On December 21, 2020, the Consolidated Appropriations Act, 2021 (“CAA”) passed both houses of Congress and was later signed into law on December 27. The CAA is a $2.3 trillion spending bill, $900 billion of which is being used for stimulus relief due to the COVID-19 pandemic. This legislation is the first stimulus relief package since the CARES Act was enacted in April, 2020.
Of the $900 billion in stimulus relief, $13 billion is allocated to the agricultural sector. Out of this $13 billion, almost $11.2 billion is assigned to the United States Department of Agriculture (“USDA”) to fund agricultural programs. The agricultural provisions of the stimulus package contain specific instructions on how the USDA is to spend the relief funds. Accordingly, under those provisions, the entire $11.2 billion given to the USDA will be used to provide financial assistant to agricultural producers across the nation.
The most significant programs funded by the $11.2 billion is a third round of direct payments under the Coronavirus Food Assistance Program (“CFAP”). In 2020, the USDA conducted two rounds of CFAP, known as CFAP-1 and CFAP-2, which provided direct financial assistance to farmers and ranchers of eligible agricultural commodities who suffered unexpected financial losses due to the COVID-19 pandemic. The majority of direct payments provided to producers under the stimulus package will be conducted through CFAP-3.
Similar to the previous two programs, CFAP-3 includes certain eligibility requirements which producers must meet to qualify for a direct payment under the program. Although the USDA has not yet issued regulations on how it will implement CFAP-3, the agency may use the same procedures and application process as the previous two programs. In general, these requirements include the type of commodity being produced, and the amount of loss a producer suffered during a specific period of time.
The stimulus package makes $5 billion in direct payments available to producers of price trigger commodities and flat-rate commodities. Price trigger commodities are major commodities, such as corn, soybeans, and barley, that suffered at least a five-percent price decline for a certain period. Flat-rate commodities, as defined in CFAP-2, are crops—like alfalfa, flax, or millet—that either did not suffer the five-percent price decline or there is no data available to calculate the price decline. Farmers and ranchers who produce these two types of commodities will receive CFAP-3 payments of $20 per planted acre under the stimulus package.
The stimulus package also provides financial assistance to producers that grow specialty crops. In general, the amount of financial support a producer receives depends on the losses the producer suffered in 2020. However, this stimulus package revised the previous sales-based rules. Under the legislation, specialty crop producers are now allowed to include crop insurance and disaster payments in calculating their sales, and may choose to use their 2018 sales instead of their 2019 sales for this calculation.
Along with CFAP-3 payments, specialty crop producers may be eligible to receive additional financial support under the stimulus package through the $100 million provided to the Specialty Crop Block Grants, and the $100 million made available to the Local Agricultural Market Program.
Livestock, Dairy & Poultry
The livestock and poultry industry continues to be been greatly affected by the pandemic. Thus, the stimulus bill provides $1 billion in direct payments to livestock and poultry contract growers. Direct payments will be available to growers who suffered losses from contract changes due to COVID-19. However, these growers will only receive payments that cover up to eighty-percent of their losses.
Many farmers and ranchers suffered losses from depopulating their livestock and poultry due to the limited access to processing facilities. Under the stimulus package, the USDA is required to make payments available to producers for these losses. Producers awarded these payments will receive up to eighty-percent of the fair market value of the euthanized animals.
Also included in the stimulus bill is a livestock dealer trust. Establishing this trust ensures that livestock producers will receive payment for the sales of their animals. This trust is comparable to the statutory trusts developed under the Packers and Stockyards Act and the Perishable Agricultural Commodities Act.
Cattle producers will also receive supplemental payments under CFAP-3. The stimulus legislation implements a formula to determine the payment amount a producer will receive. The payment amount calculated under the formula is based on the difference between the CARES Act payment rate, the Commodity Credit Corporation (CCC) payment rate, and the CFAP-2 payment rate. For example, this is how the formula will calculate the payment:
$150 (CARES Act) – $30 (CCC) – $50 (CFAP-2) x 50% = $35 per head for a cattle producer’s direct payment under CFAP-3
The stimulus bill also provides assistance to certain dairy producers. Under the legislation, small and mid-sized dairies may be eligible for increased payments under the Dairy Margin Coverage Program (“DMC”). A producer’s payment under this program is determined by their additional 2019 dairy production and elected DMC coverage level. For producers that have increased their operations since locking in their production based on 2011 through 2013 marketings, they may be eligible to increase their coverage for 75% of any increases in milk production, limited to 5 million pounds.
Another group that is qualified to receive direct payment are domestic users of upland cotton and extra-long staple cotton. These individuals will receive financial assistance for the cotton they purchased between March 1, 2020 through December 31, 2020.
The COVID-19 pandemic is having a significant effect on alternative fuel producers due to less fuel being consumed. Because of this, the stimulus package allows the USDA to make payments to producers of advanced biofuel, biomass-based diesel, cellulosic biofuel, conventional biofuel, or renewable fuels.
Aside from direct payment support, the CAA also contains tax provisions to assist fuel producers, such as a tax credit for producing second-generation biofuels, and an excise tax credit for alternative fuel and mixtures.
Businesses that harvest and haul timber are allocated $200 million in financial assistance under the stimulus package. To qualify for this assistance, the business must have suffered at least a 10% loss in profits between its 2019 profits and 2020 profits.
Out of the $13 billion given to support agricultural assistance and programs, $300 million is dispensed to the U.S. Department of Commerce to assist the fisheries industry. This financial support will assist aquaculture producers negatively impacted by COVID-19.
An additional $400 million in payments are available to milk processors who produce and donate dairy products to non-profit food assistance entities. To receive a payment under this program, the processor and non-profit entity must develop a donation and distribution plan, and the USDA reimburses the processor for the costs associated with processing and donating the milk.
The second donation program established under the stimulus package requires the USDA to provide $1.5 billion for purchasing food and agricultural products for donations to food banks and feeding programs. These funds may also be used to provide loans and grants to small and mid-sized food processors and distributors, producers, farmers markets, and seafood processing facilities to respond to the COVID-19 pandemic.
Other Stimulus Package Allocations
The agricultural provisions of the stimulus package legislation directs most of the funds to the USDA to provide direct financial assistance to various groups within the agricultural sector. However, apart from the $11.2 billion provided to the agency, the stimulus bill also assigns funds to other programs and services, such as:
- $20 million annually to the Agricultural Research Service to conduct nutrition research
- $75 million to the Farming Opportunities Training and Outreach Program to support beginning, socially disadvantaged, and veteran farmers and ranchers with financial, marketing, and technical advice and assistance
- $75 million for the Gus Schumacher Nutrition Incentive Program
- $60 million in interstate shipment grants for the improvement of meat and poultry facilities to help them sell products across state lines
- $28 million to support existing farm stress programs
Paycheck Protection Program
Established in the CARES Act, the Paycheck Protection Program (“PPP”) provides small businesses with guaranteed loans to help support its payroll. This program is administered by the Small Business Administration (“SBA”). The CAA stimulus package provided the SBA with $284.5 billion to guarantee new PPP loans.
Previously, farmers and ranchers had trouble securing PPP loans. However, the new stimulus legislation made favorable improvements to the program for producers.
One improvement to the program includes the ability for producers to use their 2019 Schedule F gross income, up to $100,000, when calculating their PPP loan. This is different from the original program rules because it required producers to use their 2019 net income for calculating their loan. Also, the stimulus package allows producers who received a PPP loan based on their 2019 net income to reapply with their 2019 gross income.
The stimulus package under the CAA will provide $13 billion in financial assistance to help many agricultural producers and processor who are suffering from the effects of COVID-19. Although the stimulus package is law, the USDA will need to issue regulations before producers know whether they are eligible to receive payments, and how to access this aid. Once available, the USDA will publish these regulations on the Federal Register website.
To read the U.S. House of Representatives House Agriculture Committee’s summary of the stimulus relief package, click here.
To read more about the PPP, click here.
To read the latest update on USDA’s additional assistance for CFAP, click here.
To read the USDA’s latest COVID-19 news updates, click here.
For updates on USDA Assistance for Farmers, click here.