In response to the economic crisis caused by the COVID-19 pandemic, Congress passed a stimulus relief bill known as the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). This stimulus package allocated nearly $50 billion to the U.S. Department of Agriculture (“USDA”) to be used for multiple purposes. One purpose was for USDA to use a portion of these funds to organize a program that provides financial aid to agricultural producers impacted by the effects COVID-19 placed on the industry.

Under the CARES Act, Congress directed USDA to use $9.5 billion of the Act funding to implement an assistance program. Also, USDA would provide an additional $6.5 billion from the agency’s borrowing authority under the Commodity Credit Corporation (“CCC”) Charter Act. USDA has authority to borrow from the CCC in order to support agency-led programs that provide assistance to producers. Therefore, with a total of $16 billion, USDA began providing financial assistance to producers under a program called the Coronavirus Food Assistance Program (“CFAP”).

In 2020, USDA conducted two separate rounds of CFAP, but the agency had $2.3 billion remaining after providing these payments. On January 15, 2021, USDA announced it would offer a third round of payments to certain producers with the remaining funds. However, the new Biden Administration has placed a Regulatory Freeze Pending Review on the $2.3 billion to be used for the third round of CFAP payments, which means USDA is not currently sending payments to producers. Although USDA cannot send payments until the freeze is lifted, the agency is still accepting applications from eligible producers until February 26, 2021.

CFAP-1

In April 2020, USDA announced it would provide financial assistance to many producers under a program called the Coronavirus Food Assistance Program (“CFAP”), later referred to as CFAP-1. This program was designed to provide direct payments to farmers and ranchers producing eligible agricultural commodities who were impacted by the decline of market prices and suffered losses due to food supply chain disruptions linked to COVID-19. Valued at $16 billion, CFAP-1 was funded in two ways: appropriations provided in the CARES Act, and through the borrowing authority under the Commodity Credit Corporation (“CCC”) Charter Act.

To receive financial assistance under CFAP-1, a producer would have to meet the eligibility requirements. In general, CFAP-1 payments were reserved for producers of specific agricultural commodities who suffered at least a 5% price decline or who had losses due to increased marketing costs. By the application deadline for CFAP-1, USDA would approve over 652,000 producer applications, and later paid over $10.5 billion to farmers and ranchers across the U.S. Applications for CFAP-1 are no longer being accepted, and funds have been paid to eligible producers.

CFAP-2

In July 2020, USDA’s CCC borrowing authority increased by $14 billion. Accordingly, the agency chose to use these funds to fund a second round of CFAP payments, known as CFAP-2.

Much like CFAP-1, producers could receive direct payment under CFAP-2 only if they met the eligibility requirements. However, USDA expanded eligibility to other commodities that were excluded from eligibility for CFAP-1 payments. In other words, more producers were eligible to receive direct financial aid under CFAP-2. By January 10, 2021, more than 890,000 applications received approval and the USDA provided over $13 billion in CFAP-2 direct payments. Applications for CFAP-2 are no longer being accepted, and funds have been paid to eligible producers.

CFAP-2.1

In January 2021, USDA announced it would be providing additional assistance to producers with another round of payments under the program, which is known as “CFAP Additional Assistance” or “CFAP-2.1”. The funds remaining from CFAP-1 and CFAP-2 would be used to fund this third round of payments under CFAP-2.1, which is valued at $2.3 billion.

To implement this additional round of payments, USDA issued a final rule, which contains important changes to the program. First, the rule expanded eligibility for certain producers and commodities. In general, CFAP-2.1 is intended to provide payments to producers who previously did not qualify for prior rounds of CFAP payments. Second, CFAP-2.1 updated payment calculations for producers who already applied for an earlier CFAP payment. In other words, certain producers would be eligible to receive a higher direct payment as a result of this new calculation once the funds are accessible to USDA.

While CFAP-2.1 is still a possibility, the regulatory freeze put into place by the Biden Administration prevents the agency from using the $2.3 billion at this time. However, eligible producers are encouraged to submit applications in order to be eligible for a payment, if/when that freeze is lifted.

Expanded Eligibility

USDA has expanded CFAP-2.1 eligibility to certain producers who experienced losses due to the coronavirus pandemic, but were not previously eligible to participate in the program.

One group of producers eligible to receive assistance under CFAP-2.1 are contract livestock producers. These producers were primarily ineligible to receive previous CFAP payments due to the structure of their industry. However, many contract producers have been affected by market disruptions resulting from the pandemic, which has led to decreased income. Thus, a portion of the $2.3 billion available under CFAP-2.1 is intended to be reserved for eligible contract livestock producers when the regulatory freeze is lifted.

If the CFAP-2.1 final rule is implemented after the freeze, the contract producers applying for the aid must meet certain eligibility requirements. In general, aside from the basic eligibility requirements, a contract producer is eligible for a direct payment under the current regulations if they satisfy the following requirements:

• The producer grows livestock under contract for someone else;
• Raised broilers, pullets, layers, chicken eggs, turkeys, hogs, or pigs under this contract; and
• Suffered a decline in revenue for the period from January 1, 2020, through December 27, 2020, as compared to the same period in 2019.

If CFAP-2.1 continues as initially intended after the freeze is lifted, contract livestock producers would recover pandemic-related revenue losses from 2020.

The CFAP-2.1 final rule also extended eligibility to pullet producers and turfgrass sod producers because these industries have been affected by COVID-19 disruptions. Like contract livestock producers, a specific formula would be used to calculate the payment amount a producer may receive under CFAP-2.1 if the funds become available.

Before the regulatory freeze, USDA established the payment calculations for pullet and turfgrass sod producers. The intended payment calculation for pullet producers would be based on their sales in 2019, which is multiplied by a specific percentage rate depending on what “sales range” the producer falls into. For example, if Producer A had $30,000 in sales in 2019, he would fall into the “$0 to $49,999” sales range. Producers that fall into this range will receive a percent payment factor of 10.6%. Therefore, Producer A will likely receive a direct payment of $3,270.

If the payment calculation for turfgrass sod producers goes unchanged after the freeze is lifted, payments would be based on the producer’s 2019 sales, plus producer’s crop insurance indemnities, Noninsured Crop Disaster Assistance Program (“NAP”), and Wildfire and Hurricane Indemnity Program Plus (“WHIP+”) payments in the 2019 crop year.

Producers who would be eligible to receive financial assistance under CFAP-2.1 must complete a new CFAP-2 Application by February 26, 2021. USDA did not release an application specifically for CFAP-2.1 assistance, and the agency will continue to use the CFAP-2 application for CFAP-2.1. applicants.

Adjusting Producer Payments

USDA also intended to adjust payment calculations for certain commodities under CFAP-2.1. According to USDA, certain producers would be eligible to receive an adjusted payment to “more accurately compensate producers who already applied for the program.” In other words, CFAP-2.1 regulations changed the way payments would be calculated for certain producers.

If the funds become accessible to USDA for CFAP-2.1, the commodities that would be eligible for a payment adjustment include: (1) nursery crops and floriculture; (2) aquaculture; (3) swine, (4) certain row crops, (5) specialty crops, (6) specialty livestock, and (7) tobacco. These producers, except for swine producers, must modify their CFAP-2 application by February 26, 2021 to be eligible for payments.

Before the regulatory freeze, USDA established different calculations for most of these commodities. Under this calculation, adjusted payment calculation for nursery crops and floriculture, aquaculture, tobacco, specialty crops, and specialty livestock would be based on the producer’s 2019 sales. However, depending on the commodity, the payment calculation would also add the producer’s 2019 crop insurance indemnities, Noninsured Crop Disaster Assistance Program (“NAP”) and Wildfire and Hurricane Indemnity-Plus (“WHIP+”) payments, and then multiply by the payment rate percentage.

The chart provided below clarifies the components that would be included to calculate the adjusted payment under the CFAP-2.1 final rule before the regulatory freeze:

Each of these components added together determines what “sales range” a producer falls into. Each range has an assigned “payment rate percentage.” The total “sales” a producer obtained in 2019 is multiplied by the appropriate percentage rate, which would equal a producer’s adjusted CFAP payment.

USDA has provided a chart to demonstrate the various sales ranges and the percent payment factors for each range under the CFAP-2.1 final rule:

To clarify how the adjusted payment calculation would operate, suppose Sally, a grower of specialty crops, applied for CFAP-2. After USDA announced CFAP-2.1, she modified her application to receive an adjusted payment calculation. On her modified application, Sally correctly stated she received $115,000 in sales, crop insurance indemnities, NAP, and WHIP+ for the 2019 crop year. This means Sally falls into the “$100,000 to $499,999” sales range. Producers that fall into this range will receive a payment rate of 9.7%. Thus, Sally’s sales are multiplied by this percentage to get her adjusted payment: $115,000 x 9.7% = $11,155.

Row Crops

Certain row crops would also be eligible for a payment adjustment if the regulatory freeze is lifted and CFAP-2.1 continues as initially planned. The row crops that would be eligible for the adjusted payment include barley, corn, sorghum, soybeans, sunflowers, upland cotton, and wheat. Importantly, adjusted payments would be reserved for producers who had crop insurance but did not have a 2020 Actual Production History (“APH”) approved yield.

Under the earlier two rounds of CFAP payments, producers without an APH approved yield, USDA used 85% of the 2019 Agriculture Risk Coverage-County (“ARC-CO”) benchmark yield to calculate a producer’s CFAP payment. However, USDA’s final rule would change the way it calculates row crop producer payments. Thus, if CFAP continues after the freeze, USDA would use a higher percentage of the ARC-CO benchmark yield to calculate payments to eligible row crop producers.

Swine

Before the regulatory freeze, swine was another commodity that would be eligible to receive additional assistance under CFAP-2.1. If the new administration elects to implement the original CFAP-2.1 program, there would be some key differences between the additional assistance that would be provided to swine producers and the other commodities:

• Payment rate for swine would increase to compensate for the estimated total economic loss.
• Only swine producers with an approved CFAP-1 application would be eligible to receive this additional payment.
• Eligible producers would automatically receive additional payments. There would be no requirement for swine producers to modify their existing CFAP-1 application.

Conclusion

Although USDA issued a final rule to implement CFAP-2.1, the Biden Administration placed a temporary regulatory freeze on the program’s funds on January 27, 2021. This means USDA will not be sending payments to producers until the administration reviews the program and lifts the freeze. While CFAP-2.1 is still a possibility, there is no specific date as to when the regulatory freeze will be lifted. However, USDA is still accepting CFAP applications from eligible producers. The deadline for producers to apply for CFAP financial assistance is February 26, 2021.

For potential updates on the freeze and information on the CFAP program itself, click here.

For CFAP-2.1 frequently asked questions, click here.

For the CFAP application and further information on applying, click here.

For more National Agricultural Law Center resources on agriculture and COVID-19, click here.