The CARES Act 2.0 now makes farms and other agricultural programs eligible for the additional $60 billion set aside for the EIDL program under the new law. 

With the enactment of the Paycheck Protection Program and Health Care Enhancement Act (CARES Act 2.0), agricultural businesses and farmers previously excluded from the Small Business Administration's (SBA) Economic Injury Disaster Loan (EIDL) program are now eligible for EIDL grants and loans. Additionally, the U.S. Department of Agriculture’s newly announced Coronavirus Food Assistance Program (CFAP) offers aid to farms and certain livestock producers through direct payments and bulk purchases. This Alert provides a brief overview of these new aid programs for the agricultural industry.

Economic Injury Disaster Loan Program

On April 24, 2020, President Trump signed the Paycheck Protection Program and Health Care Enhancement Act (aka CARES Act 2.0) into law. Among other things, the CARES Act 2.0 provides additional funding for programs created by the first CARES Act enacted in March, including the Paycheck Protection Program (PPP) and the EIDL program, each of which is administered by the SBA.

Under the CARES Act, “agricultural enterprises” were not eligible for loans or grants under the EIDL program. The SBA defines “agricultural enterprises” as “those small business concerns engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural-related industries.”

However, the CARES Act 2.0 now makes farms and other agricultural programs eligible for the additional $60 billion set aside for the EIDL program under the new law. Agricultural businesses can use loans or grants provided by the EIDL program to pay working capital needs such as fixed debts, payroll, accounts payable and other bills that the business cannot pay because of COVID-19. The EIDL grants are limited to $1,000 per employee up to a maximum of $10,000, and loans of up to $2 million under the EIDL program are available with an interest rate of 3.75 percent.

Coronavirus Food Assistance Program

On April 17, 2020, the U.S. Department of Agriculture (USDA) announced details of the CFAP, which will use funding from the CARES Act, the Families First Coronavirus Response Act (FFCRA) and the Commodity Credit Corporation (CCC) to provide a $19 billion relief package to the agricultural industry, including $16 billion of direct payments to farmers and $3 billion of bulk government purchases.

Direct Payments

The USDA is authorized to dispense $16 billion in direct grants to farmers and ranchers who are suffering as a result of the COVID-19 pandemic. Support will be calculated based on agricultural producers’ actual losses where prices and market supply chains have been impacted by short-term oversupply caused by the COVID-19 pandemic. These payments will provide financial assistance to producers facing adjustment and marketing costs resulting from lost demand.

Of this $16 billion, it is expected that:

• The livestock industry will receive $9.6 billion (including $5.1 billion for cattle, $2.9 billion for dairy and $1.6 billion for hogs);
• Producers of row crops will receive $3.9 billion;
• Specialty crop producers will receive $2.1 billion; and
• All other crop producers will receive $500 million.

Significantly, some livestock sectors, such as poultry and lamb, have not yet been referenced in any provisions. However, it is expected that producers of crops and livestock not specifically mentioned in CFAP’s provisions will have the opportunity to demonstrate losses to the Farm Service Agency (FSA) and the Agricultural Marketing Service (AMS) on a case-by-case basis in order to receive CFAP support.

Moreover, not all members of the agriculture sector will be able to receive support. One group that is currently excluded from this program is the ethanol industry. It is also unclear to what extent the program will cover aquaculture. However, it should be noted that the U.S. Department of Commerce has been provided with $300 million to support seafood and aquaculture, but it is unknown if this funding will be designated for domestic aquaculture or international fishing.

Although program details on eligibility, rates and implementation have not yet been released, the USDA expects to start reviewing CFAP applications for direct payments in May and send approved payments to producers by early June.

USDA Purchase and Distribution Program

In addition to direct payments to farmers, the USDA intends to allocate $3 billion to purchase $100 million per month of each of the following kinds of products: (1) fruits and vegetables, (2) dairy products and (3) meat products. The USDA will work with regional and local distributors to distribute these products to food banks and faith-based organizations across the country.

Implications for Farmers and Agricultural Businesses

The COVID-19 pandemic has forced restaurants, hotels and cafeterias to cancel food orders at unprecedented levels, which has caused enormous economic hardship to farmers and agricultural businesses. With the new eligibility changes to the EIDL program and the CFAP, the agricultural industry has significant opportunities for federal relief.

About Duane Morris

Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage. 

For More Information

If you have any questions about this Alert, please contact Geoffrey M. Goodale, Michael E. Barnicle, Max W. Fargotstein, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.