Focus on Ag: USDA provides some clarity on CFAP payments

Kent Thiesse
Farm Management Analyst and Vice President, MinnStar Bank

Farm operators have been wondering about the status of the additional Coronavirus Food Assistance Program (CFAP) payments that were authorized by Congress in December, as well as 2019 WHIP+ payments and other government programs. For the latest details on many of these programs, farmers should contact their local Farm Service Agency (FSA) office. Following is a brief summary of the latest information from USDA regarding the CFAP 3, or Pandemic Assistance for Producers (PAP) payments and other programs:

Crop producers: Producers of both “price trigger” crops and “flat rate crops” that were produced in 2020 will receive an additional $20 per acre CFAP 3 payment. The CFAP 3 payments were originally authorized by the COVID-19 relief bill passed by Congress late in 2020. The “price trigger” crops include corn, soybeans, wheat, barley, sorghum, sunflowers and upland cotton, with payment eligibility based on the same criteria that was used for the 2020 CFAP 2 payments. The “flat rate crops” include most crops not covered under the “price trigger” category, including sugar beets, sweet

corn and peas, as well as more than 230 fruit, vegetable and other horticulture crops. Producers will not need to re-apply for the CFAP 3 crop payments, as FSA will use the same criteria for these payments that was used for 2020 CFAP 2 payments. It is expected that FSA will issue the CFAP 3 crop payments in early April through direct deposit.

Cattle producers: Cattle producers will receive an additional CFAP payment based on the cattle inventory numbers that were submitted for CFAP 1 eligibility in 2020. This “top-up” CFAP payment will basically be a doubling of the original 2020 CFAP 1 payments. The payment rates were $63 per head for feedlot cattle ready for slaughter, $25.50 for feeder cattle 600 pounds or more, $7 per head for feeder cattle under 600 pounds, $14.75 per head for mature slaughter cattle such as non-productive beef and dairy cows, and $17.25 per head for all other cattle. Similar to crops, cattle producers will not need to re-apply for the additional CFAP payments, as FSA will use the same cattle inventory numbers that were used for 2020 CFAP 1 payments. Payments will likely occur in April; however, in some cases, payments to larger producers may be limited, as USDA did not increase the CFAP 1 payment limits.

USDA is still reviewing CFAP “Additional Assistance” (AA) payments for the following:

Hog producers: Late in the previous administration, USDA announced a proposed “top-up” payment of $17 per head to hog producers that had previously applied for and received a CFAP 1 payment in 2020. Hog producers initially received a CFAP 1 payment of $17 per head, so the additional payment would raise the total payment to $34 per head. The “top-up” CFAP payments to hog producers are still currently under review by USDA. If the funding is released, these “top-up” payments will likely occur through direct payments from FSA offices, similar to the cattle CFAP payments. No additional application is likely to be required to receive the additional CFAP payments, as the same formula that was used originally will also be used for these payments.

Updated CFAP 2 data: No additional CFAP payments were announced for crop producers that are potentially eligible for additional CFAP 2 payments based on re-adjusted payment calculations. This only affected producers that did not have 2020 APH yields available for CFAP 2 calculations and used 85% of the 2020 ARC-CO county benchmark yield, which was increased to 100 percent of the benchmark yield by the revised guidelines. USDA has announced an additional 30-day sign-up period for producers impacted by the revised CFAP 2 revisions, beginning on April 5, 2020. This change does not affect the large majority of producers that applied for CFAP 2 payments using their 2020 farm-level APH yields.

Potential CFAP payments to contract livestock producers: Contract growers of hogs and poultry were initially left out of the CFAP payments. However, USDA has allowed eligible producers to apply for potential CFAP payments, if they can document a decline in revenue in 2020 compared to 2019. USDA is still reviewing details regarding potential CFAP payments. This particularly affects contract growers that were impacted when livestock was euthanized in the spring and early summer of 2020. Contract growers that are potentially eligible should check with their local FSA office for details.

For more information on all CFAP payments, refer to https://www.farmers.gov/cfap.

USDA did not make any announcements regarding the second half of the 2019 Wildfire and Hurricane Indemnity Program (WHIP+) payments that many farmers in southern Minnesota and other areas of the Upper Midwest are potentially eligible receive, due to significant crop losses in 2019. Most eligible producers that applied have already received their 2018 WHIP+ payments and the first half of eligible 2019 WHIP+ payments. The funding for the second half of the 2019 WHIP+ payments was authorized in the COVID relief bill passed by Congress in late 2020, but is still being reviewed by USDA. At this point, there have not been any provisions for WHIP+ applications or payments for crop losses incurred from natural disasters during the 2020 growing season. For more information, refer to https://www.farmers.gov/recover/whip-plus.

Update on PPP loan applications

The U.S. Small Business Administration (SBA) is expected to announce an extension of the deadline for the Paycheck Protection Program (PPP) loan applications. Based on legislation that was recently passed by Congress, the PPP application deadline will be extended from March 31 to May 31, 2021. The PPP application extension applies to both PPP No. 1 and PPP No. 2 loan applications for any eligible business, including farm operations that file taxes as a sole proprietorship (using a Schedule F). Following are some details and clarifications regarding farm-related PPP loan applications:

Round No. 1 PPP loans: Self-employed farmers (sole proprietorships) that did not qualify for the first round of PPP loan payments due to a negative net farm profit on Schedule F (Line 34) of their 2019 federal tax return are now eligible for the first round of PPP loan payments. The PPP application for sole proprietorships is based on the gross farm income on Schedule F (Line 9) of the 2019 tax return, up to a maximum of $100,000. Based on the PPP loan calculation formula, a farm operation could qualify for a maximum PPP No. 1 loan payment of $20,832 ($100,000 divided by 12 times 2.5). Farmers that previously received a round No. 1 PPP loan in 2020 that has already been forgiven are currently not eligible to re-apply for an additional round No. 1 PPP loan, even if they received less than $20,832 in the first payment. These farmers could potentially be eligible for round No. 2 PPP loans. At this time, farm businesses that file taxes as a partnership or corporation are not eligible to apply for PPP loans using Schedule F (line 9).

Round No. 2 PPP loans: Self-employed farmers could potentially be eligible for round No. 2 PPP loans. If farmers receive a round No. 1 PPP loan under the new guidelines (listed earlier), they must wait until that loan is forgiven (minimum of 56 days) before applying for a round No. 2 PPP loan. The same $100,000 maximum gross income level and maximum PPP loan payment that existed in round No. 1 of PPP loans for farm operators filing as sole proprietorships will exist for the round No. 2 PPP loan applications. Farm operations and other businesses will need to show at least a 25% decline in revenue for one quarter in 2020, compared to a similar quarter in 2019 in order to qualify for round No. 2 PPP loan. The PPP loan forgiveness criteria for round PPP No. 1 loans will also be in place for round No. 2 PPP loans.

Farmers and other small businesses can apply for PPP loans through most local banks and ag lenders. More details on PPP loan applications are available from lenders or on the SBA website at: www.sba.gov/.

Kent Thiesse