The lingering effects of the coronavirus pandemic led USDA to approve the Coronavirus Food Assistance Program 2 (CFAP2). Today we cover registration and payment calculations for CFAP2.
Local Market Conditions
At the risk of beating the proverbial dead horse, those of us in agriculture know the challenges to our industry as a result of COVID-19. In addition to the standard health risks posed, agriculture markets face complications in the meatpacking industry, and pricing of other commodities.
USDA announced on September 17 that it will implement an expansion of the CFAP. CFAP2, a $14 billion infusion into the CFAP program, will provide producers with financial assistance that gives them the ability to absorb some of the increased marketing costs associated with the COVID-19 pandemic. The application opens today, Monday, September 21, 2020. You can learn more about USDA’s initial Coronavirus Food Assistance Program, eligibility, payment limitations, and other information by visiting farmers.gov/cfap1. However we will cover the program’s basics here.
Row crops are classified as either price trigger commodities or flat-rate crops. The payment for each calculated differently. Notable exclusions from row crop payments are forage sorghum, crops intended for grazing, and hay other than alfalfa.
Price Trigger Commodities
Price trigger commodities are those crops which experienced a fiver percent-or-greater national price decline when comparing the average prices for the week of January 13-17 July 27-31. The list of price trigger commodities is included in the table below.
Price trigger commodity payment = MAX [(Eligible acres * $15) OR (Eligible acres * Crop Marketing % * Payment Rate * 2020 APH)
If the APH isn’t available use 85 percent of the 2019 Agriculture Risk Coverage-County Option (ARC-CO) benchmark yield. Note that sorghum is measured in bushels and not in CWT. For example, a corn payment on a 100 acre field with an APH of bu/acre would be calculated as:
Corn commodity payment = 100 acres * 0.40 * $0.58 * 200 bu/acre = $4,640
This payment equals $46.40/acre, exceeding the $15/acre minimum payment. The floor is $15/acre, regardless of crop.
Flat Rate Crops
Flat rate crops are those row crops which did not meet a five-percent-or-greater national price decline trigger, or do not have a standard national price series with which to calculate such a change. The formula for payments due flat-rate crops is relatively simple.
Flat-rate payment = $15 * Eligible Acres of Crop (excluding prevented plant and experimental)
Among the full list, crops in our region that will be eligible for the flat-rate payment include alfalfa, canola, guar, hemp, oats, rapeseed, and triticale.
Producers of beef cattle, hogs and pigs, and lambs and sheep are eligible for payments as price trigger commodities. Livestock specifically excluded include equine, animals raised for breeding stock, companion or comfort animals, pets, and animals raised for hunting or game purposes.
The formula for each species is the same, with differing payment rates and inventory limitations. Payments will be applied on the highest owned inventory of eligible livestock, excluding breeding stock, on a date selected by the eligible producer from April 16, 2020, through August 31, 2020.
Payment = Max eligible inventory on a given date * $X.XX/head
For beef cattle, the payment rate applied will be $55/head up to 4,546 head. For hogs and pigs the payment rate will be $23/head up to 10,870 head. Finally, for lambs and sheep the payment rate will be $27/head. Animals used for breeding purposes are not eligible, so consider only market livestock in payment calculations.
There are specific payments for cow milk, differing from payments for goat milk. Here we focus on payments for cow milk. However, you may find details on payments for goat milk here. Payments on cow milk are equal to:
Milk payment = (Actual production April 1, 2020 to August 31, 2020 * $1.20/CWT) + (Daily average production April 1, 2020 to August 31, 2020 * 122 * $1.20)
Cow milk payments qualify as price-trigger commodities. Compensation is directed at indemnifying cow milk producers for losses accrued from April to August, and potential losses based on likely milk production from September 1 through December 31. The second half of the payment formula above is the indemnification for losses on estimated fall milk production.
A number of species are available for CFAP2 payments under the specialty livestock provisions. Again, all equine, breeding stock, companion animals, pets, and animals raised for hunting or game purposes are excluded. Eligible species include alpacas, bison, buffalo, beefalo, deer, ducks, elk, emus, geese, goats, guinea pigs, llamas, mink (including pelts), mohair, ostrich, pheasants, quail, rabbits, reindeer, and turkey.
As many/most of these species do not have a national price series, they are eligible for payments as sales commodities. Payment calculations will use a sales-based approach, based on 2019 sales. Rates for each payment range are listed in the table below. Payments for specialty livestock will be equal to:
Specialty livestock = Eligible sales in 2019 * Payment rate for that range
For example, assume sales of $80,000 of some species of speciality livestock. The payment would be:
Turkey payment = $49,999 * 0.106 + (($80,000 – $49,999)*0.099)
Turkey payment = $5,299 + $2,970 = $8,269
The chart included this week will be significant as we approach the planting decision for the high plains. The ratio included on the right hand side is an important forecasting factor for planted acreage of two crops.