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In April, the USDA announced the Coronavirus Food Assistance Program (CFAP). CFAP will provide direct monetary support to farmers and ranchers to help combat the losses suffered due to the market downturn. In total CFAP will dispense $16 billion in relief to producers across the agriculture sectors hit hardest by COVID-19, though the USDA has not finalized how that amount will be divided by commodity.
CFAP eligibility includes commodity prices which suffered at least a 5% decline between January and April 2020. The program limits payments to persons or entities with income of less than $900,000, unless 75% of the income is derived from agriculture. The payments will be made based on two calculations: (1) producers will receive 85% of the price loss experienced from January 1, 2020 to April 15, 2020; and (2) 30% of the producer’s anticipated losses for the first two quarters following Apr. 15, 2020. Payments are limited to $125,000 per commodity, with an overall limit of $250,000 per person or entity.
Although lawmakers have not issued final guidance on the application process, produces can be proactive in the process prior to the opening of the application period on May 26, 2020. Most importantly, producers should gather all of their records that indicate losses suffered as a result of market decline. This will be especially important for producers who have had to dump milk, plow planted field under, or slaughter livestock due to lack of demand or have had supply contracts canceled for upcoming harvests to take place before October 15, 2020. Additionally, producers can fill out the following linked forms, as applicable, which will be needed once the application period opens up: Form CCC-901 (This form identifies members of legal entity and relevant information); Form CCC-941 (This form reports your average adjusted gross income for programs where income restrictions apply); Form CCC 942, (This form reports income from farming, ranching and forestry for those that exceed the adjusted gross income limitation); Form AD-1026 (This form ensures a conservation plan is in place before lands with highly erodible soils are farmed); Form AD-2047 (This form provides basic customer contact information); and Form SF-3881 (This form collects your banking information to make direct deposits).
Sprouse Shrader Smith will continue to follow the developments in the governmental guidance and orders to ensure our agriculture and farming clients remain fully informed during this dynamic evolution of COVID-19 related relief efforts. For additional information or assistance please contact John Massouh, a Member at Sprouse Shrader Smith, PLLC and Head of the Agriculture and Agribusiness practice.
Article by John Massouh
NOTE: This article was updated on May 19, 2020. Because the COVID-19 situation is dynamic, with new governmental measures each day, consult with counsel for the latest developments and updated guidance on this topic.