Back in spring, when the coronavirus first upended American life — when restaurants were shuttered and everything from school to sports was canceled — the supply chain that supports the U.S. dairy industry collapsed. Producers responded by dumping milk down the drain and calling, en masse, for government intervention. Part of the federal response to aggrieved producers is the Coronavirus Food Assistance Program.
The CFAP is designed to backfill the earnings hole plaguing producers due to price declines, trade wars, and supply chain disruptions. The program is facilitated through the USDA’s Farm Service Agency, which began taking applications to distribute the $16 billion in direct payments on May 26. The important piece is that the funds don’t need to be repaid.
In its first month, the FSA processed more than $4 billion in aid, doled out to agricultural producers. Eligible producers fall into one of four categories: Dairy, livestock, specialty (fruits, vegetables and nuts) and non-specialty commodities (small grains, cotton and wool).
The program will accept applications until August 28.
As of June 22, the largest pool of applicants have been livestock producers (196,462 applications totaling $1.98 billion). The states receiving the most relief funds in the livestock category are Iowa ($205.1 million), Texas ($147.9 million), and Kansas ($153.4 million).
Non-specialty commodity producers come in a close second for CFAP funds (146,424 applications totaling $1.04 billion). States receiving the most relief in the non-specialty category are Iowa ($191.5 million), Illinois ($124.6 million), and Nebraska ($114.4 million).
Nationwide, 15,222 dairy producers have submitted applications amounting to $895.3 million in payments. Leading dairy-state recipients are Wisconsin ($202 million), California ($108.4 million), and New York ($101 million).
CFAP payments are subject to a per person and legal entity payment limit of $250,000. The limit applies to the total amount of CFAP payments made with respect to all eligible commodities. To be eligible, a person (or legal entity) must have an average adjusted gross income of less than $900,000 for tax years 2016 through 2018. However, if 75 percent of an applicant’s adjusted gross income comes from farming or ranching, the limit doesn’t apply.
Unlike other FSA programs, special payment limitation rules will be applied to participants that are corporations, limited liability companies, and limited partnerships. These corporate entities may receive up to $750,000 based upon the number of shareholders (not to exceed three) who contributed at least 400 hours of active management or labor toward the farming or ranching endeavor.
Applicants don’t have to have an established relationship with the USDA, or have a farm number, in order to apply. An official with USDA said it was possible, however, that someone would reach out to verify a producer’s compliance with conservation practices.
Relief payments are not being withheld to satisfy other outstanding USDA debts. Furthermore, there aren’t any application fees.
Importantly, even though the relief is designed to help producers hard-hit by the pandemic, producers are not required to prove financial hardship when they apply. USDA officials said producers can self-certify. They do encourage producers to gather supporting documentation if officials from the USDA conduct a spot check later.
In order to not deplete its pool of funds, FSA has sent producers 80 percent of their maximum total aid payment as applications have been approved. The balance will be paid later provided funds remain. Roughly two-thirds of funding for the program comes from the CARES Act; the remaining funding is provided by the Commodity Credit Corporation Charter Act.
Applications are made through producers’ local FSA Service Center.
RMI reveals continued weakness in ag
The Creighton University Rural Mainstreet Index increased to a weak level from May’s feeble reading. According to the monthly survey of bank CEOs in rural areas of a 10-state Midwest region dependent on agriculture and/or energy, June’s reading represented the third straight month with recessionary economic conditions.
The overall index for June climbed to 37.9, well below growth neutral, but up from May’s 12.5 and April’s record low 12.1. The index ranges between 0 and 100, and a score above 50, or growth neutral, indicates growth.
Borrowing by farmers expanded for June, but at a slower rate than in May. “Loan volume and checking deposits were impacted by the PPP loan program, causing spikes in deposit growth until the businesses spent the money,” said Todd Douglas, CEO of the First National Bank in Pierre, S.D. “We expect deposits to decrease in the next 45 days while the loans will remain elevated until borrowers get the debt forgiveness from the U.S. government.”
More than one-fourth of surveyed CEOs expect farm loan defaults and foreclosures to be the greatest economic challenge for their area of the next 12 months. Another third expected low commodity prices to hold that slot.
“Even with a slight recent rebound in prices, farm commodity prices are down by 7.3 percent over the last 12 months. As a result, and despite the initiation of $16 billion in USDA farm support payments, only 3 percent of bankers reported positive economic growth,” said Ernie Goss, Ph.D., Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business, Omaha.
The confidence index, which reflects bank CEO expectations for the economy six months out, improved slightly. “Weak agriculture commodity prices, and layoffs have decimated economic confidence among bankers,” Goss said.
Almost one-third of bankers with local ethanol plants reported current production shutdowns, either permanent and temporary. Farmland prices continued their slide but at a slower pace.
Livestock groups unhappy about land maintenance bill
In June, a bi-partisan vote in the U.S. Senate advanced the Great American Outdoors Act. Senate bill S. 3422 was sponsored by Sen. Cory Gardner (R-Colo.) and co-sponsored by 59 of his Senate colleagues, as a way to address maintenance backlogs that have built-up across national parks.
The bill will provide permanent funding to the Land and Water Conservation Fund, and will provide for maintenance on public lands that many say is long overdue. Sounds like a no-brainer.
But the bill was vehemently opposed by a hefty number of livestock and conservation groups across the country, who argued that of the $900 million appropriated annually to the LWCF, some $360 million could be diverted each year to the acquisition of private land.
The concern hinges on the inherent conflict between the government’s inability to manage its current land holdings and its implied appetite to accumulate more land, without oversight.
In a letter to Senate leadership jointly signed by 45 livestock associations and three land trusts, opponents of the bill wrote: “Federal agencies currently have more assets than they can afford to maintain. The GAO Act simultaneously recognizes and attempts to address this while also providing hundreds of millions of dollars each year for the government to buy more land … This approach is counterproductive and will result in a larger federal estate … .” The letter went on to call increased federal spending on land buys “irresponsible.”
Debate in the House was expected to begin in late July and President Trump has indicated a willingness to sign the bill.