CFAP 2 Provides Additional Assistance to Farmers

We recently interviewed Katie Epstein, loan officer and assistant manager with Horizon Farm Credit.

Katie reviewed CFAP 2, a second round of Coronavirus Food Assistance Program (CFAP) assistance for farmers who experienced losses related to COVID-19. Katie discusses the program and next steps that Pennsylvania farmers need to take to access the funding.

Let’s start with some of the basics. What is CFAP 2, how is the funding different than CFAP 1 and what do farmers need to know? 
CFAP 2 is a second round of funding for agricultural producers who continue to face market disruptions and associated costs because of the COVID-19 pandemic. It totals an additional $14 billion, using funds available from the Commodity Credit Corporation (CCC) Charter Act and CARES Act.

You might remember that CFAP 1 was available this summer and was the first round of direct assistance for farmers and ranchers. For comparison, CFAP 1 totaled $16 billion in direct funding for farmers. CFAP 2 is similar to CFAP 1 in that there are specific guidelines for each commodity on how the CFAP funding is calculated. Under CFAP 1, commodities generally qualified for payments if their price declined by at least five percent for a specified amount of time, typically between January and April 15. Under CFAP 2, the five percent price decline is one of three methods to determine eligibility and the time frame extends from April 15 to the end of the year. Additionally, CFAP 2 is available to a wider range of commodities than CFAP 1 and includes goats, bison, tobacco, hemp, additional classes of wheat and more. 

CFAP 2 is administered through the Farm Service Agency (FSA) and the application period opened earlier this week on September 21. The application period will remain open until December 11.

What’s your perspective on how CFAP 2 will help Pennsylvania farmers and who should apply?
With the expanded scope of CFAP 2, many Pennsylvania farmers will be able to qualify for most, if not all, of their commodities produced. That makes it a great program for Pennsylvania farmers.

In CFAP 2, payments are made for three categories of commodities.

• First is the Price Trigger Commodities which I already spoke about briefly. This is for commodities that meet a minimum five percent price decline over a specified period of time. Price trigger crops include corn, soybeans, barley, wheat and more. Payments are based on 2020 planted acres of the crop, excluding prevented planting and experimental acres. Payments for price trigger crops will be the greater of
  • The eligible acres multiplied by $15 per acre, OR
  • The eligible acres multiplied by a nationwide crop marketing percentage, multiplied by a crop-specific rate and then the producer’s 2020 Actual Production History approved yield.

The CFAP paperwork and your local FSA office can help you determine which method qualifies for your situation.

If you are in the poultry industry, the calculation for broilers and eggs will be based on 75 percent of your 2019 production.

If you are a dairy producer, payments are based on actual milk production from April 1 to August 31 and production for September through December will be estimated by FSA.

If you are a beef, hog or sheep producer, payments are based on the maximum owned inventory of eligible livestock, excluding breeding livestock, on a date selected by you, the producer, between April 16 and August 31, 2020.

• The second category is for Flat-rate Crops. These are crops that don’t meet the five percent price decline trigger or don’t have data available to calculate a price change. For this category, payments are calculated based on 2020 acres multiple by $15 per acre. This would include alfalfa, hemp and triticale to name a few crops here in Pennsylvania.
• The third and final category is Sales Commodities. This includes specialty crops, aquaculture, nursery crops and floriculture and some other commodities not in the first two categories. Payment calculations will use a sales-based approach where producers are paid based on five year payment gradations associated with their 2019 sales.

One item to keep in mind that is that there is a payment limitation for CFAP 2 of $250,000 per person or entity for all commodities combined, which is similar to CFAP 1. This is a separate limit from CFAP 1, so any payments received from CFAP 1 will not impact your limit for CFAP 2.

What else do you think is important for farmers to know about CFAP 2? 
First, I encourage you to learn more about CFAP 2 and the specific details related to the commodities you produce. Information is available from USDA at farmers.gov/CFAP or you can call USDA at 877-508-8364 to speak directly with a USDA employee who is ready to offer assistance. Again, you will apply for CFAP through your local FSA office, so once you have your information prepared you’ll want to reach out to them.

Second, I want to emphasize that while this assistance from the federal government will be helpful to agricultural producers this year, especially with the swings in commodity prices and uncertainty of markets, CFAP funds are taxable and may result in tax consequences on your operation. Tax planning is important every year but especially in 2020 because of the extra government support programs this year due to the pandemic. I encourage you to consult with your accountant or tax advisor in the coming months.