Letter to Sonny Perdue, Secretary of the United States Department of Agriculture - Connecticut Lawmakers Push USDA for More Assistance to Shellfish Farmers

Letter

Dear Secretary Perdue:
We write to request that USDA utilize already-existing resources and authorities to aid shellfish
growers throughout our country who have been irreparably harmed by the COVID-19 pandemic.
USDA has rejected requests to include certain farmed shellfish aquaculture in the Coronavirus
Food Assistance Program (CFAP) and has also rejected a request for the agency to purchase
oyster meat under the Section 32 program. Due to both decisions, we are concerned that USDA
has provided this industry with no other options during this economically challenging time. It is
essential that USDA reconsider these requests. We have included as attachments to this
correspondence supporting documents, including research studies, the original Section 32
proposal, and news articles providing support for this need for assistance. Although Congress has
provided $300 million to the National Oceanic and Atmospheric Administration (NOAA) for
fisheries assistance as part of the CARES Act, these funds have still yet to be disbursed to many
states, and are a pittance compared to what other farmers -- including some aquaculture
producers -- are eligible to receive under CFAP. Given that funds are still available under
CFAP (with USDA working on the structure of a second round of CFAP now) and that Section
32 continually remains an option for the agency to pursue -- and which requires no additional
Congressional appropriation at this time -- we request that you take advantage of these resources
already available to you and provide resources to this sector immediately.
The Case for Section 32 Purchases
On August 14th, the USDA Agricultural Marketing Service rejected a petition from the East
Coast shellfish industry for Section 32 oyster meat purchases. This petition was denied on the
grounds that the "cost of purchasing oyster products outweighed the volume of product that
could be made available to food banks and feeding programs." However, USDA announced it
would be purchasing up to $30 million in shrimp in early August, and in May, USDA announced
a purchase of $30 million in catfish. According to our industry experts, last year's price on whole
gulf shrimp, given that 75% of the shrimp weight would be edible meat, was approximately $8
per poundi
. With 100% oyster meat being edible meat, the costs are comparable. Our industry
experts believe the price range for oyster meats would be approximately $10-20 per pound of
edible meat.
We encourage you to consult Public Law 74-320 (7 U.S.C. 612c), which specifies three clauses
for the use of funds. Although 7 U.S.C. 612c goes into detail as to what is an appropriate use of
the funds, nowhere in the law is it written that the cost of purchasing a product should be the sole
determinant of whether that product is purchased by USDA.
The economic argument for Section 32 purchases is strong. These purchases are necessary to
avert a pending price collapse that will likely be inevitable for fresh, in-shell oysters. Oyster
farmers have significant inventories of product with sales reduced due to the lower restaurant
demand. With commodity oversupply, prices are likely to crash precipitously this fall. Growers
can maintain this inventory temporarily but will not be able to do so indefinitely.
According to a study, Impacts of COVID-19 on U.S. Mollusk aquaculture: Quarter 2 Results,
conducted by Virginia Tech, The Ohio State University, and Engle-Stone Aquatics, LLC, 90% of
respondents to their survey reported that their farm or business had been affected by the
pandemic in some way. The study, conducted from April 10th to June 29th, 2020, surveyed 117
mollusk farm participants from the Northeastern, Southern, Western, Tropical, and Sub-tropical
Aquaculture Regions. Of those surveyed, less than half (42%) indicated that their farm or
business would survive the next 3 months without any external interventions. Unfortunately,
98% of all respondents reported lost sales in the 1st Quarter Survey; in the 2nd Quarter Survey,
93% of respondents reported lost sales. Of those surveyed for the 2nd Quarter Survey, 88%
reported that they expected to experience additional lost sales in the 3rd Quarter of 2020.
Especially important for the Section 32 program, respondents to the survey were asked about
volume and price of products sold. According to the survey, during the 1st quarter, 9% of volume
was sold at a reduced price, and in the 2nd quarter, 52% of volume was sold at a reduced price.
Unfortunately, to sell market-ready products, shellfish farmers can only hold the product for a
limited period before the product becomes un-marketable. In the survey, 69% of all respondents
noted that holding products would result in reduced price, 67% noted that holding products
would reduce the quality of products, and 80% of those surveyed said that holding a product
would make it less marketable.
Additionally, of those surveyed in the 2nd quarter, 30% of respondents had laid off employees,
with another 14% responding that they would soon have to lay off employees. Of those
surveyed, 59% of respondents said that federal assistance would increase the likelihood of their
farm or business surviving the pandemic.
With more than half of all survey participants experiencing reduced prices for products in the 2nd
Quarter, it is essential that USDA take note of the real issues that this industry is facing and
provide them with commensurate relief.
During a call with USDA legislative affairs, staff were asked if shellfish farmers were changing
their marketing or approach to selling products in order to meet the challenges of the COVID-19
pandemic. Survey results demonstrate that shellfish farmers are quick to adapt and find new
markets to sell their goods, but it has been challenging. Of those surveyed in the Virginia Tech
and The Ohio State University study, 48% of shellfish growers had implemented or attempted to
implement a new marketing channel, with another 17% responding that they were in the process
of attempting to do so.
In a second study, conducted by Connecticut Sea Grant and UConn Extension at the University
of Connecticut and the Connecticut Department of Agriculture, respondents on average had a
93% reduction in revenue (in the period of March 23rd through April 3rd, 2020) compared to the
previous year. Additionally, more than half of all respondents had laid off employees, and half of
all respondents had product returned or destroyed following delivery to wholesalers or
restaurants that were subsequently closed or went out of business.
According to the Virginia Tech Q2 Aquaculture Industry COVID Impact Survey, many growers
have dropped prices, with an average decline from $0.60 to $0.53 cents between January and
June of 2020. Additionally, the Virginia Tech survey found that growers have large amounts of
inventory and have already experienced a lost value as the oysters have outgrown the desired
market size. Specifically, this survey found that the national average price decline in oysters was
20% - from $0.60/oyster in January to $0.53/oyster in July. It is likely that farmed oyster prices
will continue to drop this fall, as the wild-harvest fisheries open in October.
With the raw-bar market disappearing, raw-bar oyster growers will then have to sell these oysters
to shucking houses for a $0.25-$0.35 price, creating a huge price drop-off for this product. A
price collapse in the fall will undoubtedly push hundreds of farms into bankruptcy and could
result in several thousand lost jobs.
The Case for CFAP
In May, USDA announced that the Coronavirus Food Assistance Program (CFAP) would soon
be operational, and that USDA was interested in learning about losses for the aquaculture
industry; as provided in the FAQs: "The Department is particularly interested in the [sp]
obtaining information with respect to aquaculture and nursery products." The rule in the Federal
Register notes: "Additional eligible commodities, such as aquaculture and nursery crops
(including cut flowers) will be announced in a subsequently announced Notice of Funding
Availability (NOFA) issued by FSA on behalf of the Secretary." When the NOFA was posted on
May 20th, comments on additional commodities could be received by June 22nd, 2020.
Unfortunately, on June 1st, before the comment period ended for the proposed rule, USDA
decided that farmed shellfish aquaculture would be ineligible for CFAP. Previously, according to
USDA's own CFAP Aquaculture FAQs, the agency wrote: "USDA will consider information
submitted by aquaculture producers in the NOFA for private-owned aquaculture businesses that
propagate eligible […] freshwater and saltwater products in controlled environments."
Unfortunately, prior to the publication of the Rule, USDA made the decision not to include
farmed shellfish aquaculture in CFAP.
USDA also notes[i] that to be eligible for CFAP, "a producer must have suffered a 5-percent-orgreater price loss over a specified time resulting from the COVID-19 outbreak or face additional
significant marketing costs for inventories -- whether caused by lower prices given significant
declines in certain types of demand, surplus production, or by disruptions to shipping patterns
and the orderly marketing of commodities." Given the data provided in this correspondence, it is
clear that this industry has met the financial hardship test which would merit their eligibility for
this program.
With funds still available in this program -- which the agency will be disbursing to commodities
which have already received significant assistance -- we request that the agency consider the
shellfish aquaculture industry for CFAP, especially because USDA is already working on details
for a second round of CFAP. There is no coherent argument to exclude them from this program,
as USDA could easily promulgate regulations prohibiting any "double dipping" from NOAA
funds. Already, farmers cannot receive more than 100% of what would make them "whole"
through the Paycheck Protection Program, Economic Injury Disaster Loan Program, CFAP, or
NOAA programs. The Department should consider this change and provide this support to these
farmers, who have encountered more dire financial difficulties than many other agricultural
sectors, but have yet to receive substantial assistance from any federal agency.

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