CARES Act and Coronavirus Questions Answered – Agweek
On March 27, President Donald Trump signed into law the CARES Act (Coronavirus Aid, Relief and Economic Security Act), after it was passed unanimously by the US House and Senate. The CARES Act authorizes up to $2.2 trillion in financial aid and assistance to address the health and economic impacts of the COVID-19 virus pandemic in the United States. It is one of the largest and most comprehensive money bills ever passed by Congress. The legislation will impact nearly every US citizen and most aspects of the US economy in one way or another, including farm families, rural communities and the US agricultural industry.
Overall, the CARES Act provides approximately $48.9 billion to United States Department of Agriculture programs. A significant portion of this funding, $14 billion, is allocated as supplemental funding authority to the USDA Commodity Credit Corporation. CCC funds were used to make the 2018 and 2019 Market Facilitation Program payments, as well as fund other USDA programs. The aid package also authorizes an additional $9.5 billion in emergency funding for dairy and livestock producers, fruit and vegetable growers and fresh produce markets.
The CARES Act provides $15.5 billion in additional funding for the USDA Supplemental Nutrition Assistance Program and an additional $8.8 billion for child nutrition programs.
The CARES Act also allocated $350 billion to the U.S. Small Business Administration for emergency loans to help small businesses keep employees working and maintain operations during these difficult times. The part of the SBA’s relief program that gets the most attention is the “Payment Protection Program” which provides 100% federally backed loans to small businesses to help with these efforts. It appears that many farms and agriculture-related businesses are likely to qualify for PPP loans, especially those with monthly payments and who have regular funds withdrawn for ownership and management payments. PPP loan applications are made through SBA-approved banks and lending institutions.
The CARES Act also provides SBA Economic Disaster Loan (EIDL) funding for small businesses experiencing financial hardship as a result of the coronavirus outbreak. At the time of this writing, there is considerable uncertainty regarding the potential eligibility of agriculture-related businesses for these SBA loans. Loans through the EIDL program are issued directly by the SBA and do not require approval from a local bank or lender. For more information about the EIDL program or to make EIDL requests online, companies should go to the SBA website at:
Here are the answers to some common questions about the legislation and the coronavirus and their effects on agriculture:
Does the additional Commodity Credit Corporation funding in the new CARES Act automatically mean there will be a third round of Market Facilitation Program payments (or something similar) in 2020?
Not necessarily. The 2018 and 2019 PMF payments were linked to the loss of revenue due to the trade war with China and other countries. It is unclear whether the coronavirus will necessarily impact the new trade deal with China or agricultural trade with other countries. However, given the additional funding provided to the US Department of Agriculture and the CCC through emergency legislation and the financial challenges facing farms, it is highly likely that a similar form of assistance at the PMF will be made available to farmers and herders in the coming month. The aid package will likely be different from the 2018 and 2019 MFP payments, and the aid will likely be more commodity-based, especially with the USDA’s supplemental emergency fund that is targeted to dairy and livestock producers. and others.
What strategies can be used following the sharp drop in prices for unsold 2019 corn and soybeans that are still in storage on the farm?
Many farm operators have a considerable amount of unsold 2019 corn and soybeans stored on the farm. Following the coronavirus outbreak in the United States, there was an immediate sharp drop in local grain prices, causing spot corn prices to plummet by 70 to 80 cents per bushel in just a few weeks at many locations. of the Midwest. Additionally, many ethanol plants and other local grain markets currently do not accept corn or only do so to a limited extent. One strategy farmers could use to get temporary income from their unsold grain in storage is to use CCC’s Commodity Loan Program through local Agricultural Services Agency offices. The term of CCC commodity loans has been temporarily extended from 9 months to 12 months. Local CCC loan rates vary from county to county. Loan rates are typically just over $2 a bushel for corn and $6 a bushel for soybeans in many parts of the Midwest. The current interest rate in April on CCC grain loans is only 1.625%. Please be aware that due to the coronavirus, most FSA transactions must be conducted over the phone or via email.
Will lower grain spot prices impact 2019 farm program payments?
All 2019 agricultural program payments for the PLC, ARC-CO and ARC-IC programs will be based on the 2019 market year end average prices for corn, soybeans and other crops. The 2019 market year average price for corn and soybeans is based on monthly national average farm gate prices from September 1, 2019 through August 31, 2020, which are weighted by the percentage of bushels sold each month. USDA’s 2019 market year average price projections as of March 1 were $3.80 per bushel for corn and $8.70 per bushel for soybeans; however, many analysts expect the ending average prices for the 2019 market year to decline slightly over the next few months. Further declines in average marketing year prices would potentially increase the amount of ARC-CO and ARC-IC payments for 2019 for producers who are already likely to be eligible for payments, if they have not reached the maximum payout level. It could also make a few more counties potentially eligible for some ARC-CO corn and soybean payments in 2019. PLC corn and soybean payments for 2019 still seem unlikely at this time, as do ARC payments. -CO for corn in many counties.
Why is it important to communicate with your farm lender, farm management advisors and family partners during the financial challenges we are currently facing?
Think of agricultural lenders, farm business management instructors, marketing advisors and other consultants as informal partners in an agricultural business. Agricultural lenders and others can be a valuable resource for making management decisions and understanding some of the emergency financing tools that may be available. It is best to include all partners and family members who are part of the farm business in the discussion process, so that all key players are “on the same page” regarding financial decisions and adjustments that may affect the farm business. The additional financial hardship caused by the coronavirus is also adding a lot of personal stress to farmers and their families. Families are encouraged to use free resources available at the state and local level to help them in these situations.
Kent Thiesse is an agricultural management analyst and senior vice president at MinnStar Bank, Lake Crystal, Minn.