CARES Act for Farmers Part II: the Coronavirus Food Assistance Program (CFAP)

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[The following is written in anticipation of the release of interim rules from USDA on the described programs, and as such this is a bare bones description that will be updated as information and analysis is available. Update 4-27-2020, see outline below on Family Food Box application.]

Round One of funding for the Paycheck Protection Program – the $349 billion in Small Business Administration-backed loans made available to businesses – reportedly ran out of money on April 16. There are widespread reports that many farm operations were largely left out of the cycle of funding.

A new round of funding has been announced totaling $19 Billion is styled as the Coronavirus Food Assistance Program (CFAP), developed under statutory authority of the Coronavirus Aid, Relief, and Economic Security Act (CARES). The CFAP is a two-part program of direct payments to farmers ($16 Billion) based on commodity price losses, and a fund to facilitate direct purchases of commodities from farmers ($3 Billion) for single-family boxed food distribution efforts.

The Direct Payment program, according to preliminary reports, will be allocated accordingly:

Commodity Amount
Livestock (e.g. cattle, dairy, swine)* $9.6 billion
Row Crops (e.g. cotton, corn, soybean) $3.9 billion
Specialty Crops $2.1 billion
Other Crops $500 million

The livestock category is reportedly allocated as follows:  $5.1 billion to cattle producers, $2.9 billion to dairy, and $1.6 billion to swine. Poultry, sheep and lamb were not specifically mentioned in first release of information. American Farm Bureau reports that the program only applies to destroyed livestock and only applies to producers who own their livestock, so poultry and swine farms raising animals on contract will not qualify.

Payment of the funds, based on price loss, will be calculated in two tranches. The first calculation will be for price loss between January 1 and April 15. The payment will cover 85% of the price loss for that period. The second tranche compensates for price loss from April 15 through the following two quarters, up to 30% of the price loss. Given the timing and urgency of the program, farmers are allowed to self-certify their losses.

Due to the self-certification element, it is critical for farmers to preserve their records and document crop and livestock destruction, as well as milk dumping.

Traditional payment limitation measures are in place, with a limit of $125,000 in loss claim per individual or entity, with a cap of $250,000 per commodity. (Presumably, larger and more complex entity arrangements will be able to increase their total payments, but this may be clarified upon release of program regulations from USDA.). Additionally, clarification may be forthcoming whether the $900,000 AGI limitation (except when 75% is from agriculture) rule applies. [As of April 27, legislation has been introduced in the House of Representatives to remove payment limits on farm-direct aid and assistance]

The second part of CFAP, the $3 billion federal government purchase program – styled as the USDA “Farmers to Family Food Box” – will be administered by the USDA’s Agricultural Marketing Service (AMS). Shortly after May 1, AMS will issue requests for proposals (RFPs) seeking applications from regional, non-profit food distribution entities to distribute commodities – in a box – through their distribution networks. The USDA has announced that AMS will purchase $100 million per month in fresh fruits and vegetables, $100 million per month in a variety of dairy products, and $100 million per month. According to a recent USDA information session, the box categories to appear in the RFP must be as follows:  1) fish, 2) dairy (cheese, etc.), 3) pre-cooked meat box, 4) Combination box, and 5) fluid milk box. The USDA has identified seven application/purchase regions, which will be further defined once regulations are issued. Proposals will need to demonstrate 1) that the applicant will distribute 100% U.S. product, with emphasis on local and regional production; 2) a delivery plan including scope of region covered, number of distribution nodes (e.g. food banks) and number of boxes distributed; 3) the past performance of the applicant in procurement and aggregation; and 4) the pricing proposal for purchase of the commodities. The executed fixed-price contracts for food distribution will be awarded beginning May 15.

The RFP and application have been released for this program as of April 24, 2020. Here is a link to the application, which identifies in greater detail the items listed above. Below is an excerpt from the application showing the suggested contents for the various food box categories.

Schedule of supplies and service

As of April 27, USDA Agricultural Marketing Service (AMS) has posted a list of Frequently Asked Questions on the program.

The following is an outline prepared by colleague Jamey Lowdermilk, attorney with Brooks, Pierce, McLendon, Humphrey & Leonard, LLP. The outline summarizes info from this link to the program.

[Forms Required:  SF1449 and Acknowledgement Amendments (SF30]

I. Proposal Part One – Technical Information

1) Supporting American Agriculture. Address how proposal supports the mission of facilitating agricultural markets and describe how proposal will engage small farmers.

2) Distribution Plan. Supportive of USDA’s intent to maximize the number of end recipients served.

a. Scope, including number of location of outlets, boxes packed and distributed, and recipients to be served.

b. Geographic area applicant is willing to serve

c. Description of existing non-profit relationships and distribution channels, and plans to develop new supply chain relationships if/as necessary

3) Compliance and Delivery Confirmation Plan. Describe plan to ensure payments to subcontractors are made in accordance with the terms of the contract and how delivery will be documented evidenced. Demonstrate reporting capability and address how plan to report to Government scope of performance.

II. Proposal Part 2 – Offeror Capability. Applicants demonstrate capability including narrative discussion commercial experience, business ethics and integrity standards, policy toward food safety and/or regulatory audits, inspections, certifications, and approvals, as well as financial capability to perform stated capabilities. (Part 2 also includes Exhibit 6.)

1) valid through date but not required to be registered at time of application

2) Facility Information

a) FDA Food Facility Registration Number

b) USDA Establishment No. OR

c)  Commercial equivalent food safety or registration number

3) Small Business designation and certificate (if applicable) and WBSCM Registration Form

a) Capability Requirements

i. Company letter re number of years sold these or similar products

ii. Confirmation that applicant principals are not currently debarred or excluded

iii. If applicable, audits completed

a1) Non-manufacturers

1. Describe how offeror is engaged in wholesale/retail trade and sale of items being offered to public

– Copy of written agreement between non-manufacturer approved supplier

2. Financial Responsibility. Adequate financial resources to perform the contract or the ability to obtain them. [[May be demonstrated with (1) audited financial statement, (2) bank letter of reference, or (3) Dun & Bradstreet comprehensive report.]]

III. Proposal Part 3 – Past Performance. Three (3) written past performance references for similar contract/orders completed within the past 3 years using
Exhibit 5.

IV. Proposal Part 4 – Price. Offerors shall propose pricing, specific product, delivery schedule and constraint information using Exhibit 2.

1) If an offeror submits pricing to a region, they may be required to deliver to any locations within that region unless the offeror’s technical proposal specifically limits their geographic scope.

2) Offerors must submit delivery constraints with their proposal indicating the maximum quantity that they can deliver within the contract period of performance by Item Number (refer to box of packaging choices above).