Cornhusker Economics June 10, 2020
Coronavirus Food Assistance Program (CFAP) payments for Nebraska Corn and Soybean Producers
On April 17, 2020, U.S. Secretary of Agriculture Sonny Perdue announced the Coronavirus Food Assistance Program (CFAP), a new program to assist producers and consumers affected by the COVID-19 pandemic (USDA 2020b). CFAP will provide $19 billion in relief to producers and entities throughout the supply chain. This will be done through two programs, Direct Support to Farmers and Ranchers ($16 billion) and USDA Purchase and Distribution ($3 billion) (USDA 2020a). Producers will be paid on actual losses due to decreases in prices and/or disruption of supply chains. On May 19, 2020 USDA announced the details of the CFAP. There are three support payments for producers affected by the pandemic: euthanasia and disposal support1, support from the CARES Act, and support from Commodity Credit Corporation (CCC) payments.
Non-specialty crop corn and soybean producers are eligible to receive one CFAP payment in two installments, from two sources, CFAP and CCC. In order to be eligible, producers must have Average Gross Income (AGI) less than $900,000 for tax years 2016, 2017, and 2018, comply with conservation program regulations, and have no controlled substance violations. There is also a payment limit of $250,000 per person/entity (USDA 2020b). The CFAP payment is 50% of the two combined payments from the CARES Act and the CCC. These per-bushel payments for corn and soybean producers are $0.32, $0.35 and $0.45, $0.50, respectively from the CARES Act and CCC. Therefore, the combined CFAP payment is $.335 per bushel for corn and $.475 per bushel for soybeans. The CFAP payment will be made in two installments. The first installment will be 80% of the total payment and the remaining 20% will be disbursed later depending on the availability of funds in the two pools.
The payments will be made based on a producer’s self-certified unpriced inventory vested ownership as of January15, 2020 or 50% of the producer’s 2019 production. Unpriced inventory is defined as “any production that is not subject to an agreed-upon price in the future through a forward contract, agreement or similar binding document” (CFAP Final Rule 2020). Producers will each have their own unpriced inventory so until we know what their inventories are, it is impossible to calculate what their CFAP payment will be if their unpriced inventory turns out to be less than 50% of their 2019 production.
Table 1 illustrates an example of the expected CFAP payment for corn and soybean producers of the state based on 2019 state yield, average farm size based on the 2017 Census of Agriculture. For the purposes of this example, the unpriced inventory as of January15, 2020 is assumed to be greater than 50% of 2019 production so that the estimated payments are based on known 2019 production. Producers who have unpriced inventory that is lower than half their 2019 production can change the calculations by simply using the unpriced inventory instead of the 2019 production.
| Table 1: Expected CFAP payment for average corn and soybean producers of Nebraska | ||
|---|---|---|
| 2019 Production | Corn | Soybean |
| Acres | 971 | 971 |
| Yield | 182 | 59 |
| Total Bushels | 176,722 | 57,289 |
| 50% of production (a) | 88,361 | 28,645 |
| Unpriced inventory on Jan. 15, 2020 (b) | -------- | -------- |
| Total Bushels used for calculation of CFAP payment (lower of a or b) |
88,361 | 28,645 |
| Rate | $0.335 | $0.475 |
| Total CFAP payment | $29,601 | $13,606 |
| CFAP payment per acre | $30.49 | $14.01 |
| Installment one, 80%, farm (acre) | $23,681 ($24.39) | $10,885 ($11.21) |
| Installment two, 20%, farm (acre) | $5,920 ($6.10) | $2,721 ($2.80) |
Conclusion
The CFAP payments seem to be substantial for an average Nebraska corn and soybean producer. If both installments of the CFAP come through, an average corn producer can expect to receive payments of $30.49 per acre. Similarly, an average soybean producer can expect to receive $14.01 per acre. Producers can apply for CFAP payments from May 26, 2020 through August 28, 2020 and more information can be found at https://www.farmers.gov/cfap/non-specialty. There are also other government assistance programs, the Paycheck Protect Program (PPP), the Economic Disaster Injury Loan (EIDL), and support for depopulation.
Disclaimer
The findings and conclusions in this presentation have not been formally disseminated by the U.S. Department of Agriculture and should not be construed to represent any determination or policy.
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1Only hog producers are eligible for depopulation support due to disruption in the supply chain from the CARES Act. However, other producers might be able to get support from other sources such as FEMA. Also, there have been no reports of cattle depopulation as of May 20, 2020
References:
Coronavirus Food Assistance Program Final Rule. 2020. Federal Register Volume 85, No. 99. Available online : https://www.farmers.gov/sites/default/files/documents/cfapfrm-05212020.pdf
U.S. Department of Agriculture. 2020a. “USDA Announces Coronavirus Food Assistance Program”. Washington, DC: U.S. Department of Agriculture Press Release No. 0222.20. Available online:https://www.usda.gov/media/press-releases/2020/04/17/usda-announces-coronavirus-food-assistance-program
U.S. Department of Agriculture. 2020b. “Coronavirus and USDA Assistance for Farmers” Available at: https://www.farmers.gov/sites/default/files/documents/EQIP_Livestock_Mortality_Initiative_Factsheet-v2.pdf
Anil Giri
Research Agricultural Economist
Farm Economy Branch, Resource and Rural
Economics Division Economic Research Service, USDA
anil.giri@usda.gov
Wesley F. Peterson
Professor
Department of Agricultural Economics
University of Nebraska-Lincoln
elliott.dennis@unl.edu
Sunkalp Sharma
Kent State University at Tuscarawas