USDA Releases Final Rule for Coronavirus Food Assistance Program

May 19, 2020 | Kristine A. Tidgren

Update: USDA has released more guidance, including an example of AD-3114, the CFAP application, in Notice CFAP-4.

USDA released the Final Rule for the $16 billion Coronavirus Food Assistance Program on May 19, 2020. The CFAP is intended to provide producers with financial assistance to partially offset sales losses and increased marketing costs associated with the COVID-19 pandemic.  The CFAP compensates producers through a combination of $9.5 million in CARES Act funding and $6.5 million in Commodity Credit Corporation (CCC) funding. USDA has created a single application and will issue producers one payment comprising both CARES Act and CCC funds.

General Applicability

To be eligible for a payment, a producer generally must have suffered a five percent or greater price loss over a specified time resulting from the COVID-19 outbreak or face additional significant marketing costs for inventories. Because the USDA has identified the commodities that meet this criteria, producers are not required to prove these factors. A “producer” is a person or legal entity who shares in the risk of producing a crop or livestock and who is entitled to a share in the crop or livestock available for marketing.

Specialty crops eligible for payments include almonds, beans, broccoli, sweet corn, lemons, iceberg lettuce, spinach, squash, strawberries, and tomatoes. CFAP payments will also be made for dairy, cattle, lambs and yearlings, wool, and hogs and pigs. Non-specialty crops eligible for CFAP payments include malting barley, canola, corn, upland cotton, millet, oats, sorghum, soybeans, sunflowers, durum wheat, and hard red spring wheat.  The Rule states that eligible commodities, such as aquaculture and nursery crops (including cut flowers) will be announced in the future.

Sources of Funding

CFAP is generally intended to provide eligible producers with financial assistance that helps them offset sales losses and increased marketing costs resulting from the COVID-19 pandemic.  CARES Act funds will compensate producers for commodity and livestock losses due to price declines that occurred between mid-January 2020 and mid-April 2020 and, in the case of specialty crops, for products that were shipped but spoiled and for which no payment was received. CCC funds will partially compensate producers for ongoing market disruptions and assist with the transition to a more orderly marketing system by:

  • Assisting with the purchase of materials and facilities required in connection with the production and marketing of agricultural commodities;
  • Aiding in the removal or disposition of surplus agricultural commodities; and
  • Aiding in the development of new and additional markets, marketing facilities, and uses for such commodities

If a payment to a producer includes funding from both CCC and the CARES Act, one payment will issue, but USDA will track the funds separately.

Producer Eligibility

To be eligible for a CFAP payment, a person or legal entity must:

  • Complete a CFAP application form and provide any required documentation and
  • Have a share in the eligible commodity between January 15, 2020, and April 15, 2020, or April 16, 2020, through May 14, 2020.

Payment Rates and Calculations

Payments will be calculated using payment rates specially developed for each category of commodity.  USDA will make an initial payment of 80 percent of the calculated payment.  If funds remain available after the initial round of payments, USDA will disburse the remainder of available funding, not to exceed the $16 billion funding limit.

Non-specialty Crops

For producers of non-specialty crops, the average payment rate per unit (bushel, pound, or hundredweight) was determined for each eligible commodity based on the decline in the weekly average of the futures prices[i] between the average for the week of January 13-17, 2020, and the average for the week of April 6-9, 2020.  If the decline in futures prices was 5 percent or greater between those time periods, the commodity was eligible for a payment. These payment rates are published in charts included in the Rule.

Eligible inventory for non-specialty crops is the lesser of (1) self-certified unpriced inventory in which an eligible producer has vested ownership as of January 15, 2020, or (2) 50 percent of the eligible producer’s 2019 production of that commodity.

The payment made from CARES Act funds is calculated by multiplying 50 percent of the producer’s eligible inventory on January 15, 2020, by the CARES Act payment rate. The payment made from CCC funds is calculated by multiplying 50 percent of the eligible inventory by the CCC Payment Rate. These two calculated amounts will be combined into one payment to the eligible producer.

Livestock

For cattle, hog and pig, and lamb and yearling producers, payments from CARES Act funds are used to make a payment calculated by multiplying the CARES Act Part I payment rate per head—specified by species and class—by the volume of sales occurring between January 15 and April 15, 2020.  CCC funds are used to make a payment to the producer calculated by multiplying the CCC Part 2 payment rate per head—specified by species—by the highest inventory number between April 16 and May 14, 2020.

Specialty Crops

Producers of specialty crops are eligible for a CFAP payment if they (1) had crops that suffered a five percent-or-greater price decline between the average for January 13-17, 2020 and the average for April 6-10, 2020, because of COVID-19 (Category 1), (2) had produce shipped but subsequently spoiled due to loss of marketing channel (Category 2), or (3) had shipments that did not leave the farm or mature crops that remained unharvested (Category 3). A table showing which specialty crops are eligible for which types of payments is published here.

For producers of specialty crops eligible for a Category one payment, payments are based on the producer’s sales during that time frame multiplied by a CARES Act payment rate for sales losses (see this table). This rate was determined based upon 80 percent of the given crop’s mid-January to mid-April price change. 

For producers of specialty crops that have been shipped from the farm by April 15, 2020, but subsequently spoiled due to loss of marketing channels, Category two payments are based on the volume of shipped, spoiled crops multiplied by the CARES Act pre-specified payment rate (see this table).  This is expected to represent 30 percent of the crop’s sales value. 

For producers with specialty crop shipments that have not left the farm or mature crops that were unharvested between January 15, 2020, and April 15, 2020, and which have not been and will not be sold, payments are based on the volume of unharvested and/or unshipped crops multiplied by the pre-specified CCC payment rate (see this table). This is expected to represent 5.875 percent of the crop’s value.

Dairy

Dairy producers with milk production subject to price risk in January, February, and/or March 2020 are eligible for CFAP payments. They may also receive assistance for dumped milk during the months of January, February, and March 2020. CARES Act payments will be determined based upon a producer’s certification of milk production for the first quarter of calendar year 2020 multiplied by $4.71 per hundred weight. The CCC part of the payment is based upon a national adjustment to each producer’s production in the first quarter multiplied by $1.47 per hundred weight.

Payment limitations

CFAP payments are subject to a per person and per legal entity payment limitation of $250,000.  This limitation applies to the total amount of CFAP payments made for all eligible commodities. Payments are attributed to an individual through the direct attribution rules used in other USDA programs.The total CFAP payments attributed to an individual will be determined by taking into account the direct and indirect ownership interests of the individual in all legal entities participating in the program.

Special Rule for “Corporate Entities”

Unlike other farm programs, 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 are contributing substantial labor or management with respect to the operation of the corporate entity. 

  • Entity with one shareholder - $250,000
  • Entity with two shareholders - $500,000 if at least two members contribute substantial labor or management with respect to the operation of the entity
  • Entity with three 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. 

If payments are calculated for one of these entities and those payments exceed the applicable limit of $250,000, $500,000 or $750,000, the reduction will be attributed to all members of the entity to ensure that a net payment to the entity is not in excess of the applicable limitation.  A corporate entity may receive more than $250,000 in CFAP payments if the applicant, under penalty of perjury, certifies that two or three members of the corporation each provide at least 400 hours of active personal management or personal active labor, in which case the corporate entity may be eligible to receive up to $500,000 or $750,000, respectively.

AGI Limit

A person or legal entity, other than a joint venture or general partnership, is ineligible for payments if the average adjusted gross income (AGI) of the person or entity (using the average AGI for the 2016, 2017 and 2018 tax years) is more than $900,000, unless at least 75 percent of that person’s or legal entity’s average AGI is derived from farming, ranching, or forestry-related activities. If at least 75 percent of the AGI is derived from these activities and the participant provides the required certification and documentation, the person or legal entity is eligible to receive CFAP payments. This AGI provision will be applied to each member of a joint venture and general partnership.

Other Requirements

General requirements that apply to other FSA-administered commodity programs also apply to CFAP, including compliance with the provisions of 7 CFR part 12, “Highly Erodible Land and Wetland Conservation.” There is no requirement to have crop insurance coverage or coverage under the Noninsured Crop Disaster Assistance Program (NAP) for an eligible CFAP commodity to be eligible for participation in CFAP.

Application Process

USDA will begin accepting CFAP applications May 26, 2020.  To apply for CFAP payments, producers must submit a completed CFAP application either in person, by mail, e-mail, or facsimile to an FSA county office.  If a producer who applies must submit additional documentation for eligibility, such as certifications of compliance with adjusted gross income provisions and conservation compliance activities, those additional documents and forms must be submitted no later than 60 days from the date a producer signs the application.  Payments will not be made until all necessary eligibility documentation is received. Applications may be made through August 28 or until funds are exhausted.

The application has not yet been published, but a video preview of the payment calculator may be viewed here. Producers should go to the USDA’s CFAP page for up-to-date information and to see what additional documentation will be required.

 

[i]  Or weekly average of the cash prices, if futures prices are unavailable.