How the federal $19B coronavirus relief fund can help farmers and food producers

Dive Brief:

  • The USDA announced a $19 billion relief package for the U.S. agriculture industry to help food producers who have experienced “unprecedented losses,” Agriculture Secretary Sonny Perdue said last week at a White House news conference.
  • The financial support will include $16 billion in direct payments to farmers and ranchers: $9.6 billion to livestock, $3.9 to row crop producers, $2.1 billion to specialty crop producers and $500 million for other crops. Additionally, the USDA will purchase $3 billion in fresh produce, dairy and meat, which will then be distributed through the nation’s food banks.
  • In conjunction with this program, the USDA said it will tap into other funding sources, including $873.3 million in Section 32 funding, which is available to purchase agricultural products for distribution to food banks and $600 million earmarked in the FFCRA and CARES Act for food purchases.

Dive Insight:

This bailout package is intended to assist an industry that is deeply affected by the closure of food service, schools and restaurants. In addition to revenue losses from these closures, food producers nationwide have been forced to destroy tens of millions of pounds of fresh products. In an attempt to head this off, the government is stepping in to provide billions in purchases and aid. However, it will likely only serve as temporary relief.

While this step is a welcome one, it will not solve all of the industry’s problems. Sen. John Hoeven, chairman of the Agriculture Appropriations Committee, outlined the requirements and limitations associated with obtaining federal aid, which will only partially compensate for the losses experienced by producers across the nation.

For direct assistance payments, the USDA is limiting the threshold to $125,000 per commodity with an overall limit of $250,000 per individual or entity. This may not be much help for large farms that focus on one commodity and do not have a diversified product mix on which to fall back on. For all applicants, approval for program participation is contingent on proving the commodity in question has experienced a 5% price decrease between January and April, and then producers are eligible for 85% compensation for their losses during that period. For the future, expected losses will be covered at 30% between April 15 and the next two quarters.

“The payments will provide short term assistance to replace lost revenue, but they don’t address the underlying problem, which primarily is massive demand destruction,” Cornell University agricultural economist Andrew Novakovic told Food Dive in an email. Without reigniting demand for commercial-scale agricultural products, the industry will continue to contend with a glut that is currently being transformed into food waste.

According to the International Dairy Foods Association, 5% of the country’s milk supply is being dumped by producers, and experts predict the rate will double if quarantine closures continue in the coming months. The Wall Street Journal reported labor shortages and shrinking demand have caused U.S. cattle prices to fall 19% so far this year, even as retail sales are up. With more than half of seafood buyers closed, many of the country’s fisheries have reported sales dropping as much as 95%, and thousands of commercial fishers are at risk of bankruptcy. Poultry has also been affected, with The New York Times reporting Sanderson Farms destroyed 5.5% of its total egg production and considered euthanizing chickens in lieu of selling them at unprofitable rates.

Although intended to help the industry as a whole, within this direct assistance program there is a gap. Row crops, dairy, hogs and cattle are covered, but poultry and seafood are missing from the list of eligible producers. However, poultry and seafood appear to be eligible for the USDA’s secondary program, in which the department will purchase $3 billion in food from local producers and distributors. The USDA estimates it will buy $100 million per month in fresh fruits and vegetables, $100 million per month in a variety of dairy products, and $100 million per month in meat products. 

The pinch for the seafood industry has been particularly bad. In late March, U.S. seafood companies, including Trident, Pacific Seafoods, High Liner, Cargill and Fortune International, wrote a letter to the Trump administration to ask for support. The coalition suggested the federal government appropriate $500 million to buy surplus commercial seafood that could be shipped overseas or supplied to domestic organizations, expand USDA funding levels by at least $2 billion to support seafood supply chains and provide $1.5 billion to the Department of Commerce to help with relief for fishery disasters. This new influx of aid does not reach the industry’s proposed levels to keep seafood producers afloat.

The funding for dairy is also likely not enough to significantly turn around the fortunes of producers and farmers. Jim Mulhern, president and CEO of the National Milk Producers Federation, wrote in a letter to Agriculture Secretary Sonny Perdue at the end of March that over the last five weeks, the USDA’s “estimate of 2020 milk prices reflect a drop of about $2.85 billion at the farm level.” 

Still, this governmental assistance will be a life raft for many companies that are learning to cope with a new set of demands in a new market demographic. With continued uncertainty surrounding the duration of quarantine measures and foodservice closures — every dollar counts.

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