economic impacts of covid -19 · extension and outreach/department of economics one payment, two...

Extension and Outreach/Department of Economics

Economic Impacts of COVID-19

May 29, 2020

Chad HartAssociate Professor/Crop Marketing Specialist

[email protected]

mailto:[email protected]


July 2020 Corn Futures

Source: CME Group


July 2020 Soy Futures

Source: CME Group


June 2020 Lean Hog Futures

Source: CME Group


June 2020 Live Cattle

Futures

Source: CME Group


May 2020 Class III

Milk Futures

Source: CME Group


Coronavirus Food Assistance Program$19 billion program formed from several pieces of legislation and existing USDA authority

$3 billion for food purchases and redistribution

$16 billion for direct support to agricultural producers

Direct support triggered by 5% or greater decline in price or losses due to supply chain disruptions from COVID-19

Source: Farmers.gov/cfap


Coronavirus Food Assistance Programwww.farmers.gov/cfap



Eligible CommoditiesNon-specialty crops:

malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat, and hard red spring wheat

Wool

Dairy

Livestock: cattle, hogs, and sheep

Specialty crops: over 40 commoditiesSource: Farmers.gov/cfap


One Payment, Two Funding SourcesOf the $16 billion in direct support:

• $9.5 billion comes from the CARES Act• Covering price losses from January to April

• $6.5 billion comes from the CCC Charter Act• Covering losses due to on-going market

disruptions



CARES Act

CCC


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Thank you for your time!

Any questions?

My web site:http://www2.econ.iastate.edu/faculty/hart/

Iowa Farm Outlook:http://www2.econ.iastate.edu/ifo/

Ag Decision Maker:http://www.extension.iastate.edu/agdm/

http://www2.econ.iastate.edu/faculty/hart/

http://www2.econ.iastate.edu/ifo/

http://www.extension.iastate.edu/agdm/


Iowa State University is an equal opportunity provider. For the full non-discrimination statement or accommodation inquiries, go to www.extension.iastate.edu/diversity/ext.

Iowa State University ofrece igualdad de oportunidades. Para ver la declaración completa de no discriminación o para consultas de acomodación, siga a este vinculo:www.extension.iastate.edu/diversity/ext.

http://www.extension.iastate.edu/diversity/ext

http://www.extension.iastate.edu/diversity/ext

Coronavirus FoodAssistance Program(CFAP)

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CFAP General• Signup Dates

• May 26, 2020 to August 28, 2020

• AD-3114, CFAP Application• One application per producer• Producer Certification

• Documentation is only required upon spot check or when requested by COC

• Completed AD-3114 can be submitted to any USDA Service Center• All USDA Service Centers are currently closed to the public• Find your center: https://offices.sc.egov.usda.gov/locator/app• We continue to serve our customers through phone appointments,

email, and mail• Recording County is responsible for acting on approval/disapproval• Applications can be found at www.farmers.gov/cfap and can be

faxed, emailed, or mailed to the office. For those without internet access, please call the county office to request a mailed application

https://offices.sc.egov.usda.gov/locator/app

http://www.farmers.gov/cfap

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CFAP – Eligible Commodities

• Non-Specialty Crops and Wool• Producer will need to provide the following on an AD-3114:

• Total 2019 production for each crop • Self-certified inventory, subject to price risk as of January 15, 2020

• Eligible inventory for the purpose of non-specialty crops and wool is the lesser of self-certified inventory, subject to price risk, as of January 15, 2020, or 50 percent of the eligible producer’s 2019 production of that commodity.

• Note: For CFAP purposes only, any 2019 wool will include wool production from January 1-April 15, 2020, as long as the sheep were owned on January 15.

• Example: • 2019 Total Production: 65,000 bu• Inventory subject to price risk as of January 15: 50,000 bu

• Eligible Inventory for CFAP: 32,500 bu (50% of 2019 total production)

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CFAP – Eligible Commodities

• Non-Specialty• CARES Act Formula

• Eligible Inventory x 50% x CARES Act Rate (in table below)• 32,500 X 50% X .32 = $5,200

• CCC Charter Act Formula• Eligible Inventory x 50% x CCC Rate (in table below)

• 32,500 X 50% X .35 = $5,687.50Commodity Unit of Measure CARES Act Rate CCC RateCanola LB $0.01 $0.01 Corn BU $0.32 $0.35 Durum Wheat BU $0.19 $0.20 HRS Wheat BU $0.18 $0.20 Malting Barley BU $0.34 $0.37 Millet BU $0.31 $0.34 Oats BU $0.15 $0.17 Sorghum BU $0.30 $0.32 Soybeans BU $0.45 $0.50 Sunflowers LB $0.02 $0.02 Upland Cotton LB $0.09 $0.10 Wool (graded, clean basis) LB $0.71 $0.78 Wool (non-graded, greasy basis) LB $0.36 $0.39

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CFAP – Intended Uses

• County Offices have access to conversion factors to use on commodities such as silage, etc.

• Example: Farmer A’s corn was harvested as silage. All production is weighed at 739.5 tons of corn silage. The actual corn grain production for that year would be 5,872 bushels. (739.5 tons x 7.94 bu. per ton = 5,872 bushels)

• Intended Use table – 1-CFAP, Par. 137

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CFAP – ContractsMarketing Contract Eligibility for CFAP

Type of Contract in Existence before Jan. 15, 2020 Explanation

Contracts Eligible for CFAP

Basis Contract Producer locks in a basis leaving the future price to be set later.

Basis Fixed Contract

No Price Established Producer delivers commodity without setting a sales price.

Delayed Price

Deferred Price Contract

Contracts Ineligible for CFAP

Cash Contract Producer receives a cash price for a commodity when sold.

Fixed Price Contract

Forward Price Contract Producer receives a cash price for a commodity based on a future delivery.Cash Forward Contract

Minimum Price Contract Producer locks in the cash price and buys a call option to establish a minimum price. The net cash price will never be less than the original cash value minus the cost of the call option.

Option ContractWindow Contract

Hedge to Arrive Producer locks in a futures price leaving the basis to be set later.Futures Fixed Contract

Futures Contract

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CFAP – Specialty Crops

• Specialty• Producers of specialty crops are eligible for CFAP

payments for the following categories:• Sales: Crops that suffered a national 5-percent-or-greater price loss

between mid-January and mid-April as a result of the COVID-19 pandemic (using CARES Act funds)

• Delivered and unpaid: Crops that were shipped but subsequently spoiled due to loss of marketing channel (using CARES Act funds)

• Not delivered: Crops that had shipments that did not leave the farm or mature crops that remained unharvested (using CCC funds)

• The first two categories will be paid a $/pound and the last category will be paid a $/acre\

• For eligible crops and rates, producers can refer to: https://www.farmers.gov/cfap

https://www.farmers.gov/cfap

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CFAP – Livestock

• Livestock• Eligible livestock will be paid the sum of the results of

• Part 1 – CARES Act Funds• Payment is calculated by multiplying the number of livestock sold between January

15 and April 15, 2020 by the payment rate per head (livestock must have been owned by the producer on January 15, any offspring born from that same inventory are eligible)

• Part 2 – CCC Charter Act Funds• Payment is calculated by multiplying the highest livestock inventory between April

16, 2020 and May 14, 2020 by the payment rate per head

CFAP 23

CFAP – Livestock

• Livestock, further defined• Feeder cattle less than 600 pounds means cattle weighing less than 600 pounds.• Feeder cattle 600 pounds or more means cattle weighing more than 600 pounds

but less than slaughter cattle-fed cattle as defined.• Slaughter cattle-fed cattle means cattle with an average weight of 1,400 pounds

(including cattle with a weight of 1,200 – 1,600 pounds) which yield average carcass weights of 800 pounds and are intended for slaughter.

• Slaughter cattle-mature cattle means culled cattle raised or maintained for breeding purposes, but which were removed from inventory and are intended for slaughter.

• All other cattle mean commercially raised or maintained bovine animals not meeting the definition of another category of cattle in this rule excluding beefalo, bison, and animals used for dairy production or intended for dairy production.

• Hogs means any swine 120 pounds or more.• Pigs means any swine weighing less than 120 pounds.• Lambs and yearlings mean all sheep less than 2 years old.

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CFAP – Livestock examples

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CFAP – Livestock examples, cont’d…

CFAP 26

CFAP – Dairy• Eligible Dairy Operations

• Eligible Dairy Operations who commercially market milk in the US are eligible for CFAP

• Eligible Milk Production• milk commercially marketed for the months of January,

February, and March 2020• dumped milk during the months of January, February, and

March 2020

• CFAP Payments for eligible milk production will be the sum of the results from the following two formulas:

• Part 1 (funded by CARES Act) will pay $0.0471 per pound of the three-month milk production

• Part 2 (funded by CCC) will pay $0.0147 per pound of the three-month milk production with an adjustment factor of 1.014

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CFAP – Value Loss

• Value Loss Crops• USDA is continuing to review data associated with the

impact of COVID-19 on value loss crops, such as aquaculture. Specific value loss crops that meet the eligibility criteria will be identified in the future.

CFAP 28

CFAP - Eligibility• Conservation/Compliance (HELC & WC) requirements are

applicable to CFAP participants• Highly Erodible & Wetland Compliance required

• Payment Limitation• Actively Engaged in Farming and Cash Rent Tenant provisions are

NOT applicable to CFAP• Total CFAP Payment Limitation is $250,000 for all commodities

• Partnerships or Joint Ventures have a $250,000 Payment Limitation per “Partner” or “Member”

• Optional INCREASE in Payment Limitation for Corporations, LLC, and Limited Partnerships

• CFAP applicants that are Corporations, LLCs and/or Limited Partnerships may request an “Increase” in the $250,000 Payment Limitation to either $500,000 or $750,000 if each of the additional members, not to exceed three, EACH provide at least 400 hours or more of active personal labor or management or a combination of labor and management. The maximum Payment Limitation amount for the above entities meeting the required contributions of labor and/or management is $750,000

CFAP 29

CFAP – Eligibility, cont’d…• Direct Attribution requirements

• CFAP payments will be attributed down to the individual members of an entity to the 4 level, starting with the direct payment entity. This means CFAP payments made directly or indirectly to an individual cannot exceed $250,000 in total

• Common Attributions rules for minors to parents are NOT applicable to CFAP payments

• Adjusted Gross Income (AGI) requirements• AGI is applicable to CFAP utilizing the 2020 program year. The average AGI

cannot exceed $900,000 for the three applicable years, 2016, 2017 & 2018. 2019 is not utilized in the calculation. Form CCC-941 is required to be completed for individuals and entities, including members of entities

• EXCEPTION: If at least 75% of the persons or entity’s average AGI is derived from farming, ranching, or forestry operations, then the $900,000 AGI is not applicable. Form CCC-942 is required to be submitted by the producer and a CPA is required to sign or provide a CPA statement attesting to the 75% requirement listed above

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farmers.gov/cfap

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CFAP – Calculator

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CFAP – Calculator

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CFAP – Calculator

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CFAP – Calculator

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CFAP – Calculator

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CFAP – Calculator

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Questions

• Justin Muir• [email protected]

• Katie Kramer• [email protected]



economic impacts of covid -19 · extension and outreach/department of economics one payment, two...

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