USDA's CFAP: Simple? No… Trump Has a ‘Trump Moment’ at Presser

Posted on 05/19/2020 2:38 PM

Questions galore despite USDA taking over a month to get plan announced

 


 

Perhaps USDA should have waited longer then the just-over-a-month they had to implement the Coronavirus Food Assistance Program (CFAP). And with its announcement today, President Donald Trump, again, watered down the message when he made comments on a very controversial trade policy suggestion that further instills his nationalistic tone in policy.

 



By now you should have seen the summary of the CFAP announcements.

 

Link to USDA release.

Link to CFAP rule.

 

Link to USDA cost/benefit analysis.

 

Watch this (link) for an explanation of payment calculations.

 

Link to frequently asked questions and answers about CFAP.

 


 

First my bottom line: USDA did not design a simple, easy to understand payment structure, probably complicated by the use of two pools of money to make the payments (CARES Act and the Commodity Credit Corporation/CCC). If it was one batch of money, that would be one thing. But using different sources to make “one” payment makes it complicated. And of course USDA has to track each pot of money to make sure they do not spend more that is available.

 

How are the payments calculated? FSA county offices, get ready for this:

 

     Income losses will be partially compensated under the CARES Act (the $9.5 billion).

 

     CCC authority will be used to partially compensate producers for the purchase of materials and facilities required in connection with production and marketing of ag commodities and the disposal of surplus commodities.

 

     But they will come as one payment.

 

BUT... that is not a blanket statement.

 

     For livestock, CARES money is used to make payment for sales volume during Jan.15 and April 15. BUT, CCC funds will be used to make a payment based on the highest inventory between April 16-May 14.

 

     For dairy, the total payment will be calculated based on a producer’s certification of milk production for the first quarter of calendar year 2020 multiplied by a national price decline during the same quarter. The second part of the payment is based a national adjustment to each producer’s production in the first quarter.

 

     So, it is not a blanket statement.

 

For non-specialty crops like corn, etc.: Average payment rate per unit will be determined based on the decline in the weekly average of the futures price between the average for the week of Jan. 13-17, and the average for April 6-9. If the decline in futures is 5% or more between those two time periods, that triggers the payment and is based on the inventory held Jan. 15.

 

     CARES funds will be used for a payment by taking 50% of the eligible inventory on Jan. 15, times the pre-specified payment rate calculated as 50% of the calculated futures price decline.

 

     CCC funds will be used to make a payment to the producer by multiplying 50% of the eligible inventory by a pre-specified payment rate calculated as 55% of the futures price decline.

 

     One payment will be issued for the combination of the two calculations.

 

     First payment is 80% and if the $16 billion is not gone, the rest will be paid up to the $16 billion level and could be prorated if needed.

 

Bottom line: Not a simple, easy to understand payment calculation. You think? Of course USDA's software will be up to the task...

 

Signup and payment timeline: Eligible farmers will be able to start signing up May 26 for payments under CFAP, with payments totaling $16 billion directly to farmers. Applications will be accepted through August 28, 2020. Payments, USDA Sec. Sonny Perdue said, will be made seven to 10 days after applying.

 

     Producers of all eligible commodities will apply through their local FSA office. Documentation to support the producer’s application and certification may be requested. FSA said it has streamlined the signup process to not require an acreage report at the time of application and a USDA farm number may not be immediately needed.

 

Payment limits. USDA heard the crescendo of complaints ever since the initial plan was revealed over a month ago. There is now a limit of $250,000 per producer or entity, changed from an initial plan for $125,000 limit per crop and a total limit of $250,000 per producer or entity.

 

     CFAP payments are subject to a per person and legal entity payment limitation of $250,000. This limitation applies to the total amount of CFAP payments made with respect to all eligible commodities.

 

     Special payment limitation rules will be applied to participants that are corporations, limited liability companies, and limited partnerships (corporate entities). These corporate entities may receive up to $750,000 based upon the number of shareholders (not to exceed three shareholders) who contribute at least 400 hours of active person management or personal active labor. The information from USDA notes that is unlike other FSA programs.

 

     For a corporate entity: With one such shareholder the payment limit for the entity is $250,000; with two such shareholders, the payment limit for the entity is $500,000 if at least two members contribute substantial labor or management with respect to the operation of the corporate entity; and with three such shareholders, the limit is $750,000 if at least three members contribute substantial labor or management with respect to the operation of the corporate entity.

 

Income limit: A person or legal entity must have an average adjusted gross income of less than $900,000 for tax years 2015, 2016, and 2017. However, if 75 percent of their adjusted gross income comes from farming, ranching, or forestry, the AGI limit of $900,000 does not apply.

 

Those getting payments have to comply with the provisions of the “Highly Erodible Land and Wetland Conservation” regulations, often called the conservation compliance provisions; if a foreign person, provides land, capital, and a substantial amount of active personal labor to the farming operation; and not have a controlled substance violation.

 

Covered commodities:

 

     Non-specialty crops: malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat, and hard red spring wheat

Wool

 

     Livestock: cattle, hogs, and sheep (lambs and yearlings only) (Did you notice that chickens are not included?)

 

     Dairy

 

Specialty Crops

 

     Fruits: apples, avocados, blueberries, cantaloupe, grapefruit, kiwifruit, lemons, oranges, papaya, peaches, pears, raspberries, strawberries, tangerines, tomatoes, watermelons

 

     Vegetables: artichokes, asparagus, broccoli, cabbage, carrots, cauliflower, celery, sweet corn, cucumbers, eggplant, garlic, iceberg lettuce, romaine lettuce, dry onions, green onions, peppers, potatoes, rhubarb, spinach, squash, sweet potatoes, taro

 

     Nuts: almonds, pecans, walnuts

 

     Other: beans, mushrooms

 

Ineligible commodities: Commodities that did not suffer a five percent-or-greater price decline from mid-January 2020 to mid-April 2020 are not eligible for CFAP. Specifically, this includes sheep more than two years old, eggs/layers, soft red winter wheat, hard red winter wheat, white wheat, rice, flax, rye, peanuts, feed barley, Extra Long Staple (ELS) cotton, alfalfa, forage crops, hemp, and tobacco.

 

     However, for all commodities except for hemp and tobacco, USDA may reconsider the excluded commodities if credible evidence is provided that supports a five percent price decline.

 

Payment Structure

 

Amount farmers will receive now: Producers will receive 80% of their maximum total payment upon approval of the application. The remaining portion of the payment, not to exceed the payment limit, will be paid at a later date as funds remain available.

 

The following table lists eligible non-specialty commodities and payment rates for CFAP.

 

Commodity

Unit of Measure

CARES Act Payment Rate

CCC Payment Rate

Barley (malting barley only)

bushel

$0.34

$0.37

Canola

pound

$0.01

$0.01

Corn

bushel

$0.32

$0.35

Upland Cotton

pound

$0.09

$0.10

Millet

bushel

$0.31

$0.34

Oats

bushel

$0.15

$0.17

Sorghum

bushel

$0.30

$0.32

Soybeans

bushel

$0.45

$0.50

Sunflowers

pound

$0.02

$0.02

Wheat, Durum

bushel

$0.19

$0.20

Wheat, Hard Red Spring

bushel

$0.18

$0.20

 

Following are the livestock payment rates:

 

Livestock

Eligible Livestock

Unit of Measure

CARES Act Part 1 Payment Rate

CCC Part 2 Payment Rate

Cattle

Feeder Cattle: Less than 600 Pounds

Head

$102.00

$33.00

 

Feeder Cattle: 600 Pounds or More

Head

$139.00

$33.00

 

Slaughter Cattle: Fed Cattle

Head

$214.00

$33.00

 

Slaughter Cattle: Mature Cattle

Head

$92.00

$33.00

 

All Other Cattle

Head

$102.00

$33.00

Hogs and Pigs

Pigs: Less than 120 Pounds

Head

$28.00

$17.00

 

Hogs: 120 Pounds or More

Head

$18.00

$17.00

Lambs and Yearlings

All Sheep Less than 2 Years Old

Head

$33.00

$7.00

 

For dairy, a single payment will be made based on a producer’s certification of milk production for the first quarter of calendar year 2020 multiplied by $4.71 per hundred weight. The second part of the payment is based a national adjustment to each producer’s production in the first quarter multiplied by $1.47 per hundred weight.

 

     A single payment for dairy will be made calculated from two funding sources. Those include:

 

     CARES Act —The payment will compensate producers for price losses during the first quarter of 2020, and

     CCC Funds —The payment will compensate for marketing channel and demand disruptions for the second quarter of 2020 – April, May, and June – due to COVID-19.

 

The following the CFAP wool payment rates:

 

Commodity

Unit of Measure

CARES Act Payment Rate

CCC Payment Rate

Wool (graded, clean basis)

pound

$0.71

$0.78

Wool (non-graded, greasy basis)

pound

$0.36

$0.39

 

Link to access information relative to payment levels for specialty crops.

 

Now about the “Trump moment” during his presser. “I read yesterday where we take some cattle in from other countries because we have trade deals, I think you should look at terminating those deals,” Trump said, looking directly at Perdue. “We have trade deals where we actually take in cattle, and we have a lot of cattle in this country, and I think you should look at the possibility of terminating those trade deals.”

 

     As Trump usually does, he added a caveat, noting that if a country has been an ally to the U.S., consider that. “But there are some countries that are sending us cattle for many years and I think we should look at terminating. We’re very self-sufficient.” Trump said the imports were a “relatively small number,” but questioned why “are we bringing in cattle from other countries when we have so much ourselves? … I would say generally speaking, unless this is a country that really has been with is, we shouldn’t be taking their cattle,” he said. “And that’s the way we’re going to handle it.”

 

     Nearly all of the cattle imported into the U.S. come from Canada and Mexico. Those just happen to be the other countries included in the U.S.-Mexico-Canada Agreement (USMCA).

 



Comments: There will very likely be additional Covid-19 payments via a forthcoming Phase 4 relief package, most likely in June. Perhaps that will include a borrowing boost for the CCC and a more simple payment calculation. It will also likely include indemnity payments for producers having to depopulate their herds, even though experts say they are able to be made via FEMA or through a more accurate assessment of CCC Charter Act authority. For now, though, USDA's Perdue said help getting rid of the animals can come via USDA's NRCS... but no indemnity payments.

 


 

 

 

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