What can the Farm Service Agency offer your oyster operation? Ocean City Maryland January 14, 2017
Two Programs to Discuss Today Farm Storage Facility Loans (FSFL s) Noninsured Assistance Program (NAP)
Farm Storage Facility Loans (FSFL s) Traditionally items like grain bins, but now this and so much more
Overview of Farm Storage Facility Loan Program (FSFL) Loans are now available under the FSFL program for storage and handling equipment for aquaculture products, which includes oysters. The new regulations include loans on new and used cold storage trucks to haul oysters, cold storage units (portable and fixed), new and used portable handling equipment, including cold storage trailers.
Eligible Producers for FSFL: Compliance with NEPA (National Environmental Policy Act) and USDA provisions for Highly Erodible and Wetlands. Has no delinquent Federal nontax debt. Has not been convicted for disqualifying controlled substance violation or crop insurance violation. Is a producer of a FSFL commodity. Has a satisfactory credit history as determined by the Commodity Credit Corporation (CCC). Demonstrates the ability to pay the down payment and repay the FSFL 15% down payment required for traditional FSFL 5% down payment required for FSFL microloan- $50,000 or less
Eligible Producers for FSFL, cont d: Demonstrates a need for increased storage capacity unless the borrower is submitting CCC-185 only for handling equipment or renovating a structure. Provides proof of NAP coverage on oysters. Demonstrates compliance with any applicable local zoning, land use, and building codes for the applicable FSFL structures; and emissions and vehicle inspection requirements, if applicable. Provides all-peril structural insurance, and, if required, flood insurance; and must be registered with applicable State Motor Vehicle Administration, complying with all insurance and title provisions, if applicable.
Eligible Structures: Must have a useful life of at least 15 years and must be used for the purpose for which constructed, assembled, or installed for the entire FSFL term. Eligible storage facilities include: A new facility of wood pole and post construction, steel, or concrete suitable for storing the producer s aquaculture products. New or used walk-in prefabricated, permanently installed cold storage coolers suitable for storing the producer s aquaculture products. Uptake and discharge re-circulatory systems that are only used for storage and handling of the oysters produced by the borrower. At this time, eligible systems must not utilize water coming from natural sources, tributaries, coastal and ocean waters, or perineal waterways. Portable cold storage containers essential to the proper storage of the eligible commodity- containers on trailers and trucks are eligible.
Eligible components may be portable or permanently affixed, new or used, such as: Augers Back-up generators Ice machines Graders Sizers Sorting bins/tables Refrigeration units Electrical equipment Washers
Eligible Storage and Handling Trucks FSFL financed storage and handling trucks, new or used, must be used for the purpose for which funds were acquired for the entire FSFL term. Eligible storage and handling trucks, new or used, may include, but are not limited to: Cold storage refer trucks Storage trucks with a chassis unit Semi road tractors Storage and handling truck FSFLs may be for $100,000 or less and have a maximum of four axles with a gross weight of 60,000 pounds or less. The maximum loan term for used FSFLs, including trucks, is 5 years.
Eligible Storage and Handling Trucks, cont d All storage and handling trucks receiving FSFL financing must: Be registered with the applicable State Motor Vehicle Administration, and meet all insurance and title provisions prior to loan disbursement Meet the needs of the operation Have a clear title Have a useful life span of at least the entire FSFL term Have a valid vehicle identification number Obtain required State emissions and vehicle inspection Be insured with a policy equal to the value of the security at the time of the loan Not have been purchased earlier than 30 calendar days before the FSFL request is submitted.
FSFL Loan Conditions FSFL Security: All FSFLs are secured by CCC-186 (FSFL Promissory Note and Security Agreement) and by a lien on the farm storage facility and/or equipment financed. Additional security is required if the aggregate outstanding FSFL balance exceeds $100,000, or if the FSA State Committee establishes a more restrictive policy. When additional security is required, a lien on the real estate that includes the land where the FSFL structure and/or equipment will be located is preferred. Borrowers must obtain all-peril structural insurance on all storage structures and components receiving FSFL financing listing CCC as a loss payee. FSFL loan terms: For used storage facility, handling equipment or truck, the term is 3 5 years For a $100,000 or less FSFL, the loan term is 7 years For a $100,001 - $250,000 FSFL, the loan term is 7 or 10 years For a $250,001 - $500,000 FSFL, the loan term is 7, 10, or 12 years
FSFL Loan Conditions, cont d The interest rate on the FSFL loan is equivalent to Treasury securities of a comparable term in effect during the month of the initial FSFL approval. The interest rate is updated monthly and will remain the same for the FSFL term. A FSFL loan for $100,000 or less approved in January 2017 would be 2.25% for the 7 year term of the loan. The FSFL loan shall be payable in equal installments of principal and interest amortized over the term of the loan.
January 2017 FSFL Interest Rates Interest rates for FSFL s approved during January 2017 are as follows: 1.500 percent with three-year loan terms 1.875 percent with five-year loan terms 2.250 percent with seven-year loan terms 2.375 percent with 10-year loan terms 2.500 percent with 12-year loan terms
Noninsured Assistance Program (NAP) Most people think of this for NAP But NAP is also for this
Overview of the Noninsured Assistance Program (NAP) The NAP program is administered by the Farm Service Agency (FSA) which is an Agency within the U.S. Department of Agriculture (USDA). NAP covers crops not covered by traditional crop insurance policies, which includes oysters.
Eligible Producers: An owner or operator who shares in the risk of producing the oysters and who is entitled to an ownership share of the oysters. Must complete forms: CCC-902 CCC-941 AD-1026 (Farm Operating Plan for Payment Eligibility) (Average Adjusted Gross Income Certification and Consent to Disclosure of Tax Information) (HELC and WC Certification) SF-1199-A (Direct Deposit Sign-up Form)
Eligible Oysters: Must be placed, planted, or seeded by a commercial operator on private property in a controlled environment and must not be growing naturally in the facility or wild caught. Must be grown on owned or leased property with readily identifiable boundaries where the owner or lessee has total control of the waterbed as well as the column of water.
Eligible Causes of Loss: Damaging weather or adverse natural occurrences (drought, hail, flooding, freezing, excessive wind, earthquake, etc.) Note: For mollusks not planted or seeded in containers, net pens, wire baskets, on ropes, or similar devices designed for containment or protection, the ONLY eligible cause of loss will be the direct result of a NOAA determined tropical storm, typhoon, or hurricane. Condition related to damaging weather or an adverse natural occurrence (heat, insect infestation, disease, insufficient chill hours, etc.)
Ineligible Causes of Loss: Any alleged or actual loss of inventory or missing noncontainerized inventory resulting from a managerial decision not to seed or raise the eligible NAP crop in containers, net pens, wire baskets, or similar devices. Negligence, mismanagement, or wrong doing by the NAP covered producer or anyone else. Failure to follow recognized good farming practices for the eligible crop. Any managerial decision to attempt to grow or produce a crop in an area that is not suited to successful commercial production of oysters as determined by FSA.
NAP policies are available at different coverage levels: NAP Coverage Level Loss Level Trigger Price Level Administrative Fee= $250 per crop per county Premium= Producer Max. Dollar value X coverage level x 5.25% premium factor NTE $6562.50 Eligible for waiver of Admin Fee if BF/LR/SD* Eligible for 50% reduction in premium if BF/LR/SD* CAT 50/55 50 % 55 % N/A N/A Buy-up 50/100 50 % 100 % Buy-up 55/100 45 % 100 % Buy-up 60/100 40 % 100 % Buy-up 65/100 35 % 100 %
Eligible for waiver of administrative fee and 50% reduction in premium if BF/LR/SD BF- Beginning Farmer: 10 years or less operating a farm, actively participating in the operation LR- Limited Resource: Earns no more than $176,800/year for each of the 2 years preceding the year of NAP application AND has a total household income at or below the national poverty level for a family of four, or less than 50% of the county median household income for both of the previous two years- www.lrftool.sc.egov.usda.gov SD- Socially Disadvantaged: Traditionally underserved farmers who are a member of a group whose members have been subject to racial, ethnic, or gender prejudice because of their identity
Coverage Period: The crop year for oysters is October 1 through September 30 th. The coverage period for oysters is October 1 through September 30 th. The sales closing date for a NAP policy on oysters is September 1 for the ensuing crop year.
Annual Cycle of a NAP Policy for Oysters By Sept. 1 sign a CCC- 471 NAP Application for coverage and pay $250/crop Admin Fee for the ensuing crop year. For Buy-up Policies, Premium Billing will occur 60 days prior to Sept. 1, the premium will be due within 30 days. By Sept. 30 certify oyster crop by signing a FSA-578, provide inventory records for prior year crop. Sign CCC-576 Part G Certification and for Payment within 60 days after Sept. 30 Report losses within 72 hours by telephone/email, sign CCC-576 Part B Notice of Loss within 15 days of loss becoming apparent.
Steps to obtaining a NAP Policy on Oysters: By September 1, 2016 for 2017 year coverage: 1) Contact the FSA County Office where the operation is located, and set up an appointment to sign a CCC-471 (NAP Application for Coverage), you can do this by phone or in person, appointments are highly recommended as this allows the Office to set aside time for you and to prepare for the appointment.
Steps to obtaining a NAP Policy on Oysters, cont d: 2) Take the following with you to your appointment: A copy of your oyster lease- the Office will plot your lease area on a map for crop reporting. The required $250/crop Administrative fee- the Application for Coverage is not complete until this has been received by the County Office. Any additional information about your operation which may be needed, Social Security Numbers, EIN Numbers if you operate under an entity, Direct Deposit bank account information. Also, if you are electing buy-up coverage, you will need to know what Maximum Dollar Value you want to use to cover your operation at this time.
Steps to obtaining a NAP Policy on Oysters, cont d: By September 30, 2016: 3) Call the County Office to certify your oyster crop by signing a FSA-578 (Report of Acreage), this is an annual requirement. 4) Submit a copy of current inventory records- the Office will keep these on file to be used in the event of a loss, this is an annual requirement.
Producer Responsibilities/ Steps to Report Losses: 1) Call, email, or visit the County Office within 72 hours of the loss becoming apparent. The 72 Hour Rule was determined for hand harvested vegetables, may not be as practical for aquaculture, but contact the COF ASAP
Producer Responsibilities/ Steps to Report Losses: 2) File a CCC-576 Part B (Notice of Loss), in the County Office within 15 days of the loss becoming apparent. 3) Pending approval of the CCC-576 Part B, the County Office will schedule a certified Loss Adjuster to complete an appraisal on the oysters- it is critical that this appraisal happens timely so that FSA can potentially calculate your claim.
Producer Responsibilities/ Steps to Report Losses, cont d: 4) Maintain close contact with the County Office and make sure that you are providing information on the loss as requested, and that you complete the entire application process timely. 5) File a CCC-576 Part G (Certification and Application for Payment) within 60 days after September 30 th.
Premium Billing for Buy-up NAP Policies If you have chosen one of the Buy-up Options, you will receive a premium bill in the fall of the coverage year. The premium bill must be paid in full within 30 days of the date the bill is received.
Premium Calculation for Buy-up for Oysters (Value-Loss Crops): Multiply Producer s share x Elected Maximum Dollar Value x Coverage Level x 5.25% Premium Factor = Premium Example: For 2017 Coverage, a producer with 100% share of the oysters, elects a Maximum Dollar Value of $100,000 on his oyster inventory at the highest coverage level available, which is 65/100. 100% x $100,000 x 65% x 5.25% = $3412.50 A premium of $3413 would be due 30 days from the date the bill is received by the producer, sometime late summer to fall of 2017.
Calculation of a Loss for Oysters (Value- Loss Crops): NAP assistance for value-loss crops (oysters) is calculated based on the loss of value at the time of the disaster. To determine the loss, the value of the oysters immediately before the disaster (Field Market Value A) is compared to the value of the oysters immediately after the disaster (Field Market Value B).
Loss calculation example: The producer has CAT Level Coverage (50% of the loss at 55% of the price) The producer plants 1,500,000 spat At time of loss they are 080 MM The mortality is 50% (found in the reference table below) So if 1,500,000 are planted, we would expect to have 750,000 survive to reach 080 MM The value is.12496 (found in the reference table below) So Field Market Value A (the value before the disaster) = $93,720 (750,000 x $.12496)
Loss calculation example, cont d: Now we need Field Market Value B (Value after the disaster) FSA completes an appraisal and we figure we have 230,000 live oysters after the disaster Field Market Value B = 230,000 x.12496= $28,741 So Pre Disaster Value is $93,720 and Post Disaster Value is $28,741 Coverage at 50% would give us a disaster level of ($93,720 x.5)= $46,860
Loss calculation example, cont d: Subtract out the value after the disaster ($46,860- $28,741)= $18,119 At the CAT level this would multiply by.55 so ($18,119 x.55)= $9,965.45 Final NAP Payment of $9,965.45 Had there been buy up, the Coverage would be either 50%, 55%, 60%, or 65% at 100% of the price (instead of 55%)
Loss calculation example, cont d: Coverage Level Market Value A Market Value B Value 1 Final Payment Original Value $93,720 $28,741 Cat 50/55 $93,720 x %50= $46,860 Buy Up 50/100 $93,720 x %50= $46,860 $28,741 $46,860-$28,441= $18,419 $28,741 $46,860-$28,441= $18,419 $18,419 x.55= $9,965.45 $18,419 Buy Up 55/100 $93,720 x %55= $51,546 $28,741 $51,546-$28,741= $22,805 $22,805 Buy Up 60/100 $93,720 x %60= $56,232 Buy Up 65/100 $93,720 x %65= $60,918 $28,741 $56,232- $28,741= $27,491 $28,741 $60,918- $28,741= $32,177 $27,491 $32,177
Loss calculation example, cont d: In a real-life situation, there would likely be multiple sizes of oysters at the time of the disaster requiring calculations for each size, this example was simplified for training purposes. Please note the importance of keeping accurate inventory records to be used for calculating the value of oysters prior to the disaster event as well as the timely reporting of the disaster event to the county office so that FSA can conduct an appraisal to determine the value of the oysters after the disaster event- both of these actions are the producer s responsibility.
Reference Table for Example: Oyster Normal Mortality and Prices- Maryland 2017
Contact Information Bob Wevodau Farm Program Chief Maryland FSA State Office 339 Busch s Frontage Road Suite 104 Annapolis, MD 21409 443-482-2770 Robert.Wevodau@md.usda.gov Joanne Mann Farm Program Specialist Maryland FSA State Office 339 Busch s Frontage Road Suite 104 Annapolis, MD 21409 443-482-2768 Joanne.mann@md.usda.gov
East Coast FSA Offices State Phone Number Maine 207-990-9100 New Hampshire 603-224-7941 Massachusetts 413-253-4500 Rhode Island 401-828-8232 Connecticut 860-871-4090 New York 315-477-6300 New Jersey 855-305-6513 Delaware 302-678-4250 Maryland 443-482-2760 Virginia 804-287-1503 North Carolina 919-875-4800 South Carolina 803-806-3820 Georgia 706-546-2266 Florida 352-379-4500