April 22, 2020

 

US' relief money for agriculture runs out

 

 

The US' Payment Protection Program (PPP), which is part of a COVID-19 federal relief package, ran out of money just 14 days after opening.

 

Only a fragment went to help agriculture and related sectors.

 

On April 3, US Treasury Secretary Steven Mnuchin predicted the US$349 billion in forgiveable loans appropriated for PPP would last through June 6. But demand was "tremendous" and "overwhelming," according to lenders, and money for loans evaporated quickly.

 

The programme was part of the Coronavirus Aid, Relief and Economic Security Act passed by Congress and signed by the president March 27. Run by the US Small Business Administration (SBA), PPP was meant to support payroll so small businesses could keep workers employed during the pandemic.

 

"Farms are facing desperate times and they need financial help," said Mark Hayes, spokesperson for the Farm Credit Council, the national trade association for 72 Farm Credit system lenders across the US.

 

But the agricultural sector received little relief. According to SBA data, as of April 13, when 71% of loans had been approved, only 1.2% went to the agriculture, forestry, fishing and hunting sector.

 

Of the 20 sectors SBA reported on, that sector also had the lowest average loan approval.

 

The SBA did not immediately respond to a Capital Press request for updated numbers.

 

Experts say farms and agribusinesses missed out on most of the funding for several reasons.

 

While many banks and credit unions were already set up as SBA lenders and could immediately start processing applications, the Farm Credit system was new to working with SBA and had to leap over "government agency hurdles" to set up infrastructure, said Hayes. By the time just 35% of Farm Credit lenders were ready to process applications, the money was gone.

 

According to Veronica Nigh, economist for the American Farm Bureau, another likely reason why few agribusinesses received loans is that PPP initially did not offer loans to self-employed individuals and independent contractors—and when they did, guidance came too little, too late.

 

"SBA began accepting applications for these small businesses (self-employed and independent contractors) on April 10, but guidance related to these applications wasn't released until April 14, less than 48 hours before funding ran out," said Nigh.

 

This early exclusion from the programme was significant because, according to the most recent figures from the Bureau of Labor Statistics, ranchers, farmers and agricultural managers have the highest level of self-employment of any US occupation.

 

And according to the PEW Institute, a nonpartisan research organisation, employees of self-employed people make up 30% of the US workforce.

 

"Some of the industries that have been hit the hardest in the pandemic, like dairy farms and fruit and vegetable growers, also have a lot of employees they need to keep on payroll," said Hayes.

 

According to Nigh, the Farm Bureau economist, other factors may also have made it harder for farmers to get PPP loans. Agribusiness taxes are often complicated; monthly payroll takes longer to calculate with seasonal employees, foreign workers and labour contractors. Rent calculations, which may include equipment, are complex.

 

These many blockades that prevented agricultural industries from receiving much aid, Nigh said, "need to be addressed if and when Congress appropriates additional funding for this programme."

 

"So many farm incomes have just been decimated," said Tom Van Hoose, president and CEO of the Farm Credit Council. "These loans are incredibly necessary. And Congress is going to need to put in more money."