You may have heard of the U.S. Department of Agriculture’s new $19 billion relief program, which will provide direct aid to agricultural producers and compensate food distributors for oversupply. How exactly will it work?
Most of the funding from the Coronavirus Food Assistance Program (CFAP), $16 billion, will be directed toward farmers and ranchers whose prices and market supply chains were disrupted by the COVID-19 crisis. About $9.6 billion of these direct payments will go to livestock farmers ($2.9 billion of that to dairy farmers). The remainder will go to crop growers.
Applicants will be eligible for compensation of 85% of their price losses sustained between Jan. 1 and April 15, up to $125,000 per commodity and $250,000 per tax ID. CFAP payments will be sent out in May and June.
Dairy farms can expect on average $80,000 in direct payments per farm after factoring in the largest farms with 500-plus cows – about 10% of farms – that would likely receive the maximum compensation, according to The Dairy Market Analyst.
“[I]f USDA is right in its cost estimates, we believe there is enough money to bridge dairy farmers through this restaurant-closure crisis,” The Dairy Market Analyst said of the direct payments.
In addition, $3 billion in CFAP funding will be allocated toward the government purchase of fresh dairy, meat, produce and crops from distributors and wholesalers. This product will then be distributed to food banks, nonprofits and religious organizations to help feed their community members in need. Each month the USDA will purchase $100 million per month in fruits and vegetables, $100 million in dairy products, and $100 million in meat.
Distributors can learn how to participate by contacting David Tuckwiller, Director of Commodity Procurement for the USDA, at David.Tuckwiller@usda.gov.
Beyond the CFAP, the USDA also has up to $873 million available in Section 32 funding to purchase agricultural product. The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allow for the additional purchase of at least $600 million in food.
The Dairy Market Analyst said of the federal government’s ag purchases: “[S]o long as restaurants are closed, these government purchases will help – but not resolve – the oversupply problem. Milk will continue to be dumped until restaurants reopen and/or producers cut back milk supplies” because domestic demand for dairy is down by as much as 20%.
Due to dining site closures in the food service industry, farmers experienced a plummet in demand for their product and cannot sell their excess output. Without markets for their product, farmers have resorted to dumping milk and plowing ripe vegetables back into the soil.
Small businesses that are facing challenges paying their employees such as suppliers and distributors are eligible for a second round of loans from the Small Business Administration’s Paycheck Protection Program. Congress made $310 billion in additional PPP aid available after the federal government ran out of the initial $350 billion. The program resumed accepting applications this week.