On May 19 the USDA Agricultural Marketing Service (AMS) issued its final rule on the direct payment portion of the Coronavirus Food Assistance Program (CFAP). USDA has announced the May 26, 2020 opening date for farmers to apply for payments. The application period ends August 28, 2020. It is likely these funds will go fast (see staggered payment rule below). This final rule announces the first release of direct payment money from the $16 billion announced by USDA in April, and first release of rules for the CFAP direct payment program. Of the $16 billion, $9.5 billion is sourced from CARES Act funds and $6.5 billion is sourced from Commodity Credit Corporation (CCC) funds. [7 CFR §9.5(k)]

In General. An eligible payment recipient must be a producer having a share in an eligible commodity between January 15 and April 15, 2020, or between April 16 and May 14, 2020. The applicant must complete a CFAP application form and provide any required documentation specified in the final rule. As of May 20, no application link has been posted on the CFAP website, though required additional form links have been posted. The CFAP website advises farmers to make a phone appointment with their local Farm Service Agency office staff “will work with producers to file applications.”

Payment Limitations. USDA has also waived the $125,000 per commodity payment limitation, but has kept the aggregate $250,000 per recipient limit. Additionally, the $900,000 adjusted gross income cap (averaged for 2016, 2017 and 2018 tax years) on eligibility remains in place, unless 75% of such amount is earned in farming or forestry. The rule has established a special payment limitation for corporations, partnerships and limited liability companies (LLCs) of $750,000, which is a departure from the normal practice of treating corporations and LLCs as single entities subject to one $125,000 limitation.  The entity maximum is set at $750,000 based on three shareholders, partners or members who contribute “substantial labor or management” to the entity. (For entities with one owner, the payment limit is $250,000; two owners:  $500,000 limit; three owners:  $750,000. If entity calculates losses exceeding the $250,000 (1 owner), $500,000 (2 owners), $750,000 (3 owners) limitations, payments for all owners will be adjusted downward to fall within the applicable limitation. One owner may certify that the other owners contribute “at least 400 hours of active personal management or personal active labor.” [see generally [7 CFR §9.7]. Note that payment limitation forms and payment eligibility forms within 60-days from the date of signing the CFAP application. [7 CFR §9.4(b)]

Staggered Payments.  The rule announces that USDA will initially release 80% of the applied-for payments, holding 20% to ensure that the initial allocation of payments does not exceed the $16 billion CFAP funding limit.

Below are specifics by commodity group:

Specialty Crop Producers:  CFAP makes $2.1 billion in direct payments available to specialty crops producers. The payments will be based on market price loss and supply chain disruption. Applications for direct payments will be processed by Farm Service Agency (FSA). The three categories of eligible specialty crop producers who may apply for direct payments are set out below. A summary chart matching specialty crops to eligible payment category can be found on the USDA website.

These are the categories and payment calculations.

Category 1:  Specialty crop producers who can demonstrate a 5% or greater price loss between January 5 and April 15, 2020.  Producers of the following crops are eligible for Category 1 payments:  Almonds, artichokes, beans, broccoli, cabbage, carrots, cauliflower, sweet corn, cucumbers, eggplant, lemons, iceberg and Romaine lettuce, dry onions, peaches, pears, pecans, bell and other types of peppers, rhubarb, spinach, squash, strawberries, and tomatoes. Payment for Category 1 eligible specialty crops is calculated as the quantity sold multiplied by the payment rate in column 2 of table found at this link. [7 CFR §9.5(b)(1)]

Category 2. Producers of shipments of crops that left the farm by April 15 and spoiled due to no market or for which no payment was received. All specialty crops are eligible in this category. Payment for Category 2 eligible crops is calculated as the harvested and shipped quantity that spoiled multiplied by the payment rate in column 3 of the table found at this link. [7 CFR §9.5(b)(2)]

Category 3. Producers with planned shipments that have not left farm or mature crops that remained unharvested by April 15. All specialty crops are eligible in this category. Payment for Category 3 eligible crops is calculated as the sum of 1) the quantity of crops that did not leave the farm and 2) the quantity of mature crops that remained unharvested, multiplied by the payment rate in column 4 of the table found at this link. [7 CFR §9.5(b)(3)]

In addition to the direct payments, the USDA will also purchase up to $873.3 million in “Section 32 purchase” of specialty crops products for distribution to food banks. The latest purchase solicitations for this program are published on the USDA website.

Non-Specialty Crops. Payment for non-specialty crops will be calculated as the sum of (1) Unpriced inventory that is harvested but held in inventory as of January 15, 2020, not to exceed 50 percent of 2019 total production, multiplied by 50 percent, multiplied by the CARES Act payment rate (see chart below); and (2) unpriced inventory as of January 15, 2020 (not to exceed 50 percent of 2019 total production) multiplied by 50 percent, multiplied by the CCC payment rate (see chart below). [7 CFR §9.5(a)]. Calculation example:  Farmer has 100,000 bushels of corn in bin. ([100,000 x .50] x 0.34) + ([100,000 x .50] x 0.37) = $35,500

Livestock.

Dairy. Payments for dairy will be equal to the sum of the results of the following two calculations: (1) First quarter production, multiplied by the CARES Act payment rate of $4.71/cwt; and (2) First quarter production, multiplied by 1.014, multiplied by the CCC payment rate of $1.47/cwt. [7 CFR §9.5(e)]  

Cattle. Payments for cattle will be the sum of the results of the following two calculations: (1) Cattle sold between January 15, 2020, to April 15, 2020, multiplied by the CARES Act payment rate of [see chart type below]; and (2) Unpriced cattle inventory between April 16, 2020, to May 14, 2020, multiplied by the CCC payment rate [see chart type below]. [7 CFR §9.5(c)]

Hogs and Pigs. Payments for hogs and pigs will be equal to the sum of the results of the following two calculations: (1) Hogs and pigs sold between January 15, 2020, to April 15, 2020, multiplied by the CARES Act payment rate [see chart type below]; and (2) Unpriced hog and pig inventory between April 16, 2020, to May 14, 2020, multiplied by the CCC payment rate [see chart type below]. [7 CFR §9.5(d)]

Lambs. Payments for lambs and yearlings will be equal to the sum of the results of the following two calculations: (1) Lambs and yearlings sold between January 15, 2020, to April 15, 2020, multiplied by the CARES Act payment rate of $33/head; and (2) Unpriced lambs and yearlings in inventory between April 16, 2020, to May 14, 2020, multiplied by the CCC payment rate $7/head. [7 CFR §9.5(f)]

Other Commodities

Wool. For producers of wool, a single average payment rate on a clean basis per pound will be determined using the Eastern Market Indicator, as reported by AMS in the National Wool Review, for the weeks ending with January 17, 2020, and April 10, 2020. Only the comparison between those two-week periods is used. Producers are paid based on inventory held on January 15, 2020. Eligible inventory for the purpose of wool is the lower of self-certified unpriced inventory that an eligible producer has vested ownership in as of January 15, 2020, or 50 percent of the eligible producer’s 2019 production of that commodity. CARES Act funds will be used to make a payment for a producer by multiplying 50 percent of the producer’s January 15, 2020, eligible inventory, by a pre-specified payment rate calculated as 50 percent of the calculated price decline. CCC funds will be used to make a payment to the producer by multiplying 50 percent of such inventory by a pre-specified payment rate calculated as 55 percent of such price decline. [from Final Rule]

Payments calculations for wool are the sum of: (1) Unpriced inventory on January 15, 2020, not to exceed 50 percent of 2019 total production, multiplied by 50 percent, multiplied by the CARES Act payment rate of $0.71 (clean) or $0.36 (dirty); and (2) Unpriced inventory on January 15, 2020, not to exceed 50 percent of 2019 total production, multiplied by 50 percent, multiplied by the CCC payment rate of $0.78 (clean) or $0.39 (dirty). [7 CFR §9.5(g)]

The rule defines wool as the fiber sheared from a live sheep and includes, unless noted otherwise, graded and nongraded wool. Graded wool is paid on a clean basis, and ungraded wool is paid on a greasy basis.

Aquaculture. Aquaculture businesses growing freshwater and saltwater products in controlled environments, including raceways, ponds, tanks, and recirculating systems, extending to all farmed shrimp and salmonids (trout and salmon) are included in CFAP to the extent USDA determines individual types of the products have incurred a decline in prices of 5 percent or more between January 15, 2020, and April 15, 2020. The determination of which species are included will be specified in a Notice of Funding Availability (NOFA), which has been issued as a request for information.

Nursery (including cut flowers). Nursery crops (including cut flowers) will be announced in a subsequently announced (NOFA).