Dec 23, 2020

New COVID-19 relief plan includes $13B in support for agriculture

After months of negotiations, Congress on Dec. 21 passed a $900 billion COVID-19 stimulus package with much-needed financial relief for agricultural producers, funding for food assistance programs, enhancements to the Paycheck Protection Program and funding for enhanced broadband access, as well as additional financial resources for agricultural research and farmer stress assistance programs, among others.

According to the American Farm Bureau Federation, the package provides an estimated $13 billion directly to agricultural programs, with $300 million allocated to the Commerce Department for assistance to fisheries. This article highlights many of the direct agricultural provisions in the bill.

Agricultural provisions

Of the $900 billion in the recently passed COVID relief package, $13 billion was allocated to agricultural programs, representing approximately 1.4% of total spending in the bill. Of the $13 billion, $11.2 billion is allocated to the Office of the Agriculture Secretary, approximately $870 million is allocated for a supplemental Dairy Margin Coverage program as well as a dairy donation program, $300 million is provided to the Commerce Department to assist fisheries, and $20 million per year, or $200 million over 10 years, is to be used to address gaps in nutrition research.

Specialty crop block grant programs and Local Agriculture Market programs are allocated $100 million each, farming opportunities training and outreach and the Gus Schumacher nutrition program receive $75 million each. Interstate shipment grants were allotted $60 million and $28 million was allocated for farm stress programs.

Assistance for non-specialty and specialty crops

The bill provides approximately $11.2 billion of direct financial assistance to commodity producers. Producers of 2020 price trigger crops and flat-rate crops are eligible to receive a payment of $20 per eligible acre of the crop. Price trigger commodities, as defined in the second Coronavirus Food Assistance Program, are major commodities that meet a minimum 5% price decline over a specified period.

These crops include barley, corn, sorghum, soybeans, sunflowers, upland cotton and all classes of wheat. For example, with 91 million acres of corn planted in 2020, and based on a $20 per acre payment, corn producers would be expected to receive $1.8 billion in financial support. Across these seven crops alone, 240 million acres were planted, representing $4.8 billion in COVID-19 stimulus. Additionally, the bill allows the Agriculture Secretary to extend the term of marketing loans by three months, providing producers additional time to repay.

Flat-rate crops, as described in CFAP 2, either do not meet the 5% price decline trigger or do not have data available to calculate a price change. Flat-rate crops include alfalfa, amaranth grain, buckwheat, canola, extra long staple (ELS) cotton, crambe (colewort), einkorn, emmer, flax, guar, hemp, indigo, industrial rice, kenaf, khorasan, millet, mustard, oats, peanuts, quinoa, rapeseed, rice, sweet rice, wild rice, rye, safflower, sesame, speltz, sugar beets, sugarcane, teff, and triticale. These commodities will also receive a payment of $20 per acre.

The bill includes a provision allowing for the adjustment of direct support payments to account for price differentiation among commodities. This may include specialized varieties, local markets and farm practices such as certified organic.

For specialty crop producers, the bill modified the sales-based rules from CFAP 2 to allow specialty crop producers to include crop insurance indemnities and disaster payments in their 2019 sales, which was the basis for determining the amount of support under CFAP 2, or by substituting 2018 sales. Additionally, the bill makes available an additional $100 million in Specialty Crop Block Grants that are administered through each state’s Department of Agriculture and an additional $100 million available for the Local Agriculture Market Program.

Assistance for processors

The bill requires that a portion of the appropriated money to be used to make payments to domestic users of upland cotton and extra long staple cotton between March 1, 2020, and December 31, 2020. The payment rate is calculated by multiplying 6 cents per pound by the average monthly consumption of the domestic user from January 1, 2017, through December 31, 2019, then multiplying it by 10, e.g., cotton payment = $0.60 x (avg. monthly consumption Jan 1, 2017-Dec 31, 2019).

Moreover, one of the consequences of COVID-19 precautions and stay-at-home orders was a significant decrease in fuel consumption, and along with it was a slash to biofuel demand. Since the beginning of the year, and through mid-December, the cumulative decline in ethanol production is nearly 2 billion gallons. The bill allows for payments to producers of advanced biofuel, biomass-based diesel, cellulosic biofuel, conventional biofuel, or renewable fuel due to unexpected market losses as a result of COVID-19.

Summary

The recently passed COVID-19 stimulus package provides $13 billion, approximately 1.4% of the $900 billion package, in financial assistance to help livestock, poultry, dairy, non-specialty and specialty crop producers continue to recover from COVID-19 disruptions. In addition to the direct support for agriculture, the bill includes other agriculture-related provisions including improvements to and additional funding for the Paycheck Protection Program, an extension to livestock mandatory reporting, several tax extender provisions, such as a $1.01 per gallon credit for the production of second-generation biofuels and a $0.50 per gallon excise tax credit for alternative fuel and alternative fuel mixtures, as well as $7 billion to increase broadband access.