Digest Highlights

COVID-19 relief bill includes DMC milk production history adjustment

Congress approved a $2.3 trillion spending bill combining fiscal year 2021 omnibus appropriations with a COVID-19 relief package. The bill, nearly 5,600 pages in length, provides $1.4 trillion to finance government agencies from Oct. 1, 2020, through Sept. 30, 2021, and $900 billion in COVID-19 relief spending.

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Dave Natzke
Editor / Progressive Dairy

Preliminary reports estimate that agriculture is targeted with between $11 billion and $13 billion under the COVID-19 relief package bill. Two dairy provisions cover the Dairy Margin Coverage (DMC) program and a program to facilitate dairy product donations to those in need.

  • DMC adjustment. The COVID-19 relief bill allows dairy producers to update their milk production history baselines and receive a supplemental DMC payment on a portion of any increased milk production.

While the original DMC program established an eligible baseline on milk production in years 2011, 2012 and 2013, this bill allows producers to use actual milk production in 2019. The adjusted milk production baseline is effective January 2021 through the life of the current farm bill and DMC program, ending in 2023, and is not retroactive to 2020.

With DMC Tier I production limits remaining at 5 million pounds of milk or less annually, the adjustment primarily benefits smaller operations by allowing them to increase annual milk production eligible for DMC coverage and indemnity payments up to that cap. No supplemental payments are permitted on milk production above 5 million pounds per year.

And not all of the increase in the production history will be eligible for a supplemental payment. The bill limits that payment to cover 75% of the difference between an eligible dairy operation’s actual 2019 milk production and its previous DMC milk production history.

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Those eligible to cover additional milk under the DMC production history adjustment must already be enrolled in DMC for 2021. That enrollment deadline closed on Dec. 11, 2020, and the bill prohibits reopening of the 2021 DMC enrollment period.

Under the bill, the USDA has 45 days to initiate the DMC provisions. Once the USDA Farm Service Agency (FSA) determines a sign-up period, eligible producers will likely need to contact their FSA office with 2019 actual milk production records if they wish to adjust production history on an existing operation.

Coverage levels (percentage of milk production covered and margin covered) on the additional milk must be equal to the coverage selected previously for 2021 (and beyond) on the original production history.

Any increase in milk production history covered under DMC also means the producer will have to pay the additional margin insurance premiums on that milk.

All 2021 DMC indemnity payments are subject to a 5.7% sequestration deduction, down from 5.9% in 2020 and 6.2% in 2019.

DMC enrollment numbers had not been updated for the week starting Dec. 20. As of Dec. 14, 17,131 dairy operations (about 68.3% of those with established milk production history) had enrolled for 2021. Milk production enrolled for 2021 was estimated at 143.3 billion pounds, about 71% of the established history.

  • Dairy Donation Program. The COVID-19 relief bill provides $400 million for implementation of a Dairy Donation Program, designed to provide dairy products to food-insecure households and minimize food waste.

Patterned after the Milk Donation Reimbursement Program created in the 2018 Farm Bill, this provision creates a mechanism for eligible dairy processors to partner with nonprofit organizations to distribute food to low-income individuals. Those partnerships may apply for and receive reimbursements to cover milk-related expenses for the dairy product donations. Payments may be eligible for donations made in 2020.

While the Milk Donation Reimbursement Program was funded at about $5 million per year and covered fluid milk product donations, the Dairy Donation Program covers all dairy products, with a total spending limit of $400 million. The reimbursements will offset a portion of the raw milk cost for the milk used to manufacture the donated dairy products and will be based on Federal Milk Marketing Order (FMMO) milk class pricing. The donations must not interfere with the commercial marketing of milk or dairy products. Donations eligible for reimbursement will be selected with an attempt to maintain orderly marketing of milk by reducing volatility and maintaining traditional price relationships between classes of milk or stabilizing on-farm milk prices.

“With difficult months of the pandemic still ahead, it was crucial for lawmakers to come to a bipartisan agreement that helps farmers do what they do best: feed families,” said Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF). He noted the package includes nearly $1 billion in targeted support targeting dairy.

Jeff Lyon, general manager of the midwestern FarmFirst Dairy Cooperative, agreed. “FarmFirst approves of the latest COVID-19 relief legislation passed today by Congress, helping provide comfort and reassurance as there are many uncertainties ahead as the pandemic continues,” he said.

  • Other provisions. Other provisions of the COVID-19 relief bill impact the tax treatment of forgiven Paycheck Protection Program (PPP) loans; funds additional payments and provides the USDA more flexibility in payment limitations under the Coronavirus Food Assistance Program (CFAP) program; provides grants to encourage small-scale meat processing; and directs additional funds for rural broadband. Some producers forced to euthanize livestock during the initial wave of the pandemic and who were previously left out of aid may now qualify for assistance.

Separately, more than $13 billion in funding is earmarked for nutrition assistance, including the Supplemental Nutrition Assistance Program (SNAP), the Emergency Food Assistance Program (TEFAP) and international food aid programs.

Progressive Dairy will provide more details as they become available.

13 appointed to National Dairy Board

The USDA announced the appointment of 13 members to serve on the National Dairy Promotion and Research Board (NDB). They will serve three-year terms, effective immediately, through Oct. 31, 2023.

Newly appointed members are: Sharon DeRuyter, Washington; Timothy Bernhardt, Colorado; Robert Brouwer, New Mexico; Marvin Post, South Dakota; George Crave, Wisconsin; Donald Gaalswyk, Idaho; Lois Douglass, Ohio; and Kathryn Fogler, Maine.

Reappointed members are: Orville Miller, Kansas; Becky Levzow, Wisconsin; Alex Peterson, Missouri; John Larson, Florida; and dairy importer Ralph Hoffman, New Jersey.

The 36-member board administers dairy research, advertising and promotion programs funded through the national dairy checkoff.

CFAP 2 payment update

Another sign-up deadline, this one for the second Coronavirus Food Assistance Program (CFAP 2), closed on Dec. 11. Through Dec. 20, CFAP 2 payments for milk totaled $1.16 billion. Topping the list of state’s receiving dairy payments were: Wisconsin, $219.2 million; California, $179.1 million; New York, $110.3 million; Minnesota, $67 million; and Michigan, $65.5 million.

Created to assistant farmers who saw market disruptions and losses due to the COVID-19 pandemic, combined payments through CFAP 1 and CFAP 2 paid dairy farmers about $2.94 billion.

Reminder: Submit Dean ‘declaration’ forms quickly

Former Dean Foods dairy farmer milk suppliers and milk haulers who received avoidance claim settlement offers are being reminded to submit ”declaration” forms as soon as possible.

Authorized by the bankruptcy court, ASK LLP, a law firm based in St. Paul, Minnesota, began sending letters to all companies that received Dean payments during the 90-day period prior to the company filing for bankruptcy on Nov. 12, 2019. Under 11 US.C. § 547 of U.S. bankruptcy code, payments made by a company during the final 90 days prior to the filing of bankruptcy are considered “preference” payments and are subject to “claw back” provisions by bankruptcy trustees seeking to acquire necessary funds to pay remaining claims.

The Pennsylvania Milk Marketing Board (PMMB), in consultation with the Pennsylvania attorney general’s office and ASK LLP, developed the declarations in response to those avoidance claim settlement offers. Submitting the declarations should provide an “ordinary course of business” defense against having to pay back all or portions of payments received for milk in late 2019.

Read: ‘Declarations’ pave way for resolution to Dean settlement offer claims and Additional Dean payment ‘declaration’ form details provided.

The declaration forms should be suitable for dairy farmers and milk haulers in any state. The forms and an explanation are available on the PMMB website.

“We reinforce to everyone the critical nature of completing and returning the declarations to ASK,” said Carol Hardbarger, PMMB secretary, who noted information provided is not a substitute for obtaining legal advice from a licensed attorney. “We also are suggesting that individuals contact their own attorneys if they remain unsure of the process as we have described it.”

PMMB continues to receive calls and emails from concerned farmers and others. Milk dealers, milk subdealers and others involved in the dairy industry may have also received avoidance claim settlement offers. Since their business transactions with Dean Foods may not be regulated by the federal or state government, similar declarations cannot be developed, according to PMMB. Anyone other than a farmer or hauler who received an avoidance claim settlement offer should contact an attorney as soon as possible to determine how to respond to the demand.

Be thankful for November retail dairy sales

Smaller Thanksgiving gatherings and less travel impacted November retail dairy product sales, according to a monthly update from the International Dairy Deli Bakery Association (IDDBA). While year-over-year dairy sales growth slowed compared to previous months, both sales value and volume were up from a year earlier.

For the period of Nov. 8-29, consumer retail spending on dairy products was up about 7% compared to a similar period in 2019, the smallest monthly gain since the COVID-19 pandemic hit last March. Based on Information Resources Inc. (IRI) U.S. grocery store sales data, individual product category increases in November on a value and volume basis, respectively, were:

  • Natural cheese sales: 13.4% (value); 9.3% (volume)
  • Fluid milk: 3.5%; -0.6%
  • Butter: 1.4%; 2.3%
  • Process cheese: 8.2%; 3.5%
  • Yogurt: 3.5%; 3.3%
  • Cream cheese: 9.8%; 8.7%
  • Creams and creamers: 10.6%; 9.8%
  • Whipped toppings: 14.6%; 18.7%
  • Sour cream: 4.8%; 4.2%
  • Cottage cheese: 4.3%; 4%

In the deli department, random weight natural cheese remained a sales growth leader, up nearly 11% by value. Dollar gains easily exceeded volume gains, which points to continued inflation.

Renewed shelter-in-place restrictions and rising COVID-19 cases may push retail dairy sales higher over the next few months, although smaller gatherings and reduced travel will also likely impact Christmas and New Year’s celebrations. An IRI survey found one in three food buyers expect to spend less on groceries for the December holidays this year.

October 2020 fluid sales down slightly

Here’s an update on U.S fluid milk sales data from the USDA Agricultural Marketing Service:

  • Total sales: October sales of packaged fluid milk products totaled 3.97 billion pounds, down about 1.8% from a year earlier. Year-to-date (January-October 2020) sales totaled 38.4 billion pounds, up 0.2% compared to the same period in 2019.

  • Conventional products: October sales totaled 3.73 billion pounds, down 2.1% from a year earlier. Through the first 10 months of the year, sales totaled 35.98 billion pounds, down 0.5% from a year earlier. Despite slumping in October, whole milk remained the growth leader for the year, up 3.5%. Year-to-date sales of reduced fat (2% milk) were up about 3.2%.

  • Organic products: October sales totaled 237 million pounds, up 2.8% from a year earlier. Year-to-date 2020 sales of organic products totaled 2.39 billion pounds, up 11% from the previous year. Sales growth leaders included whole and 2% milk, up 12.5% and 15.5%, respectively. Through October, organic represented more than 6.2% of total fluid product sales.

The U.S. figures represent consumption of fluid milk products in FMMO areas and California (now a part of the FMMO system), which account for approximately 92% of total fluid milk sales in the U.S. Sales outlets include food stores, convenience stores, warehouse stores/wholesale clubs, nonfood stores, schools, the food service industry and home delivery.

Zoetis FMD vaccine petition comment period closes Jan. 4

The USDA’s Animal and Plant Health Inspection Service (APHIS) reopened a comment period on a petition from Zoetis seeking approval to produce a foot-and-mouth disease (FMD) vaccine.

The comment period, originally announced last July, is now open until Jan. 4, 2021. (A previous press release from USDA APHIS erroneously said the comment period closed Jan. 21, 2021.)

Zoetis intends to produce FMD vaccine in the U.S., where introduction of the live FMD virus is prohibited by law. The Zoetis petition states its FMD vaccine consists of a modified non-infectious and non-transmissible strain of the virus and incapable of causing FMD.

Public comments may be submitted here.

Court orders Golden Guernsey to pay $1.1 million in back wages and benefits

Bankruptcy trustees for Golden Guernsey Dairy LLC must pay former employees more than $1.1 million in wages and benefits following an agreement approved in the U.S. Bankruptcy Court for the District of Delaware.

Prior to its sudden closure in January 2013, Golden Guernsey Dairy LLC had employed over 100 people at its milk processing, bottling and distribution facility in Waukesha, Wisconsin. In addition to failing to pay employees, Golden Guernsey shut down operations without providing the required 60-day notice under Wisconsin’s business closure law, which applies to any business with more than 50 employees.

The Wisconsin Department of Justice (DOJ) filed a claim after Golden Guernsey sought Chapter 11 bankruptcy protection. The agreement provides for a priority payment of up to $11,750 to each employee. Employees owed more than that amount could receive additional funds, subject to availability in the bankruptcy estate.

At one time owned by Foremost Farms dairy cooperative, the facility was sold to Dean Foods in 2008. However, Dean was ordered to divest of the Waukesha plant over antitrust issues, and the plant was subsequently purchased in 2011 by OpenGate Capital, a California-based investment firm. Following its closure, the plant was sold to kefir manufacturer Lifeway Foods Inc. in May 2013.  end mark

Dave Natzke