Category: Economics

President Donald J. Trump today signed the “Coronavirus Aid, Relief and Economic Security Act” (CARES Act) into law with provisions to provide financially distressed consumers and small businesses greater access to business loans and bankruptcy relief. The legislative package, which quickly passed the House of Representatives on a voice vote earlier today and 96-0 in the Senate on Wednesday, provides a $2 trillion economic stimulus for U.S. industries and citizens faced with the challenges of the COVID-19 coronavirus.

Upon passage of the stimulus package, Agricultural Retailers Association (ARA) President and CEO Daren Coppock shared, “We recognize that the health and safety of all people is a priority at this time. ARA is grateful that Congress is taking swift action to remedy the current situation in our country through passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  Ag retailers and their farmer customers, as always, are committed to continuing their businesses so that they can deliver the safe, healthy, and abundant food supply that is in demand now and required for the future.  We are pleased with the support that Congress has included for the agriculture industry in this bill, and encourage the president to sign it so that we can have certainty moving forward.”

National Milk Producers Federation (NMPF) President and CEO Jim Mulhern offered the following statement:

“We thank President Trump for quickly signing this measure into law. It will provide much-needed help to dairy producers, who are experiencing steep drops in milk and dairy-product prices due to the COVID-19 pandemic.  With the CARES Act now law, we look forward to working with Agriculture Secretary Sonny Perdue on several important initiatives, including the need for a significant purchase of multiple dairy products. These efforts will be important to address sales lost because of COVID-19, lift farm milk prices and send a critical signal to disrupted dairy markets. Government dairy-product purchases will provide our food banks with an important, nutritious and popular staple item that will help feed families in need.”

Michael Dykes, President and CEO of the International Dairy Foods Association (IDFA) shared, “The International Dairy Foods Association commends Congress for acting swiftly and decisively to bring financial relief to American businesses, households and workers as a result of the COVID-19 outbreak, which has delivered an historic blow to our nation’s economy and workforce. On behalf of America’s dairy industry, IDFA is grateful that this bipartisan bill has put a special emphasis on businesses large and small, farmers, and our rural communities who grow, process and distribute many of the foods and beverages that are so vital to Americans during this crisis. We urge Congress to continue to be mindful of the critical part the food industry plays in our national security, economic security and food security. The United States is the world’s most productive food and agricultural economy in the world, and our legislators and federal officials must do everything in their power to ensure continuity of operations throughout the food supply chain. Our food security is absolutely essential.”

Dykes continued, “Now we are seeing record jobless claims for Americans, which presents hardships to families just trying to put nutritious, wholesome food on their tables. Our federal government must now turn its attention to those Americans most in need by ensuring our food banks, pantries and distributors have an abundant supply of food for families trying to make ends meet. The CARES Act includes billions of dollars to support federal nutrition and feeding programs, as well as $450 million for USDA to provide food banks with additional resources for food and distribution. With resources in place through replenishment of the Commodity Credit Corporation, billions for nutrition and feeding programs, and millions to support our food banks, it is incumbent on USDA to act without delay. We urge USDA to act today to make record purchases of fluid and powdered milk, cheese, and other dairy products, as well as other foods and commodities, to equip our food banks for a surge of food-insecure Americans and to bring certainty and balance to the marketplace due to whole sectors of the economy shutting down due to COVID-19. The closure of restaurants, cafes, bars and other food service operators as a result of COVID-19 has created a major market gap for our dairy producers and processors. While retail sales have climbed steadily, the loss of foodservice, which accounted for roughly 50% of all food sales, has presented a significant challenge to our industry. USDA should act now to direct those products to food banks to help people in need. This will prioritize those most in need, provide certainty to producers and agribusinesses, and restore needed balance in the marketplace.”

The CARES Act provides:

Relief for Farmers and Ranchers

• $9.5 billion dedicated disaster fund to help farmers who are experiencing financial losses from the coronavirus crisis, including targeted support for fruit and vegetable growers, dairy and livestock farmers, and local food producers, who have been shorted from receiving emergency assistance in the past.
• $14 billion to fund the Farm Bill’s farm safety net through the Commodity Credit Corporation.
• Eligibility for farmers and agricultural and rural businesses to receive up to $10 million in small business interruption loans from eligible lenders, including Farm Credit institutions, through the Small Business Administration. Repayment forgiveness will be provided for funds used for payroll, rent or mortgage, and utility bills.
• $3 million to increase capacity at the USDA Farm Service Agency to meet increased demand from farmers affected by the coronavirus crisis.

Assistance for Small Towns and Rural Communities

• $1 billion available in guaranteed loans to help rural businesses weather the economic downturn.
• $100 billion to hospitals, health care providers, and facilities, including those in rural areas.
• $25 million for telemedicine tools to help rural patients access medical care no matter where they live.
• $100 million for high-speed internet expansion in small towns and rural communities.
• Over $70 million to help the U.S. Forest Service serve rural communities and reduce the spread of coronavirus through personal protective equipment for first responders and cleaning of facilities.

Protections for Consumers and the Food Supply

• $55 million for inspection and quarantine at our borders to protect against invasive pests and animal disease.
• $33 million for overtime and temporary food safety inspectors to protect America’s food supply at meat processing plants.
• $45 million to ensure quality produce and meat reaches grocery stores through increased support for the Agricultural Marketing Service.
• $1.5 million to expedite EPA approvals of disinfectants needed to control the spread of coronavirus.

Food Access for Families

• $15.8 billion to fund food assistance changes made in the Families First Coronavirus Response Act. Republicans and the Trump Administration blocked additional funding to expand benefits for children, families, and seniors.
• $9 billion to fund child nutrition improvements made in the Families First Coronavirus Response Act.
• $450 million to provide food banks with additional resources for food and distribution.
• $100 million for food distribution in Tribal communities to provide facility improvements, equipment upgrades, and food purchases

The California Association of Winegrape Growers (CAWG) shared that two small business loan programs have been created as a result of the COVID-19 pandemic. These may help small business operations (growers) that are dealing with the economic challenges of the pandemic. Small business is defined as a company with less than 501 employees and California small businesses are eligible for both programs.

• The first program includes $1 billion to immediately assist small businesses hit hard by the current economic shutdown. Unlike traditional Small Business Administration (SBA) funding mechanisms, this program is being administered directly by the SBA and is live and accepting applications NOW.
• The second program includes the Paycheck Protection Program and the Economic Injury Disaster Loan (EIDL) program. These will be administered more like traditional SBA programs, i.e. through third-party 7(a) lenders.

Key Bankruptcy Provisions within the CARES Act Include:

• Amending the Small Business Reorganization Act of 2019 (SBRA) to increase the eligibility threshold for businesses filing under new subchapter V of chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7,500,000. The eligibility threshold will return to $2,725,625 after one year. The increased debt limit for struggling small businesses to access subchapter V reflects recommendations of ABI’s Commission to Study the Reform of Chapter 11.
• Amending the definition of “income” in the Bankruptcy Code for chapters 7 and 13 to exclude coronavirus-related payments from the federal government from being treated as “income” for purposes of filing bankruptcy.
• Clarifying that the calculation of disposable income for purposes of confirming a chapter 13 plan shall not include coronavirus-related payments.
• Explicitly permitting individuals and families currently in chapter 13 to seek payment plan modifications if they are experiencing a material financial hardship due to the coronavirus pandemic, including extending their payments for up to seven years after their initial plan payment was due.

The American Bankruptcy Institute (ABI) emphasized that the bankruptcy provisions of the CARES Act listed above sunset within a year. Additionally, the law provides temporary relief for federal student loan borrowers by requiring the Secretary of Education to defer student loan payments, principal, and interest for 6 months, through September 30, 2020, without penalty to the borrower for all federally owned loans. This provides relief for over 95 percent of student loan borrowers.

“The American Bankruptcy Institute (ABI) commends Congress and the President for their prompt action on this stimulus package to provide needed financial relief due to the COVID-19 coronavirus pandemic,” said ABI Executive Director Amy Quackenboss. “Consumers and small businesses will have greater access to the financial fresh start of bankruptcy thanks to this important legislation. “Our members will be sure to utilize these tools to help consumers and small businesses struggling with overwhelming debts due to the economic fallout of the pandemic.”

ABI will be holding a free abiLIVE webinar with experts examining the bankruptcy provisions of the CARES Act on April 3 at 1 p.m. EDT. To register, please click here.