Florida’s 2022 Crop Freeze: USDA Disaster Assistance
At the beginning of this year, counties across Florida suffered from several unexpected, ‘hard’ freezes. Temperatures plummeted below 32 degrees for an extended period of time, destroying or reducing the quality of several cash crops throughout the state, including citrus and berries, and creating livestock-related issues.
If you’re one of the farmers whose operations suffered from these freezes, you may be in luck. The U.S. Department of Agriculture’s (USDA) has approved Florida’s “disaster declaration” request for 17 primary counties and 10 contiguous counties affected by the freeze.
So what exactly does that mean? Basically, once the USDA has made a “disaster declaration,” farmers in qualifying counties (can apply through local Farm Service Agencies (FSAs) for “emergency” loans, which cover costs or losses associated with the disaster. As with everything, these loans have specific eligibility requirements and require certain documentation to qualify. The qualifying counties in Florida are as follows:
First, you have to be a U.S. citizen who is an “established” farmer with intent to continue operations. In other words, you cannot intend to use the money to wind up operations and retire. Instead, you have to show that you have the “ability, training, or experience” to pay off the loans over time, which is typically done through creation of a farm plan reflecting your efforts to repay the loan and stay in business. The funds can only be used toward certain operational costs, so the FSA requires you to explain how the money will be allocated. Acceptable uses for the money include paying for production costs, refinancing certain debts (not involving real property), restructuring operations (like paying for your company to be reorganized), covering basic living expenses, or refurbishing or upgrading “essential property” (think equipment).
You also have to show a certain total loss to qualify. You must be able to “directly attribute” a 30% yield or quality loss of your primary crop to the freeze through your own recordkeeping. In other words, the FSAs dealing with Florida farmers will look at whether there were other circumstances, such as negligent handling of the crop, that caused damage unrelated to the freeze.
The loans also only cover the actual crop loss, up to $500k in damage. Meaning the loan will not cover the value of the crop (i.e. the profit you could have made on the crop in your market), but only the replacement cost according to industry standards. Finally, these loans are essentially designed as last resorts, so you must have been refused by other commercial lenders and provide proof of that refusal before you can be eligible.
The Application Process
You must apply within eight (8) months of when the crop loss occurred. The application forms can be found here. What documentation is required to show refusal from commercial banks depends: if you’re requesting an FSA loan above $300,000, you must provide two refusal letters; for loans between $100,000 and $300,000, you only need one; and for all lesser amounts the USDA makes a case-by-case determination.
In all cases collateral is required to secure loan repayment. The repayment plan terms are negotiate, and can be pretty favorable depending on the security involved, the scope of the loss and your financial situation. For some loans, only one payment may be required per year. For others, like loans for operating expenses, the loan must be paid in twelve or eighteen months, depending on the commodity involved. You may also be required to obtain crop insurance or attend financial management training before disbursement.
All in all, depending on the scope of your livestock or crop loss, it may be worth giving the FSA a call and working with counsel to develop your options.
Questions about USDA Disaster Declaration Applications? Let’s chat. Contact us at email@example.com to schedule a consultation.
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