WASHINGTON, D.C. — Two days after describing the “bare shelves” in supermarkets as a “demand issue not a supply issue,” and stating that, “Our food supply chain is sophisticated, efficient, integrated and synchronized, and it’s taken us a few days to relocate the misalignment between institutional settings and grocery settings,” USDA Secretary Sonny Perdue announced a $19 billion Coronavirus Aid package for farmers and food banks that he says will support farmers and help relocate the food misalignment.
Later that evening, during a call with reporters, he provided a few details. The $19 billion consists of $16 billion in direct payments to farmers across commodities and $3 billion for immediate food purchases — prioritizing meat, milk, and produce.
Food assistance purchases – $3 billion
The $3 billion in food purchases will be done in conjunction with private entities, food banks and faith based partners, said the Secretary, and it will use regional and local distributors as well as large foodservice wholesalers like Sysco and PepsiCo. He said USDA is looking to get agriculture surpluses off the market and into the hands of food banks quickly as their needs are accelerating, and he kept coming back to the institutional foodservice companies, mentioning Sysco.
“This is an out-of-the-box example of what we are trying to do – something we have never done before — in realigning the supply,” Perdue said explaining the food-in-a-box concept.
“We are having these conversations about milk dumping, which has much to do with the dual-processing in this country with half of the calories consumed outside the home and with a supply chain of processing for institutional and a supply chain for groceries. That’s where misalignment needs to relocate,” said Perdue. “We’re working with our private providers like Sysco and other foodservice providers to help put meat protein and produce and dairy into those boxes to deliver prepackaged, pre-approved boxes to food banks to make it as easy as possible, so the food banks do not need a workforce to do that.”
As to what specifically goes in the box, that question was not answered, except that procurement will start with $100 million a month for dairy products, and the same amount per month each for meat and fresh fruits and vegetables.
“Distributors and wholesalers will provide a pre-approved box of these packaged items to food banks, community and faith based organizations, and other non-profits serving Americans in need,” the Secretary said.
“We have a very synchronized food system and we can’t afford for it to be offline for very long,” Perdue told reporters, stressing that USDA will use traditional and non-traditional channels of food purchasing to “relocate the dislocated supply chain to get food to where it is needed.
“We can use both the private system purchases through reimbursements, along with the normal bid procurement process,” he said, calling the “relocation of misalignment” a puzzle to solve “like Rubik’s Cube.”
In addition, USDA has up to an additional $873.3 million available in Section 32 funding to purchase a variety of agricultural products for distribution to food banks through the normal AMS bid procurement process, and $850 million from the CARES Act for food bank administrative costs, which includes $600 million designated for food purchases
Direct payments to farmers – $16 billion
Of the $16 billion, $9.6 billion goes to animal agriculture, with dairy to receive $2.9 billion, cattlemen $5.1 billion and pork producers $1.6 billion.
The remaining $6.4 billion would be divided as $3.9 billion to row-crop producers, $2.1 billion to fruit and vegetable specialty crop producers, and $500 million in the “other crop” category.
The $16 billion in direct payments to farmers will use economic analysis by USDA economists, including University of Missouri FAPRI, to determine the commodities that have a 5% or greater loss between Jan. 1, 2020 and April 15, 2020 and from April 15 through October 2020.
FAPRI recently estimated that traditional crop, livestock and dairy industries have experienced cash receipts losses exceeding 32% across commodities.
On the media call, Sec. Perdue explained that the $16 billion in direct payments for farmers and ranches will be funded with the $9.5 billion in emergency funds previously authorized by Congress in the CARES Act and the $6.5 billion remaining in the Commodity Credit Corporation (CCC) fund from unused trade mitigation funds.
The CCC will be replenished when the next fiscal year begins in July with and additional $14 billion that was earmarked for the fund in the recent CARES Act.
While USDA has not officially released details for the direct payments, and no congressional action is required to do them, several members of Congress did release detailed descriptions based on communications they had received from the department.
Sec. Perdue stated that the rulemaking process on these funds is being expedited to get checks in the mail by the end of May or beginning of June. Producers will receive one check that is determined according to two different formulas:
— Price losses Jan. 1-Apr. 15, 2020 – compensating for 85% of the price loss during this period.
— Expected losses Apr. 15, 2020 through the next two quarters, covering 30% of expected losses.
Payments are capped at $125,000 per individual or entity with one commodity and at $250,000 for individuals and entities with multiple commodities.
Sources indicate that recipients must derive at least 75% of their income from agriculture to receive these payments and have an adjusted gross income below $900,000.
Sign ups for these direct payments are expected to begin in early May through USDA Farm Service Agency.
Farm organizations have expressed gratitude for the aid package, but generally indicate it will not go far enough.
“Agriculture has been hit hard like other sectors,” said Sec. Perdue, explaining that the President had indicated earlier this year that another round of trade mitigation payments would not be necessary with the signing of trade agreements, but that was before COVID-19.
“Things have changed for our farmers with this pandemic. The President told me to do what it takes,” said Perdue.
— By Sherry Bunting, Farmshine, April 24, 2020