The U.S. Department of Agriculture (USDA) released details about its new Coronavirus Food Assistance Program (CFAP) for farmers hit by the impacts of the coronavirus Tuesday.
The final rule, including information about how farmers can apply, comes after Congress approved $9.5 billion for the program in late March.
In approving the relief package, Congress asked USDA to use the funds to support producers impacted by the coronavirus, including livestock, specialty crops, and local food producers. However, the USDA’s final rule includes multiple provisions designed to allow the largest producers to side-step normal payment limitations, and provides almost no support for small producers selling to local markets.
Major structural issues
Congress has placed payment limitations on a variety of other USDA farm programs, with the idea that once an operation grows beyond a certain size, taxpayer dollars should no longer go to support them year after year. However, under CFAP, the USDA is sidestepping these restrictions in two ways.
First, they are allowing operations that are structured as corporations, limited liability companies, or limited partnerships to receive higher payments. For operations structured in this way, if they have one shareholder who contributes substantial labor or management, they can receive up to $250,000; with two such shareholders, they can receive up to $500,000, and with three or more such shareholders they can receive $750,000. The USDA is counting a shareholder’s contribution as substantial if they contribute 400 hours of active personal labor or active personal management per year. This decision to offer larger payments to operations with more shareholders is clearly designed to help producers with the largest businesses access historically large payments.
A second problematic choice is that the USDA is setting precedent for ignoring the traditional limitation on payments to producers with very high Adjusted Gross Income (AGI). Other USDA farm programs are legislatively required to not afford payments to an operation with an AGI of more than $900,000. However, under CFAP, USDA ignores this precedent and allows a producer who has an average AGI greater than $900,000 over three years to still qualify for payments, as long as 75 percent of their income is from farming, ranching, or forestry.
Because USDA is making very large operations eligible for CFAP payments, and allowing for payments up to $750,000, funds are very likely to dry up before smaller producers are able to access assistance.
Small producers left out
Congress included local foods producers as a group who should be targeted by this program. However, the eligibility requirements are not designed to accommodate local producers. CFAP only addresses losses that occurred between January and April of 2020, either of changes in price or of an inability to market products. But many producers selling into local channels conduct the bulk of their business for the year after April, and will not be eligible for assistance under these provisions.
For producers who sell fruits and vegetables through local channels, only a specific list of fruits and vegetables is named by USDA as eligible for aid. While there will be an opportunity to submit comments to USDA for additional crops to be made eligible, many of the fruits and vegetables that are sold through local channels are currently left out.
Additionally, the new program does not appear to have provisions for producers who sell meat or eggs through local channels; the livestock provisions assume the sale of animals or wool rather than cuts of meat.
Producers needing assistance can apply through their local USDA Farm Service Agency (FSA) office. The rule indicates that an operation may not need to have registered for a FSA farm number to apply, which would remove one barrier. Producers will need to certify their AGI and conservation compliance, and establish the farm’s operating plan as part of the application process
The USDA is also requiring producers to provide records to demonstrate financial impact to their operation. The agency said it will accept a variety of records, such as proof of changes in price, inventory, farm operations, and other relevant information.
Applications will be accepted starting Tuesday, May 26. For producers seeking to apply, we advise gathering records and reaching out to your local FSA office soon. Visit farmers.gov/cfap to learn more.
While the program has many faults, the USDA will not know of them unless it hears from state-based offices that changes are needed. If you have concerns about CFAP, we encourage you to get in touch with your state FSA office to let them know.