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 (Farm Operating Plan for Payment Eligibility)

CCC-941 (Average Adjusted Gross Income Certification and Consent to

Disclosure of Tax Information)

AD-1026 (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 non-

containerized 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 30th.

The coverage period for oysters is October

1 through September 30th.

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.

By Sept. 30 certify oyster crop by signing a

FSA-578, provide inventory records for

prior year crop.

Report losses within 72 hours by

telephone/email, sign CCC-576 Part B Notice

of Loss within 15 days of loss becoming apparent.

Sign CCC-576 Part G Certification and for

Payment within 60 days after Sept. 30

For Buy-up Policies, Premium Billing will

occur 60 days prior to Sept. 1, the premium will be due within 30

days.

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 30th.

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

$28,741 $46,860-$28,441=

$18,419

$18,419 x .55=

$9,965.45

Buy Up 50/100 $93,720 x %50=

$46,860

$28,741 $46,860-$28,441=

$18,419

$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

$28,741 $56,232- $28,741=

$27,491

$27,491

Buy Up 65/100 $93,720 x %65=

$60,918

$28,741 $60,918- $28,741=

$32,177

$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 OfficesState 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