Producers who participate in Community Supported Agriculture (CSA) may benefit from the non-traditional aspects of the CSA business model. However, CSA producers are still able to participate in some federal programs that may help expand their customer base and subsidize specific conservation practices. The following article is the sixth in a series on CSAs and will highlight certain federal programs that could be beneficial for CSA producers to participate in. To read the other articles in this series, click here.

Background on CSA

CSA is a farm business model where consumers fund the producer’s upcoming growing season by purchasing a membership in the farm, and in return, receive a share of the season’s harvest. Once farm products are harvested, members will receive a box of farm products on a periodic basis. The CSA business structure can be beneficial for the producer because it reduces the potential risks a producer may experience under the traditional farm structure. By receiving payment from consumers upfront, a producer under the CSA structure has the assurance that despite the outcome of the growing season they will still receive payment. A CSA can be either a non-profit or a for-profit business; however, despite its atypical payment structure, a CSA is still treated as a traditional farm by most federal programs. This article will discuss various federal programs and their interaction with CSAs.

Supplemental Nutrition Assistance Program

As mentioned before, CSAs can operate as a non-profit or a for-profit business. Often, the non-profit CSA functions with the goal of providing food to lower income individuals. One way a nonprofit CSA might achieve this goal is by becoming a Supplemental Nutrition Assistance Program (SNAP) authorized retail food store. However, a for-profit CSA could also choose to expand its network by becoming a SNAP authorized retailer as well. SNAP is a program that provides low-income families with monthly benefits to purchase household foods. Generally, the rules for a SNAP authorized retailer are the same for both non-profits and for-profits; however, non-profits are given certain payment exceptions.

Eligibility as a SNAP retailer

For both a non-profit and a for-profit business to become a SNAP authorized retail food store, a retailer must obtain a permit from the US Department of Agriculture’s (USDA) Food Nutrition Service (FNS). A producer will be required to fill out an application for the permit. The application does not require a fee, but it will require certain ownership information. For example, an applicant will be required to provide a copy of a current license for the business (i.e., sales tax permit or health permit), a copy of photo identification for the farm owner, and a copy of the Social Security cards for all business owners, partners, officers, shareholders, and their spouses. It may take up to 45 days to receive the permit after submitting an application.

To be eligible as a SNAP retailer, the CSA will be required to meet the requirements of either – Criterion A (staple food inventory) or Criterion B (staple food sales). These categories hinge upon a retailer selling food products that qualify as “staple foods.” Staple foods are basic foods that make up a large part of a person’s diet. The four categories of staple foods are vegetables or fruits; dairy products; meat, poultry, or fish; and breads or cereals. Staple foods do not include prepared foods, heated foods, or accessory foods, such as potato chips or ice cream. While certain accessory foods are eligible for purchase with SNAP benefits, their stock at a retailer does not count toward securing that retailer’s eligibility to be a SNAP retailer. To learn more about SNAP eligible foods, click here to read NALC article “Excluding ‘Junk’ Food from SNAP Benefits.”

To qualify under Criterion A, a retailer must have a minimum of 36 staple food items that meet the following conditions – three varieties in each of the four staple food categories; three stocking units for each of the three varieties; and one perishable variety in two of the staple food categories. “Variety” refers to the different types of food within a staple food category. For example, apples, bananas, and lettuce each represent different varieties in the vegetables or fruits category. To qualify under Criterion B, the retailer’s staple foods must equal more than half of a store’s total gross retail sales. This is the category that a CSA will likely fall under. A CSA will likely not sell enough foods in all four staple food categories to qualify as Criterion A, but its vegetable and fruit sales will likely be greater than 50% of its total gross retail sales.

Receiving payment as a CSA SNAP retailer

The biggest issue that arises when a CSA chooses to become a SNAP retailer involves payment methods. This is because there are specific rules about how a SNAP participant can use their benefits. For example, SNAP benefits may only be used for the food itself, and not for any membership fee. Because of this, a CSA will need to ensure that any additional fees associated with the purchasing of a share are not paid for with SNAP benefits. Additionally, SNAP benefits are doled out monthly and may not be used to pay for items bought on credit. This means that a CSA might have to adjust its payment model for a member using SNAP benefits. Typically, under the CSA model, a member purchases their share in the CSA in full at the beginning of harvest. Since a SNAP participant will not have the equivalent of the share’s cost in benefits at the beginning of the season, CSAs will likely have to accept multiple payments spread out across the season. If the CSA is a non-profit, it will be allowed to collect payment from a SNAP customer up to 14 days before the customer receives their food box, but a for-profit CSA will not have that flexibility. Because of the payment constraints, it might be smart for a CSA to consider asking a member paying with SNAP benefits to sign a written agreement guaranteeing their participation in the CSA for that season. Additionally, the CSA could ask that member to provide a refundable non-SNAP deposit at the beginning of the season. To learn more about general membership agreements between CSA operations and members, click here to read NALC article “Community Supported Agriculture: A Field Guide for Producers and Consumers (Formation and Contracting with Members).”

Another payment hurdle that a CSA operator accepting SNAP benefits might face is processing payments with an Electronic Benefits Transfer (EBT) card. EBT, the primary mechanism that USDA uses to issue benefits, is a state-issued debit card where benefits are uploaded into an account monthly. The card is run through an electronic reader, often called the “point of sale terminal” (POS), when a SNAP participant uses the benefits to purchase groceries. To help combat the cost of purchasing POS equipment, USDA provides EBT-only POS equipment to certain direct marketing farmers and farmers’ markets (DMFs/FMs). Specifically, in 2019, twenty-nine states received funds from USDA to provide POS to these types of SNAP retailers. Additionally, USDA is offering a grant program to allow DMFs/FMs to accept SNAP EBT payments on their own smart device. To learn more about this grant program, click here. USDA also offers manual vouchers to DMFs/FMs who are unable to operate EBT devices on-site. If manual vouchers are used, the CSA staff will have to call their state’s EBT processor to verify the customer’s available funds and place a hold on the purchase amount.

National Organic Program

Along with CSAs that operate to help lower income individuals get access to fresh and healthy food products, many CSAs also operate to use sustainable production practices or grow organic food products. To achieve this purpose, a CSA might consider growing and selling products that are USDA certified organic. The federal program that develops and enforces consistent national standards for organic agricultural products in the United States is the National Organic Program. A CSA operation must be certified by the USDA for its products to bear the USDA Organic Seal. According to the USDA, there are five steps to organic certification:

• Adoption of organic practices, selection of a USDA-accredited certifying agent, and submission of an application and fees to a certifying agent.
• Review the application by the certifying agent and verification that the practices comply with USDA organic regulations.
• Conduction of an on-site inspection of the applicant’s operation.
• Review of the application and inspection report by the certifying agent to determine if the applicant complies with the USDA organic regulations.
• The issuance of the organic certification by the certifying agent.

The certified organic CSA will be required to go through an annual review and inspection process to maintain the organic certification. The certification process and maintenance can be expensive. Additionally, the initial process of meeting organic certification standards can be an expensive venture that requires time and resources. This can be especially frustrating because during this transition period, the producer is expending resources to become organic but cannot yet reap the benefits of bearing the organic label. To help combat the costs of NOP, USDA has a program called the Organic Certification Cost Share Program (OCCSP).

Organic Certification Cost Share Program

OCCSP is a federal program that provides assistance to producers and handlers of agricultural products who are obtaining or renewing their certification under the NOP. This program may offer up to 75% of the certification costs for certified operations but will not exceed $750 per certifications scope. OCCSP assistance will cover expenses such as application fees, inspection costs, inspector travel expenses, and more. OCCSP might be a beneficial tool for CSA operators renewing their organic certification. To learn more about OCCSP, click here.

Microloan Program

Another USDA program that could be beneficial for a CSA operator is the Microloan Program run through USDA’s Farm Service Agency. This program was developed for niche and non-traditional operations, like CSAs, and offers more flexible access to credit for smaller farming operations. There are two types of microloans available – operating microloans and ownership microloans. Operating microloans can be used for expenses such as initial start-up expenses, marketing and distribution expenses, family living expenses, purchase of materials essential to farm operations, and more. Ownership microloans can be used for expenses such as purchasing farmland, constructing new farm buildings, paying closing costs, and more. An applicant for a microloan can apply for a combined maximum of $100,000, meaning that an applicant can receive a maximum of $50,000 for an ownership loan and a maximum of $50,000 for an operating loan. To learn more about the Microloan program, click here to read USDA Microloans Factsheet.

Farmers Market Promotion Program

Another USDA program that CSA operations might benefit from participating in is the Farmers Market Promotion Program (FMPP). This program works to expand direct producer-to-consumer markets to increase access to and availability of locally produced agricultural products. FMPP funds projects that provide outreach, training, and technical assistance to direct producer-to-consumer market opportunities such as domestic farmers markets, agritourism activities, and CSAs. Specifically, FMPP offers four types of projects Capacity Building, Community Development Training and Technical Assistance, Turnkey Marketing and Promotion, and Turnkey Recruitment and Training. To learn more about FMPP, click here to view USDA’s factsheet.

Conservation Stewardship Program

For CSA operators who prioritize farming with conservation practices, participation in the USDA’s Conservation Stewardship Program (CSP) might be beneficial. CSP is a program that provides technical and financial assistance to agricultural producers who use conservation efforts in their operations. This program rewards the management of ongoing conservation efforts and the adoption of new conservation enhancements. To learn more about CSP, click here to read NALC article “Building Blocks: Basics of CSP.”

Environmental Quality Incentives Program

CSA operators interested in adopting sustainable practices might benefit from participating in the USDA’s Environmental Quality Incentives Program (EQIP). EQIP is a voluntary conservation program that is run through the USDA’s Natural Resource Conservation Service (NRCS). This program incentivizes producers to implement conservation practices in exchange for payment and technical assistance. EQIP encourages the implementation of conservation practices such as improving irrigation efficiency, improving soil health, and restoring wildlife habitats. To learn more about EQIP, click here to read NALC article “Building Blocks: The Basics of EQIP.”

Conclusion

Though CSAs operate differently from the traditional farm business structure, CSA operators might still be eligible to apply for certain USDA programs. These programs include NOP, OCCSP, Microloans, FMPP, CSP, and EQUP. Specifically, a CSA may be eligible to become a SNAP retailer but might have to adjust their typical payment structure to accommodate SNAP participants.

To learn more about Nutrition Programs generally, click here to view NALC’s Nutrition Programs reading room.

To learn more about NOP, click here to view NALC’s National Organic Program reading room.

To learn more about conservation programs generally, click here to view NALC’s Conservation Programs reading room.