In recognition of your time, we’ll attempt to summarize recent events or actions making dairy headlines and reported in our weekly digital newsletter, Progressive Dairy Extra. Then we’ll try to put that news into perspective and briefly describe how it might affect you.
CORONAVIRUS FOOD ASSISTANCE PROGRAM (CFAP)
What happened?
U.S. Secretary of Agriculture Sonny Perdue announced the application period and payment rates for direct producer financial assistance through the Coronavirus Food Assistance Program (CFAP). The application period opened May 26 and closes Aug. 28. Applications are being administered through USDA Farm Service Agency (FSA) offices.
What’s next?
Program rules were still being tweaked at Progressive Dairy’s press deadline, so check our website or your FSA office for updates.
Below the surface, CFAP payments for milk are complex. That’s because the payment comes from two federal pools of money (the Coronavirus Aid, Relief, and Economic Security Act and the Commodity Credit Corporation [CCC]). And the payment is calculated at different rates for milk production during the first two quarters of 2020.
Cutting through all the accounting details, there’s one application and one payment (well, sort of), equal to about $6.20 per hundredweight (cwt) on their first-quarter 2020 milk production. Before you use the full $6.20 per cwt to pay bills, be aware: The first CFAP payment installment covers just 80% of the total. So the first check will be closer to $4.95 per cwt. The remaining 20% is being held in reserve. At a later date, it could be paid in full or may be pro-rated to ensure that the USDA does not exceed its budget.
Initially, the USDA said forward contracted milk was not eligible for a payment, and there were questions related to milk covered under the Dairy Margin Coverage (DMC) or Dairy Revenue Protection (Dairy-RP) programs. But since the CFAP program is based on production levels, that no longer seems to be an issue.
Beyond milk, there are payment rates for several categories of livestock, including separate rates for feeder and slaughter cattle and cull cows. Uncertainty arose over whether the sale of dairy cattle qualified for a payment. The latest information is that cull cows and veal calves sold between Jan. 15 and April 15, 2020, will qualify; breeding animals will not.
There are payment rates for specialty crops (mostly vegetables, fruits and nuts) and non-specialty crops. (Soybeans and corn are covered but forages aren’t.)
Whether you can get a CFAP payment on any other commodity besides milk depends on the overall payment cap. Under provisions announced in May, the payment cap is $250,000 per person or entity for all commodities combined. Corporations, limited liability companies or limited partnerships may qualify for additional payment limits, up to a total of $750,000, when up to three members actively provide personal labor or management for the operation.
Adjusted gross income limitations and erosion and conservation compliance provisions apply.
Bottom line
Call or email your FSA office first, and don’t procrastinate. With COVID-19 restrictions still in place, face-to-face meetings with FSA staff require appointments, and much of the paperwork might be able to be completed via phone or email. The sooner you get in line, the quicker you should see a payment while reducing the risk you get paid before the USDA runs out of money.
Will there be more financial assistance coming? We don’t know. Congress allocated more CCC funding, which the USDA could use to provide additional direct payments. However, that money isn’t available until July 1.
And House Democrats pushed through a $3 trillion Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act in May, with several provisions directly impacting dairy producers, processors and marketers. However, Senate Republicans don’t seem inclined to move that bill forward, preferring to wait to see how current assistance programs work. As of late May, there had been a nice rebound in dairy product and milk futures prices, but there’s plenty of skepticism over whether those higher prices can hold.
DEAN FOODS AND FMMO PAYMENTS
What happened?
Several Federal Milk Marketing Order (FMMO) administrators indicated Dean failed to make FMMO producer settlement fund payments in May for milk pooled during April 2020, affecting farmer milk checks nearly nationwide.
Dean Foods is fully regulated on nine of 11 FMMOs, all except Arizona and the Pacific Northwest. The USDA’s Ag Marketing Service office confirmed producer settlement fund payments were not made in the Appalachian, Florida, Southeast, Central, Northeast, Upper Midwest, Mideast, California and Southwest FMMOs. No estimate of the payment total for individual or all FMMOs was available.
What’s next?
FMMO administrators and the USDA were working with the U.S. Department of Justice (DOJ) in an attempt to recover the money. Should the payments be recovered, full payments will be distributed.
Substantially all of Dean Foods’ facilities and assets were sold through a Chapter 11 bankruptcy agreement, and most transactions closed around May 1. The buyers of those facilities will be responsible for producer settlement fund payments going forward.
Bottom line
When producer settlement fund payments are not made, FMMO regulations stipulate that distribution of available money is prorated uniformly to all milk handlers, including co-ops, in the FMMO, which then distribute the money to producers. Handlers are notified of the nonpayment and the pro-ration of available producer settlement monies. That results in lower milk payments to all dairy farmers pooled in each affected FMMO.
DEAN FACILITY SALES TO DFA
What happened?
In a development related to the sale of Dean assets, Food Lion LLC and the Maryland and Virginia Milk Producers Cooperative Association (MDVA) filed a lawsuit seeking to find DFA’s acquisition of Dean facilities in North Carolina and South Carolina in violation of antitrust laws and asking that DFA be required to divest at least one of three fluid milk processing facilities in those states. The lawsuit was filed in the U.S. District Court for the Middle District of North Carolina, May 19.
What’s next?
No court hearing date had been set at Progressive Dairy’s press deadline. Monica Massey, DFA’s executive vice president and chief of staff, said the organization would aggressively defend itself.
Bottom line
Dean plants in High Point and Winston-Salem, North Carolina; and Spartanburg, South Carolina, were part of the bankruptcy sale agreement between Dean and DFA. According to the complaint, the purchase of those facilities positions DFA to monopolize the dairy supply chain in the region.
The three facilities were not part of DFA divestiture order issued by the DOJ in early May.
Food Lion is one of the largest retail purchasers of processed fluid milk in the region, operating more than 1,000 supermarkets in 10 states. MDVA is a dairy cooperative with approximately 950 member farms in 11 states throughout the Mid-Atlantic and Southeast. 
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Dave Natzke
- Editor
- Progressive Dairy
- Email Dave Natzke
