Impact of the Paycheck Protection Program on U.S. Producers

Introduction In response to the COVID-19 pandemic, the U.S. government implemented multiple assistance and stimulus packages to aid consumers and businesses, including agricultural producers. Agricultural operations qualified for assistance from three relief programs in 2020: The Coronavirus Food Assistance Programs (CFAP 1 and CFAP 2) are targeted exclusively at agricultural producers and include direct payments to eligible operations. With some exceptions, producers of agricultural commodities (crop, livestock, dairy, or aquaculture) for which prices declined by 5% or more were eligible for a CFAP payment (Johansson et al., 2020). Some commodities (such as hemp, alfalfa mustard, etc.), for which price data were not available, were also eligible for payments under CFAP (Johansson et al., 2020). A third program for which agricultural producers qualified was the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA). The PPP was designed to help small businesses keep employees on the payroll and offset some of their operating costs. The maximum loan amount, which was forgivable if used during the 24-week period following the first disbursement of the loan on eligible expenses (payroll and allowed overhead expenses), was 2.5 times the monthly average profit plus payroll costs, including eligible overhead costs (employer insurance payments, employer unemployment taxes, etc.) (SBA, 2020). PPP data on each of the loans, including agricultural businesses loans, were released on December 1, 2020. This article examines the PPP participation rate, the average amount received, and PPP distributions relative to labor cost at the state level for the agriculture sector.