What's in the Senate HEALS Act for agriculture?

Paul

Neiffer: And it all comes down to this. 2 on, 2 out, bottom of the 9th. The Farmers lead by 1. Full count, here comes the play at the plate, and it's the Ag View Pitch!

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch, and We are here with Chris Barron and Paul Niefer from CliftonLarsonAllen, or better known as thefarmcpatoday.com. Paul, how's it going today?

Paul

Neiffer: Good, good. I'm actually in Iowa. I actually signed off on buying my acreage this morning at the bank. So that was good. Signed my life away.

Chris

Barron: Yeah, you're an Iowa farmland owner now, right?

Paul

Neiffer: Exactly, exactly.

Chris

Barron: Yeah, congratulations.

Paul

Neiffer: Yeah, thank you. Thank you. And I think based on the appraisal, I could even sell it for a profit. So that's—

Chris

Barron: Yeah. Yeah. Well, it's not too often that that's happened as of late. So congratulations on that. And I'm doing— It's kind of funny. You're sitting in Iowa where I live and I'm sitting in Illinois in a hotel room, but you're in a hotel room tonight too, aren't you?

Paul

Neiffer: Yep. Yep. And actually I'll be in a hotel room in Illinois tomorrow night. So I come home Friday morning. Yeah.

Chris

Barron: Well, I'll be in my room in Iowa tomorrow night. I'll wave at you when we meet each other. Or something.

Paul

Neiffer: Okay, sounds good.

Chris

Barron: All right. Hey, so the reason for this podcast, we probably better get to that, I guess, here and reminisce later. But, um, so the HEALS Act from the Senate has, uh, information is kind of getting out there now. What I wanted to do is just have a conversation with you and have you bring the Ag View Pitch listeners up to speed with kind of what you're seeing in that package and kind of what it looks like and what it means to farmers. So I'm going to leave it at that broad question right now and then I'll start asking you some specifics, but I'll let you kind of start telling us a little bit about what you're seeing there.

Paul

Neiffer: Okay, yeah, and I think one of the first things is, and we're definitely keying in on the ag side or the farm side, is, you know, they have provided an extra $20 billion of funding for USDA and the CCC program, which means it's very broad. There's really no restrictions, although they said they wanted to expand. So ethanol, uh, some of the ag processors, not just ethanol but other ag processors out in our area, that could be some of our fruit and potato warehouses, they're likely going to qualify for some type of aid. Don't know what it's going to be, but that along with the $14 billion that was already provided, that gives them a war chest of about $34 billion.. And then, um, you're going to get the extra $1,200 per person payment, just like the, the CARES Act. And they've also expanded for your dependents.

Uh, in the CARES Act, you had to have a child under age 17 to get that extra $500. Now it's any dependent, so it could be a college student, it could be a 17 and 18-year-old, it could even be your parents if they're living with you. You're going to get that extra $500 payment. And then the one area that Under the CARES Act, if you got a PPP loan, and we know most of our listeners out there likely did get a Paycheck Protection Program loan, the PPP loan, you were unable to take advantage of what was called the Employee Retention Tax Credit, and that's a refundable credit, which is really good. What that means is if you got employees and you're filing your payroll taxes, uh, for farmers, the 943 at year end, but during your— year where you're paying in those taxes, you're allowed to file a form based on the payments to those employees. That covers the tax liability that you owe.

And then if the credit amount is greater, Uncle Sam actually writes a check to you. Under the CARES Act, that was capped at $5,000 per employee, and you couldn't do it if you participated in the PPP program. Well, this act says now the credit could be as high as $20,000 per employee. So that's a pretty good deal. And you can also do it even though you got a PPP loan. So it's going to allow you to sort of double dip. Well, what they don't allow you to do is use the same wages. So if you use those wages to qualify for forgiveness, you can't use it for the credit. But most of those wages are going to get soaked up in an 8 or 10 week period, whereas this credit goes through the end of the year. So I, I see that being a pretty good deal for a lot of farmers. So that's That's actually pretty good.

And then I think for some of our farmers that showed losses on their 2018 or '19 return, many of them carried it back 2 years. Well, the CARES Act said, no, no, you can't carry it back 2 years, you have to carry it back 5 years. Even though you carried it back 2 years, you got to amend 2016 and '17 return and then file an amended return in 2013 and '14 and so on. Well, this Act has got a clause that's in Section 224, if I remember right, that says the farmer's got the option to carry it back 2 or 5 or elect not to carry it back. Or if they've already elected to carry it back or carry it forward, they can undo that election and carry it back. So it's really broad, uh, you know, flexibility for that farmer, which would be really nice because for a lot of our farmers, if they didn't change that rule, it's going to be a paperwork nightmare.

So Those are some of the key provisions that I saw in the HEALS Act. We can talk about the paycheck protection changes. That's actually in a different act. I love how they come up with all these acronyms. House has the HEROES Act, now they got the HEALS Act. I was talking to National Cattlemen's Beef Association yesterday in Colorado and we were talking about CFAP and I said, well, just think that they came out with a ranch provision, then it would be CRAP instead of CFAP. Yeah, I just love all these acronyms.

Chris

Barron: So exactly, so on the PPP, if, if a producer already got that and they have a payroll, they received the PPP loan, just touch on that again one more time as far as what that looks like for a producer that's already gotten that, then explain that just a little bit.

Paul

Neiffer: Yeah, so —So what happens with a producer that's a Schedule F farmer? We're not sure about partnerships. We know corporations, there's likely not really much change there. But if you're a Schedule F farmer that on your 2019 Schedule F you showed a loss, but you went ahead and got a loan because you had employees. So let's say you had $100,000 worth of employee payroll and you got a $20,000 loan. That technically be $20,833, but let's round it to $20,000. You didn't get any credit for the fact that you showed zero or a loss on your Schedule F, so you weren't able to get any loan for your earnings. You could only get it for your employees. Well, what this act says, instead of looking at your net bottom line Schedule F income, which in fact for '19 was zero or a loss, you're gonna look at the top line. You're gonna say, okay, how much was my revenues?

Did I sell corn, soybeans, hogs, dairy, whatever it might be, more than $100,000, which most farmers did. So if you sold more than $100,000 of, of farm products, you automatically then qualify for a $20,833 loan. And my reading of the Act, it sounds like the bank is supposed to automatically calculate that because they already have that information, then they're supposed to send a check or fund that for you. So for a lot of our Schedule F farmers, And I, I know the National Farm Bureau and, and probably 20 other ag groups out there, the pork side, the beef side, I know for sure the beef side and so on, they were really lobbying to get this changed because a lot of our Schedule F farmers, they report a lot of income on a different form related to farm income and they weren't getting credit for that on, on the original PPP program.

So this is going to open up another And again, it maximizes at $20,833, but if you have a spouse that files a Schedule F and you file a Schedule F, maybe you're going to qualify for a $42,000 loan approximately. And again, that would be forgiven. It's an automatic forgiven, uh, forgiveness basically for Schedule Fs.

Chris

Barron: Okay, so one of the things that I know a lot of our farmer listeners are thinking about Couple of things, actually let's start with ethanol though. I know that's an area that we've heard a lot about the ethanol industry wondering, you know, what are we going to get? Is there anything in there? Talk a little bit about the ethanol part.

Paul

Neiffer: Yeah, you know, it states in the section dealing with the extra $20 billion of funding, it essentially states that we want there to be assistance for the ethanol industry, but we're not telling you what it is and we're not telling you the amount. Now over in the House bill, the HEROES Act, they definitely do provide— if my memory is right, they provide some additional specific funding for ethanol, but that's not in the HEALS Act. It just states that we want you to use part of your $20 billion for ethanol, but we're not telling you what to use or how to use it.

Chris

Barron: So there's not a lot. I mean, As far as the House and the Senate, both of those, you know, the— I guess talk a little bit about the differences between those two as it relates to ag.

Paul

Neiffer: Is there much difference really between the two of them on the ag side? Yeah, I think the key difference is that again, the House is a lot more specific. You know, if you listen or read what Collin Peterson has stated on that, you know, he's the chairman of the House Ag Committee. He is not happy with the FSA or USDA just sort of coming up with these programs without any guidance from Congress. He wants there to be more restrictions, more guidance on how to implement it and the amount that's going to be allocated. Whereas on the Senate side, they're like, "Eh, we don't care. Here's your money. You know, you guys know what you're doing. Keep us out of it." So that's going to have to be reconciled between the House and the Senate.

Chris

Barron: What's your thought on that? Because if the USDA has to decide how much do they allocate to the ethanol industry, how does that impact the rest of ag? Yeah, I, I think I probably lean a little bit more toward—

Paul

Neiffer: well, I'm going to talk out of both sides of my mouth. Part of me says that I think I like the House because then you're making sure that this industry is going to get this support, this industry is going to get— or this segment of ag is going to get this support and so on. But I also like the fact that on the Senate side they're saying, hey, you're, you're the administration, you deal with this day to day, we don't really deal with it day to day, you know where the most hurtful parts of the ag industry is at, go ahead and take this money and use it appropriately. Now we know how well, to some degree, you know, the USDA has handled that in the past, you know, sometimes good, sometimes not so good, it depends on whether you're benefiting from it or whether you're not benefiting from it. So it's just hard to know.

Chris

Barron: Right. So on the, the money that's going to be allocated out of the CCC to producers, we really don't know what that looks like yet, right?

Paul

Neiffer: That's something that— No, there's, yeah, we have no guidance on that at all. Matter of fact, USDA is probably waiting for the final numbers because Right now all they know is they have— I think they have more than $14 billion because the CFAP, you know, it's only at $6 billion and there was supposed to be about $16 billion, you know, 9.5 CARES, 6.5 I think with CCC, that's $16 billion. And I think CFAP's not even going to hit $10 billion even with the extra 20%. So I think they know they still have another $4 or $5 billion that they can use however they want to, plus the $14, so there's $18 approximately, maybe let's round it to $20, and then there's the next $20. Now the House I think was even a little bit higher, so there's going to be a fair amount of money available, but it's not going to go to producers 100%.

You know, it's going to go ethanol, it's going to go for processors, it might even go for ag implement dealerships. You know, that type of situation where maybe their sales have been curtailed because of COVID Okay.

Chris

Barron: So, and that, that all kind of makes sense and I guess we're going to see what happens there. Again, from a farmer's perspective, payment limits, you know, for some of these operations that are livestock heavy and row crop. Yeah. Touch on that for a minute.

Paul

Neiffer: What's your thought? Yeah. You know, we don't know. 'Cause a lot of these producers already tapped out on the limit based on CFAP. So hopefully whatever comes up next is gonna be a separate program with separate limits. If it is a, if it's tied in with CFAP and all part of the same program with the current limits, some of these producers are gonna get nothing. So yeah, that's something that especially on the livestock side, cattle guys have got Well, of the $6 billion, cattle guys have gotten about half of it, $2.8 billion, then dairy's next at about $1.4 billion, I think if my memory's right, and then corn is actually right around a billion. So, you know, 90% of the payments going— or 85% of the payments going out are, you know, livestock related plus corn. So, you know, you would hope that they're going to have additional payment limits, but you just don't know.

Chris

Barron: Yeah, you can see that that could be a likelihood. And then, you know, the row crop guys, specific just row crop, probably wouldn't, you know, in some cases or a lot of cases anyway, maybe pushing that limit anyway.

Paul

Neiffer: Yeah, they're, they're still, unless you have an extremely large operation under the umbrella of one entity, which, you know, most larger operations typically have multi, you know, multiple entities, partnerships and so on. It's pretty tough for the row crop, especially if it's based on— if it's still based on '19 production, you know, how are you going to get anything more anyway? The '20 production is not even there, so, you know, it's— I think what I keep hearing rumblings are to be maybe some type of like an MFP type payment, you know, per acre payment, based on whatever county you live in, you're going to get a certain amount. I know some of the row crop, the cotton guys, I think the rice guys, they like that. Of course, they got big payments last year. You know, the down south guys got the bigger payments. So yeah, I don't know what's going to happen.

And likely we're all guessing, and what USDA came out, comes out with is going to be completely different. Yeah, definitely.

Chris

Barron: Excuse me, by county is a I mean, that, that worked pretty, pretty well for people based on county. It's just that I know there were some issues with the discrepancy from one county to the next. There was some— in some areas there was a big spread difference and hopefully they can figure something out there.

Paul

Neiffer: Yeah, and I think maybe they'll try to smooth it out a little bit more because this really isn't based on the trade war. This is based on, you know, the economic damage due to COVID. So, right now, certainly that isn't going to work real well for livestock because that is really based on producer. User base. It's not based on the county. So, you know, and so, you know, they have to work those details out and then do you allocate $1 billion or $2 billion to ethanol? Now COVID, you know, was COVID all the cause of the ethanol issue? Maybe not. I mean, I think there is going to be less and less miles or less and less gasoline usage. And, you know, we've already started, you know, probably the waivers is more of an issue than COVID even. So, you know, who knows?

Chris

Barron: Right. Is there anything else I haven't asked? I mean, we don't have to go on too long here. I think, you know, I'll probably get back with you as these details get more certain and we get more guidance. Is there anything I haven't asked or anything you need to tell me?

Paul

Neiffer: Well, I think the one thing we do need to understand is there is a lot of turmoil in the Senate. You know, you have a lot of the Senate Republicans that are not happy about the trillion-dollar price tag. Uh, this may go on for, uh, for a month or two. Uh, you know, everybody assumed it's going to be a week or two. Uh, but I think the hot one right now is extending the unemployment. Uh, they may come up with a bill on that and then, uh, you know, this thing, cause there really is no true deadline. The only deadline is the unemployment. Nothing else is really a deadline. So, uh, I mean, you know how Congress deals with deadlines sometimes. So yeah, I wouldn't count on having a final bill on this in the next week or two. It may happen. I hope I'm wrong.

Chris

Barron: With the USDA, does that include the—

Paul

Neiffer: what do you call it? The food stamp? Oh, SNAP. Yeah. The SNAP, the— yeah, Supplemental Nutrition Act. SNAP program, I think is what it is. Yeah, the Senate didn't have any additional funding for that. You know, the House had some additional funding. I don't think that's, even for the House, I don't think it's a big deal, 'cause you know, there's $70 or $80 billion already a year going for SNAP. So, you know, 60% of the USDA budget is SNAP. So, and nobody, I'm not aware of people in the U.S. really going hungry right now with COVID I mean, we've had issues with, supply chain, but I haven't seen anybody even in our area that— because the food line or the systems, like in my little town of Dayton, every Tuesday they pass out the food, the free food and so on, and that seems to be going fairly smoothly.

I'm not hearing people going hungry, but I may be in the wrong part of the country too. Yeah.

Chris

Barron: Well, I think —part of this is just gonna be watching and seeing what they come up with and what comes out of all this and what some of the guidance is along the way and especially out of the USDA through the CCC. That will be interesting and very pertinent to a lot of listeners here.

Paul

Neiffer: Well, and remember they still have $14 billion that they get to play with right now. They don't need the HEALS Act and the HEROES Act. They have $14— well, they probably, I think they have closer to $20 billion. So they could come up with another program right now. Right. Yeah. Right. But I, I'm, I'm not sure if they have an incentive to do that. I think they're waiting to see what Congress does. But if, if this thing at Congress level does go on another month or two, then I think you will see USDA come out with something.

Chris

Barron: Yeah. And then with where, where prices are at and with ethanol being that, that issue, if there is $14 billion there, hopefully, um, they can start figuring some things out on that end.

Paul

Neiffer: Yep. Yep. Yep.

Chris

Barron: Exactly. Exactly. Hey Paul, we will, we will keep in touch and we will, as, as things develop, you know, and you write about this too, um, tell everybody where they can, can find your information.

Paul

Neiffer: Yeah. Just go to the blog. It's, it's just farmcpatoday.com. So farmcpatoday.com. I also, you know, every time I do the blog post, at that site. I also usually put it on AgWeb, the farm journal site, so you can find it either spot. But if you go to the farmcpatoday.com, you don't have to go there every day. All you have to do is go there once, click on the subscribe button, and then every time we do a post, it'll just get emailed to you. So that's probably the easiest way to do it. Yep.

Chris

Barron: And that's a good segue to tell everybody to hit subscribe on this podcast as well. And that way podcast just shows up.

Paul

Neiffer: Exactly, exactly. Exactly. That sounds good.

Chris

Barron: So hey, Paul, um, any, any last comments?

Paul

Neiffer: Uh, other than, like I say, it's, it's good to be an Iowa landowner, farmland owner, you know. I'm feeling pretty good about that. I haven't had to make my first payment yet, you know. I don't think that's due for 6 months.

Chris

Barron: Yeah, yeah. Well, that's, that's the good part. Now the part is, though, is you're gonna have to come back and run a combine.

Paul

Neiffer: Then that's the best part. That's the best part. Uh, you know, I, I like, right, or operating the a combine. Except usually when I show up, you make me repair a grain cart or something.

Chris

Barron: Yeah, well, that happened last time. I have a feeling that I'll be drying the corn that you're combining.

Paul

Neiffer: Okay, well, good. That's good. That'll work. It'll— we'll make a team. So yeah, yep, exactly, exactly. I'm going to come back and plant the corn this year, but, uh, you know, COVID sort of knocked that out of the loop.

Chris

Barron: So yeah, well, hopefully by next year we'll be able to travel around and and, uh, do a little more than hiding in hotel rooms.

Paul

Neiffer: And exactly, exactly. So I'm looking forward to that.

Chris

Barron: So yeah, well, enjoy yourself tomorrow night in, uh, Illinois, and I'm gonna enjoy myself back in Iowa tomorrow night.

Paul

Neiffer: So, well, on Friday night I'll be back home in my bed. So I'm actually home for like 3 weeks before I go back out on the road for a week.

Chris

Barron: So that'll be good. Okay, back to Washington. So that's awesome. Okay, so hey, hey Paul, thanks Paul, thanks a lot. Great conversation. This was awesome. And if anybody has any questions, again, be sure to look up farmcpatoday.com. Follow what Paul stays really close attention to what's going on with all this stuff and the craziness in DC. So with that said, I would like to thank everybody for listening and we will catch you again next time on the Ag View Pitch.