Help is on the way.
For produce growers and distributors suffering since mid-March with a near-complete lack of foodservice demand, the hope for financial relief through the U.S. Department of Agriculture’s Coronavirus Food Assistance Program is universally welcomed.
While some states are planning to slowly reopen parts of their economy in May, a widespread recovery in foodservice demand is expected to be months away.
The USDA assistance plan consists of $2.1 billion in direct payments to fruit and vegetable growers and $100 million per month for six months in domestic fresh produce purchases in what is called the Buy Fresh Program.
While direct payments to compensate for coronavirus losses could be many weeks away, the Buy Fresh Program was gearing up in late April.
Buy Fresh details
With fresh produce sales to foodservice channels previously estimated at $1 billion per week in normal conditions, the $100 million per month Buy Fresh program won’t come close to replacing all those sales. Still, industry associations and distributors welcomed it.
“(The Buy Fresh) program is something that I think is needed now; it is going to be an important part of the recovery,” said Robert Guenther, senior vice president of public policy for the United Fresh Produce Association.
“I think it’s going to help the supply chain release some of the pressure of the marketplace.”
The USDA indicated it would solicit bids starting April 24 from distributors to supply commodity boxes to nonprofits on a mutually agreed-on schedule. Awards are expected to be announced by May 8 and the program will be operational by May 15, according to the USDA.
Distributors receiving the USDA contracts will pack boxes with fresh produce, dairy, or cooked meat products, or a combination of those products, and deliver them to the food banks/nonprofits.
“We will pay for the assembly of boxes, and then you get to pick the nonprofit destinations that you will deliver to,” USDA Agricultural Marketing Service Deputy Administrator David Tuckwiller said in a web seminar.
The USDA will award contracts based on the delivery of those boxes to identified locations, he said.
He said contractors are responsible for all supply chain and logistics activities necessary to ensure the boxes are distributed to people in need of food.
“You as a contractor can invoice USDA and then we’ll pay,” he said. “One of the expectations is to make sure payments are flowing through all the way; we will expect payment of any subcontractors, which can include growers, producers, processors, promptly, if you will.”
Distributors said that the Buy Fresh program sounded appealing.
“I’m very excited about (the Buy Fresh) program because I’m already (working) with the food bank now,” said Brent Erenwert, CEO of Brothers Produce, Houston.
The Buy Fresh program appears to be well matched for the needs of the foodservice distributor segment, said Alex DiNovo, president and chief operating officer of DNO Produce, Columbus, Ohio.
“Most every distributor has labor, packaging, produce, and distribution that has been sidelined since the country began to shut down,” he said, adding that the program will help put people to work and allow assets to be used.
Dennis Nuxoll, vice president of federal government affairs for Western Growers, said the Buy Fresh plan has a number of good features but is “a drop in the bucket” compared with the need.
Nuxoll also said the program might be more effective if it was “front-loaded” for heavier purchases at the beginning of the six-month period. By this fall, he said foodservice conditions may be much improved.
Under the $2.1 billion direct payment plan, fruit and vegetable producers will receive a single payment determined by using two calculations:
- 85% of price loss from Jan. 1 to April 15;
- 30% of expected losses from April 15 through the next two quarters.
The payment limit is $125,000 per commodity with an overall limit of $250,000 per individual or entity. Qualified commodities must have experienced a 5% price decrease between January and April. The USDA is expediting the rulemaking process for the direct payment program and expects to begin sign-up in early May to get payments to producers by the end of May or early June.
Nuxoll said creating online applications for direct payments to growers will take time.
“My suspicion is that it is going to take them a couple weeks to figure out some of these document issues needed for the process,” he said April 23.
Western Growers is working to raise the payment limit for growers in the direct payment plan, because high-value produce crops like strawberries can cost as much as $30,000 per acre to produce.
“That (cash) gets burned up real quick,” he said. “We are pushing quite aggressively to see if we can make adjustments to the payment limit,” he said.
So far, COVID-19 has not resulted in extreme shortages of farm workers.
President Donald Trump signed an executive order April 22 that puts a 60-day pause on immigration into the U.S.
However, the executive order won’t stop the movement of guest agricultural workers to the U.S., but instead will stop green cards from being issued.
“We are pleased that the recent proclamation by the president regarding immigration into our country recognizes the importance of the non-immigrant temporary agricultural worker program in providing food to American citizens during this pandemic,” Michael Marsh, CEO and president of the National Council of Agricultural Employers said in an e-mail. “Growers are happy to know that the administration understands the critical role agriculture plays in pulling our country into recovery.”
Marsh said April 22 that H-2A workers are able to come to the U.S.
“We’re still short of workers, and still working hard to try to get to additional workers, but it has not been quite the calamity we might have thought it would be about a month and a half ago,” Marsh said.