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COVID-19 - Week of April 13 updates

Progressive Dairy Published on 23 April 2020

COVID-19 updates for the week of April 13, 2020.

Progressive Dairy shares news, industry statements and press releases, and educational resources for dairy producers to help deal with the impacts of COVID-19. Email additional news and resources to Dave Natzke.

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This week’s COVID-19 updates

Milk disposal in anaerobic digesters: Some things to think about

One option for disposing of excess milk is via anaerobic digesters, be they on-site, at food processors or other “community digester” locations. Before putting milk in digesters, farmers need to think through a few important technical and legal considerations, warn members of the Michael Best law firm. 

Authored by attorneys David Crass, Jordan Hemaidan and Jecoliah Williams, an article notes that milk contains potential energy content far exceeding that of manure, creating value in the form of renewable natural gas. That, in turn, can generate revenue from power production or various environmental subsidies, including California’s Low Carbon Fuel Standard (LCFS) or the Federal Renewable Fuel Standard (RFS).

From a technical aspect, digesters' substrates must be carefully managed in order to maintain the microorganism balance in the digester. Introducing too much high-energy milk can cause microorganism die-off, or an imbalance in the microorganism mix. Other problems can result when milk is removed from the substrate stream.

Beyond the physical operation of the digester, putting milk in the digester will change the type and value of RFS credits. Gas produced exclusively from manure generates credits known as “D3 RINS” under the RFS Program. But when you add food sources in addition to manure, the digester loses its D3 RINS qualification and may be eligible only for “D5 RINS,” which are generally only about half as valuable as D3 RINs at today’s prices. 

For now, the EPA has taken the position that qualification for D3 RINS is solely based on the cellulosic content of the digester feedstock, but the EPA is expected to release guidance for industry regarding enforcement of this distinction during the ongoing milk disposal crisis.

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If your digester is producing gas to generate LCFS credits, putting milk in the digester will require certification of a new “pathway” by the California Air Resources Board (CARB). Every farm that is certified by CARB to produce LCFS credits is certified for a specific process using specific substrates – in most cases purely manure. The value of those credits is based on the carbon intensity (CI) score of the substrate going into the digester. While the process to determine it is complex and quantitative, introducing milk into the digester will likely change the farm’s CI score, and that in turn requires the farm to get a new LCFS credit pathway certified by CARB that assigns a new CI score.

If you are using your digester to produce electric power for a utility that is purchasing the power, there’s probably no downside to using milk in the digester. Unless something in your power purchase agreement (PPA) contract with the utility requires you to use only manure in the digester, you should be able to put milk in the digester without any consequences. You should review your PPA before doing so, however.

Read: Milk disposal in anaerobic digesters: Some things to think about.

Milk value as fertilizer: $27 per 1,000 gallons

Significant quantities of surplus milk may have to be land applied in the coming weeks due to unprecedented market disruptions created by the COVID-19 emergency. A recent e-Alert from Cornell’s PRO-Dairy program looks at that milk’s value as a fertilizer.

Every 1,000 gallons of milk contains 44 pounds of nitrogen (N), 18 pounds of P2O5 and 17 pounds of K2O, according to Karl Czymmek, dairy extension environmental management specialist. An economic value can be placed on these nutrients based on the following approximate fertilizer prices: urea at $330 per ton, diammonium phosphate at $400 per ton and muriate of potash at $380 per ton.

Using these values, the total N-phosphorus (P)-potassim (K) nutrient value of milk is $27 per thousand gallons. A 5,000-gallon per acre application of straight milk delivers nearly $135 per acre of N-P-K that is readily available to plants.

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Milk also contains other nutrients such as sulfur, calcium, magnesium and zinc that have not been valued in this calculation. Further, there is some evidence that the land application of milk may significantly improve soil health by supporting bacteria and fungi that live in the soil. 

The New York State departments of Agriculture and Markets and Environmental Conservation (DEC) have provided guidance for recycling milk as fertilizer for crops. The DEC also announced that the agency will not be enforcing the concentrated animal feeding operation (CAFO) permit part 360 requirement for land application of food waste, through Oct. 1, 2020, as long as the land applications follow the technical guidance. 

For more information on land spreading and other disposal methods, including concerns over runoff, odor and more, read also: Dumping milk? Consider these recommendations.

AFBF’s Newton describes how pooling of dumped milk works

As a direct result of COVID-19, many dairy processors and cooperatives are requesting that dairy farmers reduce their milk supplies. With reports of widespread milk dumping, the USDA has announced new flexibilities to allow this dumped milk to be priced and pooled on the Federal Milk Marketing Order (FMMO) system.

American Farm Bureau Federation (AFBF) chief economist John Newton describes how pooling of dumped milk works in a new Market Intel article.

Read also: Weekly Digest: USDA addresses milk dumping under Dairy-RP, LGM-Dairy programs.

The Paycheck Protection Program

Farm business owners, along with other self-employed individuals and sole proprietors, are eligible for the Paycheck Protection Program (PPP), a program authorized under the coronavirus aid bill. University of Illinois ag economists Dale Lattz, Gary Schnitkey, Krista Swanson, Nick Paulson and Jonathan Coppess, joined by Bob Rhea, with the Illinois Farm Business Farm Management Association, recently provided a summary of the program on farmdoc daily. (Read: The Paycheck Protection Program (PPP) of the CARES Act.)

The PPP is a new SBA 7(a) loan option overseen by the Treasury Department and backed by the Small Business Administration (SBA) to help small businesses keep employees on the payroll and bring back workers who have been laid off.  Loan amounts can be 2.5 times the borrower’s average monthly payroll cost for the prior 12 months or calendar year 2019, not to exceed $10 million. Loans, which can be issued through June 30, 2020, will carry a 1% interest rate with a two-year repayment period.  Loan payments are deferred for the first six months of the loan. The six months start when the loan is disbursed. However, interest will accrue on PPP loans during the six-month deferment.

Additionally, PPP loans contain a forgiveness process, allowing up to eight weeks of covered expenses to be forgiven for the borrower with no tax consequences. There are a number of requirements with typical SBA loans that have been waived for this program, including SBA fees, the requirement that the borrower sought credit elsewhere and was denied, that sufficient collateral is available and that a personal guarantee is required.

Applications can be processed and submitted through any existing SBA lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.

Due to high demand, some lenders are only taking applications from current clients. It is recommended that you contact lenders soon if interested in submitting an application.

Check with your current lenders to see if they are participating in the program as a first step. If you are not currently working with a lender who can submit an application for you, SBA has a searchable webpage to locate an approved lender by zip code

USDA addresses milk dumping under Dairy-RP, LGM-Dairy programs

The USDA’s Risk Management Agency (RMA) is ensuring that milk producers are not inappropriately penalized if their milk must be dumped because of recent market disruptions caused by the COVID-19 pandemic.

For the 2020 calendar year, RMA is allowing approved insurance providers (AIPs) to count dumped milk toward the milk marketings for the Dairy Revenue Protection (Dairy-RP) or actual marketings for the Livestock Gross Margin for Dairy (LGM-Dairy) programs, regardless of whether the milk was sold.

Producers will still have to provide to the AIPs supporting documentation from the cooperative or milk handler verifying the actual pounds dumped and that the milk was dumped.

In addition, RMA is extending inspection deadlines, waiving inspection requirements and authorizing more crop insurance transactions over the phone and electronically to help producers during the crisis. Visit RMA’s website for additional information.

Pennsylvania provides contingency planning resources

Pennsylvania’s Center for Dairy Excellence is working to ensure dairy farm families have contingency plans in place to protect their employees and businesses in light of the COVID-19 situation.

Dairy producers who are interested in having assistance in preparing a contingency plan to address critical areas of operation related to COVID-19 will be paired with dairy industry professionals. The industry professional and farm team will work together remotely to address farm management questions and develop detailed plans for operations amidst the pandemic.

During remote meetings, dairy farms will discuss the following guidelines and establish written contingency plans for navigating these new restraints:

  • Strategies for practicing social distancing and communicating with farm staff

  • Steps to protect employees, which may include informing them about the coronavirus, providing appropriate cleaning supplies, cross-training for critical jobs and providing resources like travel letters for potential shelter-in-place restrictions

  • Procedures for farm visits and deliveries to mitigate the spread of the coronavirus and ensure farm safety

  • Preparations for maintaining dairy and medical supplies and plans for how to operate if they become in short supply

  • Strategies to mitigate any potential losses in product sales associated with the COVID-19 situation

  • Financial calculations to determine how the business can continue to operate given any potential loss in product sales

Dairy farmers should email Melissa Anderson or call (717) 636-0779 to be paired with an industry professional who can assist with contingency planning. Visit the CDE website for additional COVID-19 farm resources.

Prairie Farms raises ‘cap’ value for food bank donations

Prairie Farms Dairy Inc., through its charitable giving program, Our Caps Your Cause, is increasing its support of food banks during the ongoing COVID-19 crisis.

Through the program, anyone purchasing gallons or half-gallons of Prairie Farms milk can peel the sticker on the cap to reveal a code. Visiting the Our Caps Your Cause redemption webpage, they can choose one of nearly 50 food banks and enter the cap code. During the special campaign, the value of each cap is quadrupled, to 20 cents. Once the 1,000-cap goal is met, the designated food bank will receive a check for $200. 

“We’re blessed to be in a position to help food banks when they need it most,” said Sam Schwoeppe, a Prairie Farms dairy farmer from Huntingburg, Indiana. “Our Caps Your Cause is already providing dollars for food banks and other organizations, but these are extraordinary times, and they need our help even more.” 

Because of COVID-19, families are navigating a new “stay-at-home” reality. To help offset this disruption to everyday lives, Prairie Farms has launched a webpage that offers a variety of resources including recipes, Chef Rob “how to” cooking tips, coupons and a video series featuring Prairie Farms dairy farm families.

Prairie Farms Dairy Inc. is a dairy cooperative representing more than 700 farm families in the Midwest. Headquartered in Edwardsville, Illinois, Prairie Farms has 44 manufacturing plants and over 100 distribution facilities, generating annual sales of over $3 billion.

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