Are hog producers being left out of USDA’s Emergency Relief Program (ERP) Phase 2? Paul Neiffer, a CPA who specializes in farm taxes, told AgriTalk’s host Chip Flory that’s what it looks like from his perspective.
USDA released a fact sheet that shows the differences between the Emergency Relief Program (ERP) Phase 2 and the Pandemic Assistance Revenue Program (PARP). The key finding that Neiffer sees on the fact sheet that has clarified some confusion is that no livestock sales are included in Phase 2, but livestock sales are included in PARP.
“After reading the fact sheet again and looking at their comparison between ERP phase two and PARP, ERP is strictly crop-based,” Neiffer said.
ERP Phase 2 is part of the Extending Government Funding and Delivering Emergency Assistance Act, which includes $10 billion in assistance to agricultural producers impacted by expenses associated with losses of eligible crops due in whole or part, to a qualifying disaster event experienced during calendar years 2020 and 2021. ERP Phase 2 provides direct financial assistance to producers who suffered an eligible revenue loss in the applicable disaster year, compared to the benchmark year.
Meanwhile, PARP provides direct financial assistance to producers of agricultural commodities who suffered at least a 15% loss in gross revenue in calendar year 2020 due to the COVID-19 pandemic.
The fact sheet on ERP Phase 2 originally was not clear on whether livestock sales were included or not, Neiffer explained on his blog. If this new fact sheet comparison is correct, then all livestock sales are not included in ERP Phase 2. However, hog producers are eligible for relief under PARP.
“PARP’s got the same type of issues with calculations – It’s a little bit more of a shallow loss, kicks in quicker,” Neiffer explained. “With ERP Phase 2, you need a 30% reduction in revenues and on PARP, it’s only 15%. So those hog producers that were hammered in 2020 and couldn’t get their hogs to market, their revenues for the year had to go down by more than 15%.”
Later on in 2020, many of those same hog producers saw good returns, he added. Because of that he doesn’t think their revenues went down by 15% for the year.
“It’s just difficult to find out whether they’re going to collect much,” Neiffer said. “USDA says, ‘Hey, we’re going to get about $2.5 billion of claims through PARP, but we’re only going to pay $250 million. So that’s a 10% payoff. That’s not a very good deal. Plus, for a lot of these hog guys $125,000 payment limit on these things, that’s going to provide some relief, but not a lot.”
If you are looking for some kind of relief from the lost revenue in hog production, is the best option to look at PARP?
Neiffer thinks so. He reminded producers that it has to be determined on a calendar year basis.
“A lot of your hog producers out there are not on a calendar year. They’re going to have to go in, do a whole lot of number crunching with their accountant or their tax advisor, and they may end up spending a couple thousand dollars with their tax advisor to find out that they don’t get anything,” he warned.
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