Expansion of the Coronavirus Food Assistance Program Begins September 21

WASHINGTON, Sept. 18, 2020 – President Donald J. Trump and U.S. Secretary of Agriculture Sonny Perdue today announced up to an additional $14 billion for agricultural producers who continue to face market disruptions and associated costs because of COVID-19. Signup for the Coronavirus Food Assistance Program (CFAP 2) will begin September 21 and run through December 11, 2020.

“America’s agriculture communities are resilient, but still face many challenges due to the COVID-19 pandemic. President Trump is once again demonstrating his commitment to ensure America’s farmers and ranchers remain in business to produce the food, fuel, and fiber America needs to thrive,” said Secretary Perdue. “We listened to feedback received from farmers, ranchers and agricultural organizations about the impact of the pandemic on our nations’ farms and ranches, and we developed a program to better meet the needs of those impacted.”

Background

The U.S. Department of Agriculture (USDA) will use funds being made available from the Commodity Credit Corporation (CCC) Charter Act and CARES Act to support row crops, livestock, specialty crops, dairy, aquaculture and many additional commodities. USDA has incorporated improvements in CFAP 2 based from stakeholder engagement and public feedback to better meet the needs of impacted farmers and ranchers.

Producers can apply for CFAP 2 at USDA’s Farm Service Agency (FSA) county offices. This program provides financial assistance that gives producers the ability to absorb increased marketing costs associated with the COVID-19 pandemic. Producers will be compensated for ongoing market disruptions and assisted with the associated marketing costs.

CFAP 2 payments will be made for three categories of commodities – Price Trigger Commodities, Flat-rate Crops and Sales Commodities.

Price Trigger Commodities

Price trigger commodities are major commodities that meet a minimum 5-percent price decline over a specified period of time. Eligible price trigger crops include barley, corn, sorghum, soybeans, sunflowers, upland cotton, and all classes of wheat. Payments will be based on 2020 planted acres of the crop, excluding prevented planting and experimental acres. Payments for price trigger crops will be the greater of: 1) the eligible acres multiplied by a payment rate of $15 per acre; or 2) the eligible acres multiplied by a nationwide crop marketing percentage, multiplied by a crop-specific payment rate, and then by the producer’s weighted 2020 Actual Production History (APH) approved yield. If the APH is not available, 85 percent of the 2019 Agriculture Risk Coverage-County Option (ARC-CO) benchmark yield for that crop will be used.

For broilers and eggs, payments will be based on 75 percent of the producers’ 2019 production.

Dairy (cow’s milk) payments will be based on actual milk production from April 1 to Aug. 31, 2020. The milk production for Sept. 1, 2020, to Dec. 31, 2020, will be estimated by FSA.

Eligible beef cattle, hogs and pigs, and lambs and sheep payments will be based on the maximum owned inventory of eligible livestock, excluding breeding stock, on a date selected by the producer, between Apr. 16, 2020, and Aug. 31, 2020.

 Flat-rate Crops

Crops that either do not meet the 5-percent price decline trigger or do not have data available to calculate a price change will have payments calculated based on eligible 2020 acres multiplied by $15 per acre. These crops include alfalfa, extra long staple (ELS) cotton, oats, peanuts, rice, hemp, millet, mustard, safflower, sesame, triticale, rapeseed, and several others.

Sales Commodities

Sales commodities include specialty crops; aquaculture; nursery crops and floriculture; other commodities not included in the price trigger and flat-rate categories, including tobacco; goat milk; mink (including pelts); mohair; wool; and other livestock (excluding breeding stock) not included under the price trigger category that were grown for food, fiber, fur, or feathers. Payment calculations will use a sales-based approach, where producers are paid based on five payment gradations associated with their 2019 sales.

Additional commodities are eligible in CFAP 2 that weren’t eligible in the first iteration of the program. If your agricultural operation has been impacted by the pandemic since April 2020, we encourage you to apply for CFAP 2. A complete list of eligible commodities, payment rates and calculations can be found on farmers.gov/cfap.

Eligibility

There is a payment limitation of $250,000 per person or entity for all commodities combined. Applicants who are corporations, limited liability companies, limited partnerships may qualify for additional payment limits when members actively provide personal labor or personal management for the farming operation. In addition, this special payment limitation provision has been expanded to include trusts and estates for both CFAP 1 and 2.

Producers will also have to certify they meet the Adjusted Gross Income limitation of $900,000 unless at least 75 percent or more of their income is derived from farming, ranching or forestry-related activities. Producers must also be in compliance with Highly Erodible Land and Wetland Conservation provisions.

Applying for Assistance

Producers can apply for assistance beginning Sept. 21, 2020. Applications will be accepted through Dec. 11, 2020.

Additional information and application forms can be found at farmers.gov/cfap. Documentation to support the producer’s application and certification may be requested. All other eligibility forms, such as those related to adjusted gross income and payment information, can be downloaded from farmers.gov/cfap/apply. For existing FSA customers, including those who participated in CFAP 1, many documents are likely already on file. Producers should check with FSA county office to see if any of the forms need to be updated.

Customers seeking one-on-one support with the CFAP 2 application process can call 877-508-8364 to speak directly with a USDA employee ready to offer assistance. This is a recommended first step before a producer engages with the team at the FSA county office.

All USDA Service Centers are open for business, including some that are open to visitors to conduct business in person by appointment only. All Service Center visitors wishing to conduct business with FSA, Natural Resources Conservation Service or any other Service Center agency should call ahead and schedule an appointment. Service Centers that are open for appointments will pre-screen visitors based on health concerns or recent travel, and visitors must adhere to social distancing guidelines. Visitors are also required to wear a face covering during their appointment. Our program delivery staff will be in the office, and they will be working with our producers in the office, by phone and using online tools. More information can be found at farmers.gov/coronavirus.

Estimating 2019 Ohio Agricultural Risk Coverage and Price Loss Coverage County Level Payment Rates

By Ben Brown, Department of Agricultural, Environmental and Development Economics, The Ohio State University- August 25, 2020

Click here to access complete article as PDF

Agricultural producers across the United States are periodically allowed to enroll in federal commodity programs offered through the Federal Government. These programs contribute to a public safety net protecting against variations in year to year revenue due to reductions in production, price or both. Since the 1930s, Congress has authroized a federal Farm Bill every 5-7 years providing a variety of programs to producers, agribusinesses, landowners, and consumers. Economic conditions, producer preferences, world integration, and political appetite have influenced the federal safety net over the last 90 years causing introduction, implemetnation, and in some cases repeal of programs. The current suite of Title 1. commodity programs authroized in The Agricultural Adjustment Act of 2018 (2018 Farm Bill) includes: two revenue protection programs for row crop producers through Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, Marketing Assistance Loans (MAL), and programs for dairy and sugar producers. In some cases an election must be made between programs to complete enrollment. This article estimates county based ARC and PLC payments for enrolled Ohio producers for the 2019 program year, which ends September 30, 2020. In the case payments are triggered, distribution to producers will happen later in 2020 calendar year.

Introduction

Enrollment dates for federal commodity programs depend on specifics in the implementing documents, but regularly occur every fiscal year. Election into programs does not have to match enrollment. For instance, the 2018 Farm Bill allowed producers one election period between ARC and PLC for 2019 and 2020 program years combined (September 1, 2019- March 15, 2020), but had two separate enrollment periods (program year 2019: September 1, 2019- March 15, 2020 and program year 2020: October 1, 2019- June 30, 2020). For 2021, 2022 and 2023 program years, enrollment and election periods will happen simultaneously (October 1- March 15). Producers will also be allowed to adjust their elections between ARC and PLC starting in the 2021 program year (October 1, 2020- March 15, 2021.) Payments are calculated and distributed at the conclusion of the program year.

The ARC program provides shallow loss revenue protection using yields and national Marketing Year Average (MYA) prices to calculate a historical revenue benchmark. Payments are triggered when the product of current year yields and the commodity specific national MYA price falls below 86% of the historical benchmark. Producers have the option between two versions of ARC: ARC-Individual (ARC-IC) and ARC-County (ARC-CO). Yields provided by invidual Farm Service Agency (FSA) farm numbers are used for ARC-IC; whereas, county area yields are used for ARC-CO. The PLC program is a shallow loss protection program using an nationwide effective reference price per commodity as the benchmark. PLC payments trigger when the national MYA price falls below the effective reference price. More information about ARC and PLC program mechanics can be found in The Ohio State Unviersity’s Guide to the 2018 Farm Bill Commodity Programs (Brown, Griffith, and Zoller,  2019).

Data and Methodology

The payment rates presented in this article are estimates calculated by the author as of the published date. Official ARC-CO and PLC payment rates are released by FSA typically in October of the following year. Payments to FSA farmer numbers enrolled in ARC-IC are individual to the farm and cannot be estimated on a county wide basis. Noteworthy, the 2018 Farm Bill blends ARC-CO yields across county lines based on share of acres enrolled by that FSA Farm in each county.

Yields

Historical yields (2013-2017) for ARC-CO are provided by FSA. The 2019 program year is the first-year historical yields were trend adjusted, as the 2014 Farm Bill used reported yields in the historical benchmark calculation. County yields used in this article for ARC-CO are author calculations using 2019 Risk Management Association (RMA) area yields weighted by irrigation practice. A previous article explains these yield estimates (Brown, 2020). County yields may differ from these estimates, as FSA reserves the right to adjust ARC-CO yields.

For the PLC program, the national payment rate per bushel is multiplied by the individual FSA farm yield on file. Producers have the option to update their FSA farm yields by commodity for program year 2020 and any future years or programs using these values up to September 30, 2020. More information on PLC Yield Updates can be found in the OSU Farm Bill Handbook. For program year 2019, PLC yields match FSA farm yields used under the 2014 Farm Bill.

National Prices

National MYA prices are not official for the 2019/20 marketing year for all commodities. Wheat has a marketing year that runs June 1- May 31, whereas corn and soybean have marketing years that run September 1- August 31. National MYA prices are calculated by multiplying the monthly commodity price received by producers and the percent of the crop estimated to have been marketed that month. The national MYA is often higher than producer prices in areas with relatively weak basis values and lower than producer prices in areas with relatively strong basis values. The estimated MYA prices used in this report are calculated by using National Agriculture Statistics Service reported prices for months available: June through May on Wheat and September through June for corn and soybeans. Futures prices with a national average basis adjustment are used for July and August in the case of corn and soybeans. All months are then multiplied by a 5-year average marketing weight. The estimated national MYA prices used for ARC and PLC are included in Table 1.

The 2018 Farm Bill created commodity specific effective reference prices building on the reference prices congressionally set in the 2014 Farm Bill. Effective reference prices for program year 2019 are included in Table 1.

 Table 1. 2019 Effective Reference Prices and Estimated 2019-20 Market Year Average Prices

 

2018 Statutory Reference Price 2019 Effective Reference Price 2019/20 Market Year Average Price PLC Payment Rate ($/bu.)
Corn $3.70/bu. $3.70/bu. $3.58/bu. $0.12/bu.
Soybeans $8.40/bu. $8.40/bu. $8.60/bu. $0.00/bu.
Wheat $5.50/bu. $5.50/bu. $4.61/bu. $0.89/bu.

2019 Corn ARC-CO and PLC Estimates

Figures 1, 2, 3, and 4 illustrate estimated corn ARC-CO and PLC payment rates per county. The payment rates listed have been adjusted to pay out on 100% of a producer’s eligible base acres. Without the adjustment, producers would need to multiply their eligible base acres by 85%. Payments have also been reduced by an anticipated government sequestration of 6.8%.

Illustrated in Figure 1 are the rates for Ohio ARC-CO corn payments for those counties with no separation in irrigation practices. As mentioned earlier, some counties have both an irrigated and nonirrigated ARC-CO program. Four Ohio counties have both an irrigated and nonirrigated corn program: Champaign, Pickaway, Ross, and Williams. The payment rates for these counties by irrigated and nonirrigated yields are illustrated in Figures 2 and 3, respectively. Thirty Ohio counties are expected to trigger ARC-CO corn payments with an average payment of $33/eligible corn base acre with a range of $0-$66 per acre.

 

Ohio corn PLC estimated rates per county are illustrated in Figure 4. As a reminder PLC rates are sensitive to the MYA price as every $0.05 per bushel change in the MYA price translates to $8-$10 per acre. PLC rates are multiplied by the FSA farm yield instead of the county average yield used by the author. County average yields are meant to represent all farms in a county but will be low for some farm numbers and higher for others. With an estimated $0.12 per bushel payment triggered across the country, most Ohio producers should see a payment between $8-$13 per acre payments, a much smaller range in payments compared to ARC-CO. Ohio corn participation rates between ARC and PLC are not known, but 76% of producers nationwide elected PLC for program year 2019. University decision tools ubiquitously forecasted large 2020 program year PLC payments with few expecting 2019 program year payments. Reduction in ethanol production due to COVID-19 lowered the 2019/20 MYA price and increased the probability of PLC payments.

2019 Soybean ARC-CO and PLC Estimates

Figures 5, 6, 7, and 8 illustrate estimated soybean ARC-CO and PLC payment rates per county. Like corn, payments have been adjusted to apply on 100% of base acres and a 6.8% sequestration.

Illustrated in Figure 5 are the rates for Ohio ARC-CO soybean payments for those counties with no separation in irrigation practices. Eleven Ohio counties have both an irrigated and nonirrigated soybean program: Allen, Auglaize, Champaign, Hardin, Putnam, Seneca, Shelby, Union, Ver Wert, Williams, and Wyandot, represented in grey. The payment rates for these counties by irrigated and nonirrigated yields are illustrated in Figures 6 and 7, respectively. Fifty Ohio counties are expected to trigger ARC-CO soybean payments. Of those counties triggering payments, the average payment is $26/eligible base acre with a range of $0-$48. Three counties (Belmont, Monroe and Noble) did not have sufficient yield data or base acres enrolled in ARC-CO.

It is not likely soybeans will trigger a PLC payment in program year 2019.  With an effective reference price of $8.40, the current forecasted MYA price of $8.60 is $0.20 above the required threshold. This will not be surprising to many producers as 14% of soybean base acres were enrolled in PLC, whereas 86% were enrolled in either ARC-CO or ARC-IC. During the Farm Bill election period, university decision tools did not forecast PLC payments in 2019 and only a small change of payments for program year 2020. Anecdotally, producers expressed a greater likelihood their county yields would come in lower than the historical benchmark for ARC-CO compared to the MYA falling below the effective reference price.

2019 Wheat ARC-CO and PLC Estimates

Figures 9 and 10 illustrate estimated wheat ARC-CO and PLC payment rates per county, respectively. Like corn and soybeans, payments have been adjusted to apply on 100% of base acres and a 6.8% sequestration.

Illustrated in Figure 9 are the rates for Ohio ARC-CO wheat payments. There are no Ohio counties that have both an irrigated and nonirrigated ARC-CO wheat program. County yields are weighted based on the share of irrigated and nonirrigated insured aces to create a yield for all practices. Seventy-three Ohio counties are expected to trigger ARC-CO wheat payments. Of those counties triggering payments, the average payment is $32/eligible base acre with a range of $0-$40. Twelve Ohio counties (represented in black) have missing yield data or do not have enrolled base acres of wheat for program year 2020.

 

Figure 10 illustrates the estimated wheat PLC county payment rates. Given that the marketing year for wheat has concluded, it is all but certain the national MYA wheat price will fall below the effective reference price of $5.50 per bushel. The estimates used in this report estimate a national MYA price of $4.61/bushel while the World Agricultural Outlook Board in the August World Agricultural Supply and Demand Estimates forecast a MYA price of $4.58 per bushel. A $0.03 per bushel difference amounts to roughly a $1.60 per acre payment difference. The estimates for wheat payments between ARC-CO and PLC are similar in size. University decision aides forecasted a large PLC payment for program year 2019 and potentially for program year 2020. While there was the possibility wheat would trigger ARC-CO payments it was not as large as the probability for PLC.  Nationwide 93% of producer chose PLC for eligible wheat base acres vs 7% for ARC.

Conclusion

This article estimates county level Agricultural Risk Coverage and Price Loss Coverage payment rates for program year 2019, which are expected to be announced by the Farm Service Agency later in calendar year 2020. These estimates are calculated using Risk Management Agency area yields and forecasted market year average prices in August of 2020.

  • Yields and prices may differ from these assumptions, but these estimates should provide producers with an idea of cash flow from 2018 Farm Bill authorized programs.
  • Farms with acres in multiple counties will have a blended ARC-CO yield for all enrolled acres within a specific commodity and FSA farm number. The entire data file with historical benchmarks is posted at go.osu.edu/farmbill2019
  • National participation rates show producers favored PLC for corn and wheat, but ARC for soybean base acres.
  • County corn payments are higher for ARC-CO than PLC, but not all counties are expected to trigger an ARC-CO payment. For program year 2019, all county units are expected to trigger a PLC payment while thirty county units out of ninety-three are expected to trigger ARC-CO payments.
  • No county unit is expected to trigger a PLC soybean payment while fifty out of one hundred are expected to trigger ARC-CO payments.
  • Wheat payment frequency and size are approximately the same between ARC-CO and PLC, but the majority of wheat base acres are enrolled in PLC.
  • As a reminder, enrollment for the 2021 program year starts October 1, 2020 and ends March 15, 2020.

References

Brown, B. “Evaluating Ohio Yield Possibilities for 2019 Agricultural Risk Coverage County Level Payments.” AEDE Agricultural Report 2020:014, Department of Agricultural, Environmental, and Development Economics, The Ohio State University, August 25, 2020. https://aede.osu.edu/sites/aede/files/imce/images/2019%20Ohio%20RMA%20Yields.pdf

Brown, B., M. Griffith, C. Zoller. “The Ohio State University’s Guide to the 2018 Farm Bill Commodity Programs.” AEDE Agricultural Report 2019:012 Department of Agricultural, Environmental, and Development Economics, The Ohio State University, November 12, 2019. https://aede.osu.edu/sites/aede/files/imce/images/Farm%20Bill%20Decision%20Central%20Guide_0.pdf

United States Department of Agriculture- Farm Service Agency. “2019 Covered Commodity Contract Base Acres (and Percentage) on Enrolled Farms by Program by Commodity.” https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/arc-plc/2019/pdf/enrolled_base_2019.pdf

United States Department of Agriculture- Farm Service Agency. “2019 Effective Reference Price Calculations.” August 12, 2020. https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/arc-plc/2019/pdf/2019_ERP.pdf

Specialty Crops Available for CFAP Funding

by:  Chris Zoller, Extension Educator, ANR Tuscarawas County

The United States Department of Agriculture (USDA) announced earlier this year the Coronavirus Food Assistance Program (CFAP).  Developed earlier this year, CFAP is intended to assist farmers who suffered economic losses as a result of the COVID-19 pandemic. Initial payments were made available to growers of certain non-specialty and specialty crops, dairy, livestock, and wool producers.  On July 9, 2020 USDA announced additional specialty crops eligible for economic assistance.  The list of specialty crops includes:

  • alfalfa sprouts, anise, arugula, basil, bean sprouts, beets, blackberries, Brussels sprouts, celeriac (celery root), chives, cilantro, coconuts, collard greens, dandelion greens, greens (others not listed separately), guava, kale greens, lettuce – including Boston, green leaf, Lolla Rossa, oak leaf green, oak leaf red and red leaf – marjoram, mint, mustard, okra, oregano, parsnips, passion fruit, peas (green), pineapple, pistachios, radicchio, rosemary, sage, savory, sorrel, fresh sugarcane, Swiss chard, thyme and turnip top greens.

The USDA also expanded CARES Act funding for sales losses for seven currently eligible commodities – apples, blueberries, garlic, potatoes, raspberries, tangerines and taro – because USDA found these commodities had a five percent or greater price decline between mid-January and mid-April as a result of the COVID-19 pandemic. Originally, these commodities were only eligible for marketing adjustments.

How to Apply for CFAP

Producers have several options available to apply for CFAP funding:

  • The online portal, accessible at farmers.gov/cfap, allows producers with secure USDA login credentials—known as eAuthentication—to certify eligible commodities online, digitally sign applications and submit directly to the local USDA Service Center.
  • Complete the application form using the Farm Service Agency CFAP Application Generator and Payment Calculator found at farmers.gov/cfap. This Excel workbook allows customers to input operation specific to populate the printable application form. The application form needs to be signed and submitted to a USDA Service Center.
  • Download the AD-3114 application form from farmers.gov/cfap and manually complete the form to submit to a USDA Service Center by mail, electronically or by hand delivery to an office drop box. In some limited cases, the office may be open for in-person business by appointment.

Where to Apply for CFAP Funding

Eligible growers need to contact their local Farm Service Agency (FSA) office.  Visit farmers.gov/coronavirus/service-center-status  to check the status of your local FSA office.   New customers seeking one-on-one support with the CFAP application process can call 877-508-8364 to speak directly with a USDA employee ready to offer general assistance. This is a recommended first step before a producer engages the team at the FSA county office at their local USDA Service Center.  If you have been enrolled in previous FSA programs, you may contact your local FSA office to discuss CFAP program eligibility and begin the enrollment process.

Additional Information

If you are interested in learning more about CFAP for specialty crops, please visit https://www.farmers.gov/cfap/specialty.

Tax Value of Farmland Expected to Drop

There’s a bit of good news for Ohio farmers to counter the bad news caused by COVID-19, as well as by last year’s historic rain. In counties scheduled for property value updates in 2020—about half of Ohio’s 88 counties—the average value of farmland enrolled in the Current Agricultural Use Value (CAUV) program should be about 40% lower than 2017–2019, or about $665 per acre.

That’s according to projections by researchers at The Ohio State University College of Food, Agricultural, and Environmental Sciences (CFAES).

The same projections say that in counties due for property value updates in 2021—another quarter of Ohio’s counties—average CAUV values should be about 25% less than 2018–2020, or about $760 per acre.

The declines should mean lower property taxes, on average, for most of the farmers in those counties.

The projections were published in a May report by postdoctoral researcher Robert Dinterman and Ani Katchova, associate professor and farm income enhancement chair, both of CFAES’ Department of Agricultural, Environmental, and Development Economics.

“Less money paid in property tax will help reduce farmers’ costs and allow them to keep a greater share of the revenues they bring in,” Dinterman said.

But he noted that CAUV values are “not exactly equal to the property tax someone will pay.” A farm’s total property tax bill, he said, also depends on how many taxing jurisdictions the land is subject to and the tax rate, or millage rate, within those jurisdictions.

There could “certainly be a few cases where an agricultural landowner sees a large reduction in their CAUV value but has a corresponding increase in their millage rate and ends up paying the same in property taxes,” Dinterman said.

Ohio counties update their property values, including their CAUV values, every three years on a rotating basis, with about a third of the counties seeing updates every year. The new values then apply for the next three years.

The state’s CAUV program allows farmland to be taxed based on its agricultural value instead of its full market value. Enrollment in the program, which is voluntary, “normally results in a substantially lower tax bill for working farmers,” an Ohio Department of Taxation website says.

A county’s CAUV values are based, roughly, on a formula using net farm income data from over the past five to seven years. More specifically, the data comes from a hypothetical farm producing soybeans, corn, and wheat during that period.

“In a nutshell, CAUV values are high when the previous five to seven years of farm income were high. CAUV values are low when the previous five to seven years of farm income were low,” Dinterman said.

Farmers had a boom in net income from about 2010-2014, which was partly a major cause of rising CAUV values in the past, he said.

“So now that we have been in a prolonged period of what people might consider low farm incomes, those values start to enter the CAUV formula and in turn lower their values,” Dinterman said.

“Clearly a farmer does not want to have low income, but a bit of good news that comes with that is that at least their tax bills will be a bit lower,” he said.

Dinterman and Katchova’s report also states that based on early projections, the quarter of Ohio counties scheduled for CAUV updates in 2022 will see only a small decrease in their values, about 1%, to $880 per acre.

That ties in with the researchers’ expectation that the CAUV declines won’t continue.

“We should give a bit of a warning to farmers that the recent trend we’ve seen in reduced CAUV values has plateaued,” Dinterman said.

The reason: a major legislative change to the CAUV formula—related to how capitalization rates are calculated—was started in 2017. The change was phased in, and 2020 marks the end of the phase-in.

“That phase-in over 2017–2020 helped ease into the lowest CAUV values we’ve seen since about 2012,” Dinterman said. “We’re likely to stay within a range of about $650–$900 for average CAUV values in the foreseeable future.”

Read the report at go.osu.edu/may2020cauv.

FOR MORE INFORMATION CONTACT:

Kurt Knebusch
knebusch.1@osu.edu
330-263-3776

SOURCE(S):
Robert Dinterman
dinterman.1@osu.edu

Ani Katchova
katchova.1@osu.edu

 

OSU Income Tax Schools Summer Update Federal Income Tax & Financial Update Webinar

by: Barry Ward, Director, OSU income Tax Schools

 Significant tax related changes as a result of the new legislation passed in response COVID-19 have created some questions and perhaps consternation over the past few months as taxpayers and tax professionals wrestle with how these many changes may affect tax returns this year and beyond. OSU Income Tax Schools is offering a Summer Update to address these issues and other important information for tax professionals and taxpayers.

The OSU Income Tax Schools Summer Update: Federal Income Tax & Financial Update Webinar is scheduled for August 13th and will be presented as a webinar using the Zoom platform.

John Lawrence, CPA, will teach the course that offers continuing education credits for tax professionals and attorneys. Mr. Lawrence has taught at OSU Extension tax schools for over 20 years and developed this curriculum. He retired from the IRS in 2006 and has since run his own firm in Lawrence, Indiana and Wooster, Ohio.

Webinar Content:

New tax provisions implemented by the CARES Act and Families First Coronavirus Response Act and how to account for them such as the new net operating loss rules, the payroll tax credit, etc. Paycheck Protection Program Loan Issues: loan applications, forgiveness issues and the IRS ruling on loan expenditures that are forgiven under PPP are not tax deductible and how to account for them in preparing a return, etc.

Dealing with the IRS in these difficult times.  Also, what it means to the practitioner as to “dos” and don’ts” regarding the announcement that beginning this summer the IRS will allow the electronic filing of amended returns.

The “Hot IRS Audit Issues – Pitfalls for S Corporations and Partnerships”.  Basis of entities as to the rules and related rulings, how to track basis in these entities, creation of basis where none had been computed in prior tax years, losses in excess of basis and when they are not allowed, definition of an excess distribution, taxation of excess distributions, distribution of appreciated property,  conversion of C corporations to S corporations – do and don’ts, computation of the Built-In Gains Tax, inference and imputation of a reasonable wage for purposes of the computation of the qualified business income deduction, etc.

Other rulings, developments, and cases.

Webinar personnel:

John Lawrence, CPA, John M. Lawrence & Associates: Instructor

Barry Ward, Director, OSU Income Tax Schools: Co-Host & Question Wrangler

Julie Strawser, Program Assistant, OSU Income Tax Schools: Co-Host and Webinar Manager

Details:

OSU Income Tax Schools Summer Update

Federal Income Tax & Financial Update Webinar

(Zoom Webinar)

August 13th, 2020: 10am – 3:30 (Lunch Break: Noon – 12:50pm)

Cost: $150

Registration information and link to the registration page can be found at:

https://farmoffice.osu.edu/osu-income-tax-schools

This workshop is designed to be interactive with questions from the audience encouraged.

Continuing education offered:

Accountancy Board of Ohio (5 hours)

IRS Office of Professional Responsibility (5 hours)

Continuing Legal Education, Ohio Supreme Court (4.5 hours)

 

Economic Assistance Available for Dairy Farms

by: Dianne Shoemaker, OSU Extension, shoemaker.3@osu.edu

Click here for PDF version of article

One hundred and fifty days.  In only 150 days we have gone from anticipating a solid year of recovery for the dairy industry to seeing an April Class III price of $13.07 per cwt, the lowest Class III milk price in 10 years, with May announced at $12.14 on June 8th.  In that same time period major market disruptions occurred for nearly every commodity with impacts all along the food chain.  The response to the anticipated economic impact at the farm level has been swift, with a variety of options available to assist dairy farms.   We will touch on a few of them here, including links for additional information.  Every farm should review these options and see if there are opportunities to assist with cash flow shortfalls.

PPP– Paycheck Protection Program

At the end of May, there were still funds available for the PPP.  This low-interest loan program, authorized by the CARES Act (Coronavirus Aid, Relief and Economic Assistance Act) is administered through the SBA (Small Business Administration) to assist small businesses, including farms.  The maximum loan amount is calculated as up to 2.5 months of qualifying payroll expenses as well as sole proprietor income.    While loan proceeds can be used for any business expense, if it is used for specific expenses including payroll, utilities, mortgage interest or some rental payments within a specified time period, some portion or all of the loan may be forgiven.  Farms must apply through an SBA approved lender.  Find approved lenders and more information at http://sba.gov.   Recipients must apply for loan forgiveness.  Applications for forgiveness are now available, but specific guidance on eligible items and time periods continues to be announced.

EIDL – Economic Injury Disaster Loan

This is another CARES-authorized SBA program which is currently open only for farm applications at the sba.gov website.  Farm businesses and agricultural cooperatives with no more than 500 employees may apply for EIDL, which gives loans up to $2 million for businesses that suffer economic injuries due to COVID-19.  An “emergency advance” component provides an advance of up to $10,000 even if the loan is not approved.  The advance may be forgiven if the farm does not also have a PPP loan that is forgiven.  Clarification is pending.  Approved loans will incur 3.75% interest for terms up to 30 years.  Collateral will be required for larger loans.  Applications taken on-line only.  Find more information at http://sba.gov.

CFAP – Coronavirus Food Assistance Program

The intent of this program is to directly assist farms impacted by the effects of the COVID-19 outbreak.  Sign-up began at your local FSA (Farm Service Agency) office on Tuesday, May 26th and continues through August 28th.  FSA offices currently work with clients via email, fax, and phone by appointment.

Two funding sources are being used for this program, CFAP ($9.5 billion), and CCC, the Commodity Credit Corporation, ($6.5 billion).  The sources and uses are being tracked separately by FSA, but the payments will be combined and distributed to farms as a single payment.  Payment limits have been raised for this program only, to $250,000 per farm or up to $750,000 for farms that are set up as corporations, limited liability companies, or limited partnerships (corporate entities).  If these entities have up to three shareholders who meet eligibility requirements, they may be eligible for up $750,000 of assistance.  Eligibility requirements include gross farm income levels, wetland, and conservation compliance, and for individuals involved in multiple-shareholder situations, time spent actively working or managing in the farm business.  Once a farm has been approved, they will receive a first payment of 80% of the total calculated payment up to $200,000 per entity (80% of the $250,000 payment limitation).  If there are still funds available, the remaining 20%, or a prorated amount based on remaining funds available, will be paid at a later time.

The CFAP program is based on the change in futures prices between the weeks of January 13 – 17, and April 6 – 9, 2020.  Commodities that experienced a decline of greater than 5% are included in this program.  For dairy, that decline was around 33%, or $5.88 per cwt., calculated by USDA as the weighted average of the Class III price (60%), and the Class IV price (40%) which was selected as a reasonable representation of the trend of the US all-milk price.

Dairy markets took a severe beating since January and only recently trended upward in June – and will only actually settle at decent price levels going forward if supply aligns with demand.  We cannot keep milking more and more cows.

The program’s dairy (milk) section will yield the greatest assistance to qualifying farmers.  Cull cows, bull calves and dairy steers are included in the cattle section.  Farms that sell qualifying grain crops which were subject to price risk in the first quarter of 2020 will also find assistance in that section.

CFAP Dairy Calculation

Milk produced in January, February, and March (first quarter 2020) that was not priced through a forward contract, is eligible for assistance.  The formula for dairy is:

1st quarter milk production (cwt.) x $4.71/cwt. (CARES act rate)

plus

(1st quarter milk production x 1.014) x $1.47/cwt. (CCC rate)

  • The CARES rate of $4.71/cwt represents the price loss in Jan, Feb, and March.
  • Part two of the equation applies a projected 1.4% production increase.
  • The CCC rate represents anticipated price losses in April, May, and June.

Example:

Background Information:

A herd with 100 milking cows ships an average of 80 pounds of milk per cow per day or a total

of 7,280 cwt. of milk for the period January – March 2020 (91 days):

Dairy formula

1st quarter milk production (cwt.) x $4.71/cwt. (CARES act rate)

7,280 cwt x $4.71 = $34,288.80

+

 (1st quarter milk production x 1.014) x $1.47/cwt. (CCC rate)

(7,280 cwt x 1.014) x $1.47 = $10,851.42

Equals

$34,288.80 + $10,851.42 = $45,140.22 Total

80% or $36,112.18 will be paid shortly after the application is approved

These program payments are not subject to sequestration deductions.

The increase in payment limitations for this program has increased the assistance available to larger farms.  Using the simple example above, a herd with 500 milking cows shipping 80 pounds per cow per day would have a calculated total payment of $227,050, leaving an opportunity to apply for some assistance based on cull cows and bull calves sold between January 15 and April 15, 2020 before reaching the $250,000 payment limit.

Cull Cows

Dairy cull cows qualify for assistance in the “Slaughter Cattle – Mature Cattle” category.  The definition for these animals is “culled cattle raised or maintained for breeding purposes, but which were removed from inventory and are intended for slaughter.”  For animals sold between January 15 and April 15, the payment rate is $92 per head.  The dairy breeding stock herd is not eligible for a per-head payment.

Bull Calves, Dairy Steers

These animals, because they are going into beef production channels, qualify as either “Feeder Cattle less than 600 pounds” or “Feeder Cattle more than 600 pounds”.  Cull heifers sold for beef production would also be included in these categories depending on weight.  Animals less than 600 pounds are eligible for $102 per head (CARES Act rate) if they were sold between January 15 and April 15.  Animals greater than 600 pounds sold in the same time period are eligible for assistance at $139 per head (CARES).  For farms that finish steers (or heifers for beef) that meet weight requirements of 1,400 pounds liveweight or more with an average carcass weight greater than 800 pounds intended for slaughter are eligible for $214 per head (CARES rate).  The CCC rate applied to these animals is based on the highest inventory between 4/16/2020 and 5/14/2020.  If the farm keeps an inventory of animals for beef production, the highest inventory of animals between 4/16/2020 and 5/14/2020 is eligible for a $33 per head payment.  For cull cows, it appears that the highest inventory will be the total number of cows culled between 4/16 and 5/14.  For bull calves, the highest inventory between 4/16 and 5/14 would be equal to the largest group of calves sold in that time period.

Feed and Grain

Clarifications issued by FSA indicate that corn silage converted to bushels of grain is eligible for the CFAP program as well.  Farms that also sell grain and other eligible commodities can make application for those commodities.

Applying for CFAP

Farm Service Agency offices are working with farms via phone, fax, US mail, and internet.  Most FSA offices will ask for supporting documentation for milk and livestock sales at the time of application.  Participating farms should also keep records of those sales for at least three years.

At the FSA office, information is collected via a user-friendly spreadsheet found along with additional program information at  https://www.farmers.gov/cfap.  Farmers who have not previously applied for FSA programs can find information for first-time applicants at this web site or call 877-508-8364 for additional assistance.  While documentation is not collected at time of application, it may be requested for verification or spot checking during the next three years.

Dairy prices have taken tremendous hits, which were painfully obvious in the April final milk checks.  The Class III milk price of $13.07 is the lowest since April 2010 and even with a positive producer price differential of $1.15, well below cost of production. May will be more of the same.

These programs will help with some of the resulting cash shortfall.  Find more information about all these programs and others that may assist with COVID-19 related employee-related leave and unemployment issues at http://dairy.osu.edu and http://farmoffice.osu.edu.

Dairy farms are facing huge challenges this spring and have to make many unanticipated decisions.  Our OSU Dairy Working Group is responding with DIBS (Dairy Issue Briefs) to help inform those decisions.  These “breaking news” DIBS are posted regularly at http://dairy.osu.edu

 

 

Farm Office Live Webinar Slated for Thursday, June 11 at 9:00 a.m.

OSU Extension is pleased to be offering the a “Farm Office Live” session on Thursday morning, June 11 from 9:00 to 10:30 a.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the two weeks.  Topics to be highlighted include:

  • Updates on the CARES Act Payroll Protection Program
  • Prevent Plant Update
  • Business & Industry CARES Act Program
  • EIDL Update
  • CFAP- update on beef classifications and commodity contract eligibility
  • Dicamba Court Decision Update
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Thursday morning at  https://go.osu.edu/farmofficelive 

 

Navigating Direct Support for Ohio’s Farmers and Ranchers Webinar on May 27 at 9:30 am

Join OSU Extension’s Ben Brown and Dianne Shoemaker for a webinar  on “Navigating Direct Support for Ohio’s Farmers and Ranchers” on Wednesday, May 27, 2020 at 9:30 am with special guest, Ohio Farm Service Agency Director Leonard Hubert.  This webinar is generously produced and distributed by Ohio Ag Net.

This webinar is produced and distributed by Ohio Ag Net.

The webinar will be available for viewing at https://farmoffice.osu.edu/, or through Ohio Ag Net’s Facebook Live Video.

Sign up for USDA-CFAP Direct Support to Begin May 26, 2020

Ben Brown, Peggy Kirk Hall, David Marrison, Dianne Shoemaker and Barry Ward
The Ohio State University

Since the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020 and the announcement of the Coronavirus Food Assistance Program (CFAP) on April 17, 2020, producers in Ohio and across the country have been anxiously awaiting additional details on how the Coronavirus Food Assistance Program (CFAP) will provide financial assistance for losses experienced as a result of lost demand, short-term oversupply and shipping pattern disruptions caused by COVID-19.

The additional details on CFAP eligibility, payment limitations, payment rates, and enrollment timeline arrived on May 19, 2020, when the USDA issued its Final Rule for CFAP.  In this article, we explain the Final Rule in this issue of News from the Farm Office.

Click here to read the complete article

Starting Tuesday, May 26, 2020, producers can contact their local FSA office and begin to sign up for CFAP.  This bulletin serves as the authors’ interpretations of the Final Rule released by USDA, and FSA interpretation may be different.

OSU Extension and Ohio FSA will conduct a webinar in the upcoming days to outline program materials and answer questions. For information about the webinar and additional information on CFAP, please visit farmoffice.osu.edu.

Information provided on the program by USDA along with a webinar for new FSA program participants is available at farmers.gov/CFAP.

Ohio Corn, Soybean and Wheat Enterprise Budgets – Projected Returns for 2020

by: Barry Ward, Leader, Production Business Management, College of Food, Agricultural and Environmental Sciences, Ohio State University Extension

COVID-19 has created an unusual situation that has negatively affected crop prices and lowered certain crop input costs. Many inputs for the 2020 production year were purchased or the prices/costs were locked in prior to the spread of this novel coronavirus. Some costs have been recently affected or may yet be affected. Lower fuel costs may allow for lower costs for some compared to what current budgets indicate.

Production costs for Ohio field crops are forecast to be largely unchanged from last year with lower fertilizer expenses offset by slight increases in some other costs. Variable costs for corn in Ohio for 2020 are projected to range from $359 to $452 per acre depending on land productivity. Variable costs for 2020 Ohio soybeans are projected to range from $201 to $223 per acre. Wheat variable expenses for 2020 are projected to range from $162 to $198 per acre.

Returns will likely be low to negative for many producers depending on price movement throughout the rest of the year. Grain prices used as assumptions in the 2020 crop enterprise budgets are $3.20/bushel for corn, $8.30/bushel for soybeans and $5.10/bushel for wheat. Projected returns above variable costs (contribution margin) range from $109 to $240 per acre for corn and $179 to $337 per acre for soybeans. Projected returns above variable costs for wheat range from $152 to $262 per acre.

Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from -$48 to $72 per acre in 2020 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $65 to $214 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $70 per acre to $173 per acre.

Total costs projected for trend line corn production in Ohio are estimated to be $759 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $75 per acre include depreciation, interest, insurance and housing. A land charge of $187 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $67 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.

Total costs projected for trend line soybean production in Ohio are estimated to be $517 per acre. (Fixed machinery costs: $59 per acre, land charge: $187 per acre, labor and management costs combined: $46 per acre.)

Total costs projected for trend line wheat production in Ohio are estimated to be $452 per acre. (Fixed machinery costs: $34 per acre, land charge: $187 per acre, labor and management costs combined: $41 per acre.)

Current budget analyses indicates favorable returns for soybeans compared to corn but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2020 have been completed and posted to the Farm Office website: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets