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Legislative Update: USDA CFAP details released

May 19, 2020
Reading Time: 4 minutes

By Amanda Bilek, senior public policy director for the Minnesota Corn Growers Association

Today, after weeks of speculation, the United Stated Department of Agriculture (USDA) published the final rule for the Coronavirus Food Assistance Program (CFAP). Funding for this program was authorized by Congress in the Coronavirus Aid, Relief and Economic Security (CARES) Act at the end of March and signed into law by President Trump in early April. USDA announced initial details for the CFAP program on April 17.

A few quick links for the program and more information

There have been some changes in the final CFAP rule from the initial details outlined by USDA in April. On May 26, local Farm Service Agency offices will begin accepting applications from farmers who have suffered loses. Applications will be accepted through August 28, 2020.  As a reminder, FSA offices are open for appointment only so you will need to call your local office once the application period opens.

Here are the main elements that are important for corn farmers to know:

Eligibility

Corn farmers who suffered a five percent-or-greater price decline from mid-January to mid-April due to the COVID-19 pandemic and faced increased marketing costs for inventories are eligible to apply. Adjusted gross income (AGI) limits apply, unless 75 percent of AGI is derived from farming. Conservation compliance provisions also apply to CFAP.

Payment structure

A payment will be made based on 50 percent of a farmer’s 2019 total production or the 2019 unpriced inventory as of January 15, 2020, whichever is smaller, multiplied by 50 percent and then be multiplied by a commodity payment rate. Unpriced inventory means any production that is not subject to an agreed-upon price in the future through a forward contract, agreement, or similar binding document.

FSA is using two different funding sources for payment. Each funding source has a different commodity payment rate. For CARES Act funding, the payment rate for corn is $0.32/bushel. For CCC funding, the payment rate for corn is $0.35.

Or to summarize, the single payment to a farmer will be the sum of:

  • Unpriced inventory that is harvested but held in inventory as of January 15, 2020, not to exceed 50 percent of 2019 total production, multiplied by 50 percent, multiplied by the CARES Act payment rate.
  • Unpriced inventory that is harvested but held in inventory as of January 15, 2020, not to exceed 50 percent of 2019 total production, multiplied by 50 percent, multiplied by the CCC payment rate.

Readers can refer to this previous post for a breakdown in overall funding for the $16 billion CFAP.

The commodity payment rate was calculated based on a 16-percent decrease in the future price when calculating loses based on futures average from January 13-17 compared to April 6-9.

In preparing your application, a farmer will need to document the following information:

  • Total 2019 production for the commodity (corn) that suffered a five percent-or-greater price decline, and
  • Total 2019 production that was not sold as of January 15, 2020.

Once an application is approved, a farmer can expect to receive 80 percent of their maximum total payment. The remaining portion will be made at a later date as funds remain available and doesn’t exceed the program payment limit.

Payment limit

An individual or legal entity is limited to a total payment of $250,000 for all eligible commodities. A special payment limitation rule will apply to corporations, limited liability companies and limited partnerships. These types of entities will be limited to a total of $750,000 based on number of shareholders, but not to exceed three shareholders who contribute substantial labor or management to the farming operation.

The program details are a bit complicated so as we get answers to questions or receive additional clarity, we will update this post or get you the most up to date information.

Future federal assistance

It is great to see USDA moving forward with additional details and sign up for the CFAP program. It is a great first step in helping farmers cover losses, but more assistance is going to be needed to help corn farmers.

According to recent analysis, commissioned by the National Corn Growers Association and conducted by the University of Illinois, Minnesota corn farmers have most recently experienced a 28-percent decline in the cash price for corn when comparing the average cash price in January and February ($3.74/bushel) through the first week of May ($2.69/bushel).

Therefore, as Congress and the administration considers a future aid package, MCGA sent a letter this week to Minnesota’s congressional delegation highlighting the importance of including direct assistance for ethanol plants in addition to support for pork producers and comprehensive relief for corn farmers. The letter shows support for the assistance that has been provided to agriculture so far, but stresses the need for additional relief to help farmers now in their seventh year of a severe recession. It is imperative both ethanol producers and hog producers receive direct relief to avoid financial implications that would hurt our entire ag sector. For corn farmers, pork and ethanol are top in-state markets.

We appreciate work of members of our delegation to provide needed assistance and relief for Minnesota corn farmers, and we will keep you updated on future efforts.

Minnesota Legislature

The 2020 session ended Sunday night with many legislative priorities left on the table. However, both the Agriculture Policy bill and Agriculture Supplemental Finance bill passed through the House and Senate with near unanimous support. The policy bill was signed into law by Governor Walz Saturday and the finance bill is awaiting the governor’s action. Readers can refer to an update last week of items included in the Ag Policy and Ag Finance bill.  

The legislature will likely be back in special session in mid-June following further negotiations on a bonding bill and will likely pass a tax bill as well. As always, we will keep you updated with any developments farmers need to know.

Be sure to follow the MCGA blog and its social channels (Facebook, Twitter) for updates. You can also follow me on Twitter (@AjBilek).