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CFAP application period to open May 26; dairy payment is about $6.20 on 1Q production

Progressive Dairy Editor Dave Natzke Published on 19 May 2020

Editor's note: This article will be updated as more information becomes available.

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).

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The application period will be held May 26-Aug. 28 at USDA Farm Service Agency (FSA) offices. For dairy farmers, the payment rate will equal about $6.20 per hundredweight (cwt) on their first-quarter 2020 milk production, although initially, producers will see just 80% of the total calculated payment.

One payment, but …

Technically, there will be one CFAP payment for all eligible dairy, cattle and other ag commodity producers. However, the payment comes from two sources and at different rates: Funding ($9.5 billion) authorized under the Coronavirus Aid, Relief and Economic Security Act (CARES) will compensate producers for price losses during the first quarter of 2020, and USDA Commodity Credit Corporation (CCC) funds ($6.5 billion) will compensate for marketing channel and demand disruptions for the second quarter (April-June) of 2020 due to COVID-19.

In addition, to ensure the availability of funding throughout the application period, producers will receive 80% of their maximum total payment upon approval of the application. The remaining 20% portion of the payment, not to exceed the payment limit, will be paid at a later date as funds remain available.

A producer application form and payment calculator will be available online once sign-up begins.

Dairy payments detailed

CFAP payments are eligible to all dairy operations with milk production in January, February and/or March 2020. Any dumped milk production during those months is eligible for payment. All milk volumes will need to be certified.

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The first part of the payment will be made based on a producer’s certification of milk production for the first quarter (January-March) of calendar year 2020 multiplied by $4.71 per cwt. The second part of the payment is based on a national adjustment (1.014) to each producer’s production in the first quarter, multiplied by $1.47 per cwt.

For example, the payment to a dairy farmer producing 1 million pounds (10,000 cwts) of milk during the first quarter of 2020 would total about $62,005, or about $6.20 per cwt. However, because only 80% is distributed, the actual total in the first check would be about $49,600.

According to the NAtional Milk Producers Federation, milk production enrolled in risk management programs, such as Livestock Gross Margin, Dairy Revenue Protection, Dairy Margin Coverage or forward contracts, also qualifies for CFAP payments.

Livestock payments

The cattle payment will be calculated using the sum of the producer’s number of livestock sold between Jan. 15-April 15, multiplied by the payment rates per head, and the highest inventory number of livestock between April 16-May 14, 2020, multiplied by the payment rate per head.

Payment rates per head are as follows:

  • Feeder cattle (less than 600 pounds): $102 (CARES) and $33 (CCC)
  • Feeder cattle (greater than 600 pounds): $139 and $33
  • Slaughter (fed) cattle: $214 and $33
  • Slaughter (mature) cattle: $92 and $33
  • All other cattle (not including those used or intended for dairy production): $102 and $33

Dairy animals do not qualify for the livestock payments, but cull dairy cows are eligible for payment under the category of “Slaughter Cattle: Mature Cattle.”

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Non-specialty, specialty crops

CFAP payments are eligible to producers of non-specialty crops who have suffered a 5%-or-greater price decline over a specified time as a result of the COVID-19 pandemic and who face increased marketing costs for inventories. Non-specialty crops eligible for CFAP payments include malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat and hard red spring wheat.

Specialty crops include most fruits and vegetables, almonds, pecans, walnuts, beans and mushrooms. The total payment will be based on the volume of production sold between Jan. 15-April 15, 2020; the volume of production shipped but unpaid; and the number of acres for which harvested production did not leave the farm or mature product destroyed or not harvested during that same time period, and which have not and will not be sold.

Payment cap tweaked

The USDA originally set a $125,000 payment cap per commodity, with diversified operations able to choose a second commodity, with an overall payment limit of $250,000 per individual or entity.

Under provisions announced May 19, the payment cap is $250,000 per person or entity for all commodities combined.

Applicants who are corporations, limited liability companies or limited partnerships may qualify for additional payment limits where members actively provide personal labor or personal management for the farming operation.

For a corporate entity:

  • With one such shareholder, the payment limit for the entity is $250,000.
  • With two such shareholders, the payment limit for the entity is $500,000 if both contribute substantial labor or management.
  • With three such shareholders, the limit is $750,000 if each member contribute substantial labor or management.

Dairy response

Initial reaction to the dairy payment levels were tepid, with several organizations suggesting direct payments to dairy farmers would fall far short of losses.

While still reviewing details of the USDA plan, the head of the National Milk Producers Federation (NMPF) said the announced aid levels will be insufficient to meet the needs of milk producers and other agricultural sectors facing massive disruption from the coronavirus crisis. NMPF projected dairy losses of $8.2 billion based on USDA data, placing them among the hardest-hit U.S. agricultural commodities.

“We welcome this federal dairy assistance, which is critically needed as the nation’s dairy farmers face an unprecedented market collapse,” said Jim Mulhern, president and CEO of NMPF. “USDA’s plan will provide relief to many farmers, and we appreciate the department’s adjustments to payment limits, an issue which we raised prior to the department finalizing this package.

“Even so, we believe more flexibility in payment limits and some changes to payment calculations will be needed in future rounds of funding to meet the unprecedented challenges faced by producers of all sizes, in dairy and throughout agriculture.”

The president of FarmFirst Dairy Cooperative expressed similar sentiments.

“We strongly encourage the USDA to consider additional funding support for dairy farmers, as the industry as a whole has experienced a delayed effect on feeling the impact of the pandemic on dairy market prices,” said John Rettler, FarmFirst president and a dairy farmer of Neosho, Wisconsin. “Quite frankly, the USDA’s current plan to pay only 30 percent of dairy’s projected losses since April 15 falls far too short of the support that dairy farmers need to stay in business, considering that much of dairy’s losses will be reflected in milk checks paid after April 15.”

The CARES Act provided additional funding of $14 billion to the CCC, but these funds cannot be used before July 1. Although the USDA has not announced any additional programs, this $14 billion provides the USDA with flexibility to initiate new programs later this year.

Prepare ahead of time

While the application process doesn’t open until May 26, eligible producers can begin to prepare by gathering information regarding recent sales and inventories. Do not send any personal information to the USDA without first initiating contact through a phone call. Local FSA staff will seek the following information:

Other details regarding eligibility, rates and implementation are available at the CFAP website. Due to the COVID-19 pandemic, USDA FSA service centers are open for business by phone appointment only, and fieldwork will continue with appropriate social distancing. While program delivery staff will continue to come into the office, they will be working with producers by phone and using online tools whenever possible. More information can be found here.

Additional information

Three dairy economists have published a paper summarizing the CFAP direct dairy producer payment provisions. Authoring the paper were Mark Stephenson at the University of Wisconsin – Madison, and Chris Wolf and Andrew Novakovic with Cornell University. Read: USDA’s new direct payments program for dairy farmers.

Staff training scheduled

The USDA has also scheduled CFAP regional training webinars for state and county office staff on May 21-22. Sessions will be held (all times are Eastern time zone):

  • May 21, 9:30 a.m. to 12 p.m. – Northeast and Southeast states: Alabama, Arkansas, Connecticut, Delaware, Florida (and Virgin Island), Georgia, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Vermont, Virginia and West Virginia

  • May 21, 2-4:30 p.m. – Northwest and Southwest states: Alaska, Arizona, California, Colorado, Hawaii (and Guam), Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington and Wyoming

  • May 22, 9:30 a.m. to 12 p.m. – Midwest states: Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio and Wisconsin  end mark
Dave Natzke
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