In our last blog, we covered the COVID-19 coronavirus’s initial impact on agriculture — from the U.S.-China trade deal, to crop input and animal protection concerns, to agricultural prices.
As the pandemic continues to spread, new concerns have risen, but there’s also relief on the horizon in terms of legislation. Let’s talk about what’s new:
1. The stimulus bill
Farmers and ranchers have a lot to be happy about in the $2 trillion stimulus bill, which provides $48.9 billion specifically to help the USDA respond to COVID-19.
Highlights of the stimulus bill include:
- $14 billion for the USDA’s Commodity Credit Corporation (CCC), helping it reimburse net realized losses. The Secretary of Agriculture has broad authority with how CCC dollars are used. For example, the CCC was used for the market facilitation program and for various farm bill programs.
- $9.5 billion for an assistance program to support ag producers, including specialty crop producers, livestock and dairy producers, and producers supplying local food systems.
- $145.5 million for the USDA Rural Development mission.
- $45 million for the Ag Marketing Service department of the USDA.
- $3 million for the Farm Service Agency.
- $367 billion for forgivable loan programs for small businesses that keep their employees during this COVID-19 crisis, helping these businesses to pay their employees, rent and utilities.
- $1,200 for each adult individual earning less than $75,000 per year (based on their 2018 or 2019 tax return). Married couples earning less than $150,000 per year receive $2,400. Every child under 18 claimed as a dependent gets the taxpayer an additional $500.
- $250 billion for unemployment benefits. Specifically, the bill provides individuals who apply for unemployment with $600 per week on top of state unemployment benefits. This is a significant provision, as over 3.3 million people applied for unemployment during the week of March 15th.
2. Ethanol production and corn prices
People across the country are staying home, and many states have enacted shelter in place orders where only employees of essential businesses (e.g., grocery stores, pharmacies, hardware stores and ag producers) can travel. That has drastically decreased the need for ethanol fuel. Plus, the oil price war between Saudi Arabia and Russia has driven the price of oil way down.
In this domino effect, ethanol plants are closing because gas demand has fallen, which means they’re not buying corn, which means corn prices have fallen. Some plants are only taking contracted corn. Others are only taking bids for overrun bushels.
The 2020 outlook for corn producers is, so far, not a very positive one.
3. Cash flow concerns
We know that for many in agriculture, cash flow has always been an issue, even before COVID-19. We continue to see clients attempt to diversify their operations to provide additional revenue streams. As with many of our small business clients, we’ve seen some local producers to turn to delivery as an option for distribution, as farmers markets face an uncertain future due to the pandemic.
Lending is also an option. If making impending loan payments is a concern, you can inquire with your lenders about opportunities to modify payment terms to provide near-term cash flow relief.
Bank regulators are encouraging financial institutions to work prudently with borrowers who may be unable to meet the payment terms on loans because of the effects of COVID-19. Agencies consider such proactive actions to be in the best interest of the institutions, their borrowers and the economy.
The Small Business Administration (SBA) is another resource during this time. Agribusinesses such as fertilizer application companies, feed mills and implement dealers are eligible for the Economic Injury Disaster Loan (EIDL) program, which provides up to $2 million in disaster assistance to a business. While farmers are not eligible for EIDL, they could consult with the Farm Service Agency for potential assistance from that agency. Ag associations are currently lobbying for provisions to add farmers to the EIDL program. We encourage farmers to consult with their lender regarding other SBA programs, including the Small Business Paycheck Protection Program.
Farmers and agribusinesses alike should also check for lending options through their respective state governments. For example, Illinois offers emergency small business grants and loans assistance; the small business emergency loan fund allows small businesses outside Chicago with fewer than 50 employees and less than $3 million in revenue in 2019 to apply for low-interest loans of up to $50,000.
This is a fluid situation, and we expect that things will change and evolve over the coming weeks.
If you have questions about other ways COVID-19 may impact you, or if you are looking for additional information, visit our COVID-19 resource center. We’ve put together a variety of information to help businesses and individuals weather the coronavirus.
How the COVID-19 coronavirus is impacting the agriculture industry
Families First Coronavirus Response Act FFCRA FAQ
State and local taxing authority responses to COVID-19