13 billion ag sector package: $11.2 billion is provided to the Office of the Secretary to support agricultural producers, processors, and contract growers impacted by coronavirus, including:

  • Supplemental payments to price trigger and flat rate crops under CFAP of $20 per eligible acre. This payment is a supplement to the Coronavirus Food Assistance Program (CFAP 2) which only covered 80% of the price loss due to coronavirus impacts on a portion of the crop marketings for each commodity (40% for corn).
  • Include crop insurance indemnities and disaster payments in 2019 sales, which was the basis for determining the amount of support under CFAP 2 sales crops, or by substituting 2018 sales.
  • Directs the Secretary to provide additional assistance to producers of specialty crops, livestock and dairy that had payments under CFAP 1 and 2 reduced by arbitrary payment caps, leaving significant losses uncovered by the original programs.
  • Payments to livestock and poultry producers forced to depopulate herds due to lack of processing, excluding packers and live poultry dealers, equal to 80% of fair market value plus cost of depopulation offset by any EQIP payment or state program payment.
  • Payments to cattlemen to mitigate the distinction between livestock marketed before and after April 15. Livestock producers that marketed livestock after April 15 will receive 50% of the difference between the aid provided on livestock marketed before April 15 and the assistance provided on livestock marketed after April 15.  Breeding stock will receive 25% of the difference between the assistance provided on livestock marketed before April 15 and the assistance provided on livestock marketed after April 15.
  • Payments to contract growers of livestock and poultry who were affected by cancelled or delayed contract by covering not more than 80% of revenue losses, capped at $1 billion.
  • $20 million for animal disease prevention and response.
  • Payments to domestic users of upland cotton and ELS cotton of 6 cents per pound. Supports textile mills which are the primary domestic users of cotton and have seen retail clothing sales significantly impacted by coronavirus stay at home orders.
  • Supplemental payments to ensure assistance more closely aligns with actual losses of producers not to exceed 80% of losses, notwithstanding pay limits, and broadening agriculture income for AGI purposes to include agricultural sales, including gains, agricultural services, sale of agricultural real estate, and prior year net operating loss carry forward.
  • Authorizes payments to processors for losses of crops due to insufficient processing access.
  • Authorizes the Ag Secretary to extend the marketing loan to up to 12 months (Allows the Secretary to extend the term of marketing loans by 3 months, providing producers additional time to repay.)
  • $1.5 billion for food purchases — Provides resources for additional commodity and food purchases and grants/loans for additional assistance for producers, processors, and other agricultural entities to respond to coronavirus, including measures to protect workers. 
  • $200 million for timber harvesting and hauling businesses with certain losses to support timber harvesting and hauling businesses.
  • Allows the Secretary to account for price differentiation (i.e. higher prices for organics) when calculating assistance.
  • Authorizes the Secretary to make payments to biofuels producers.
  • Authorizes a dairy recourse loan program.
  • $100 million for specialty crop block grants.
  • $100 million for local agriculture market program.
  • $75 million for Farming Opportunities Training and Outreach Program.
  • $75 million for Gus Schumacher Nutrition Incentive Program.
  • $20 million for Agricultural Research Service.
  • Supplemental Dairy Margin Coverage Payments for small producers. Creates supplemental coverage under the Dairy Margin Coverage program for dairies under 5 million pounds that have production left uncovered by the current safety net.
  • Establishes a Dairy Donation Program for dairy organizations that establish a partnership with a non-profit distributer and provides $400 million for reimbursement of donated dairy products to the partner non-profit distributer.
  • Establishes a livestock statutory dealer trust to give unpaid sellers of livestock priority in collecting receivables in the event of a dealer default.
  • $60 million for grants for improvements for small meat and poultry processors to upgrade operations in order move to federal inspection or a state inspection program that allows for the sale of products across state lines.
  • $28 million for farm stress programs.
  • WHIP+: The fiscal year 2021 omnibus measure includes an anomaly in order to fully fund the commitments made to producers under WHIP+ for both the 2018 and 2019 crop years, including such things as quality loss coverage and the second 50% of benefits. Note: It looks like lawmakers are leaving it to the next Congress to consider a WHIP+ program for 2020 crops.

     Comments; Retiring lawmakers Rep. Mike Conaway (R-Texas) and Sen. Pat Roberts (R-Kan.) worked closely to secure the ag aid. Conaway crafted the aid for row crop and livestock producers and with Roberts led the way it getting roughly $5 billion ($20/ac on roughly 250 million acres). Their final act in Congress was to take care of production agriculture one last time.

 

Attorney General Bill Barr is leaving office on Wednesday, and Republicans are calling for a special counsel to take charge of the Hunter Biden investigation under the new administration.

 

 


Economic Reports for the Week


 

Monday, Dec. 21


     • Chicago Fed National Activity Index


Tuesday, Dec. 22


     •  Conference Board Consumer Confidence Survey, a monthly measure of public confidence in the health of the U.S. economy. Look for a reading of 97 for December, compared with November’s 96.1.
     • National Association of Realtors November tally of sales for existing single-family homes. NAR estimates that it captures 30% to 40% of all existing-home sale transactions with this monthly survey. Economists expect a seasonally adjusted annual rate of 6.675 million new-home sales, compared with October’s 6.85 million.
     • Federal Reserve Bank of Richmond Fifth District Survey of manufacturing for December. Expectations are for a 12 reading, compared with 15 in November. The composite index represents a weighted average of the shipments (33%), new-orders (40%), and employment (27%) indexes.
     • Q3 GDP final reading.

Wednesday, Dec. 23


     • MBA Mortgage Applications
     • U.S. Bureau of Economic Analysis monthly Personal Income and Outlays data. Look for personal consumption to increase 0.3% in December, compared with a 0.5% rise in November. Personal Income is expected to decline 0.3%, compared with November’s 0.7% drop.
     • University of Michigan final reading of the Index of Consumer Sentiment for December. Economists see a decline to 76.9 from the preliminary 81.4 reading for December.
     • U.S. Census Bureau new-home sales for December. Look for a seasonally adjusted annual rate of 987,500 new units, compared with 999,000 units in November.
    • Census Bureau Durable Goods report for November. New orders for durable manufactured goods are expected to rise 0.55% after a 1.3% gain in October. Excluding transportation, new orders are seen edging up 0.5%, compared with 1.3% in October.
     • FHFA House Price Index
     • Jobless Claims


Thursday, Dec. 24


     • Fed Balance Sheet
     • Money Supply

Friday, Dec. 25


     • Holiday. Markets all over the world, including the U.S, are closed in observance of Christmas Day.    

 


Key USDA & international Ag & Energy Reports and Events 


 

 

Monday, Dec. 21
 

     Ag reports and events:

     • Export Inspections

     • Food Price Outlook
 

     Energy reports and events:

     • Australian resources and energy report (quarterly)
 

Tuesday, Dec. 22
 

     Ag reports and events:

     • Cotton Ginnings
     • Chickens and Eggs
     • Cold Storage
     • National Hop Report
     • Poultry Slaughter

 

     Energy reports and events:

     • API weekly U.S. oil inventory report
 

Wednesday, Dec. 23
 

     Ag reports and events:

     • Weekly Export Sales
     • Broiler Hatchery
     • Hogs and Pigs
     • Livestock Slaughter
     • Peanut Prices
     • China customs publishes data on imports of corn, wheat, sugar and cotton

 

     Energy reports and events:

     • EIA Weekly Petroleum Status Report including ethanol production & stocks
     • EIA weekly Working Gas in Underground Storage Report
     • Baker-Hughes rig count
     • China trade data (November)
     • Genscape weekly ARA crude inventory report 

 

Thursday, Dec. 24
 

     Ag reports and events:

     • U.S. federal gov’t offices closed
     • Port of Rouen data on French grain exports

 

     Energy reports and events:

     • Most ICE Futures Europe oil-related contracts halt trading at 1 pm ET
     • CME energy products trade to close at 12:45 pm CT
     • Russian weekly refinery outage data
     • Singapore onshore oil product stockpiles weekly update
     • Insights Global weekly report on European refined product inventories in ARA region

 

Friday, Dec. 25
 

     Ag reports and events:

     • Christmas Day; markets and governments in most of the world closed
     • NOTE: Commitments of Traders reports for both ICE Futures Europe and CFTC will be delayed to Monday, Dec. 28
     • China customs publishes country-wide soybean and pork import data

 

     Energy reports and events:

     • China third batch of Nov. trade data, including country breakdowns for energy and commodities

 


 

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