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Dairy CORE proposal seeks immediate cash infusion, regional supply management flexibility

Progressive Dairy Editor Dave Natzke Published on 09 April 2020

The Minnesota Milk Producers Association (Minnesota Milk) board of directors has endorsed a proposal designed to provide immediate financial assistance to dairy farmers while offering more regional and seasonal flexibility in managing milk supplies during the COVID-19 crisis.

Named the “Dairy CORE” (COronavirus REcovery) program, the proposal builds off a “Milk Crisis Plan” advanced by the National Milk Producers Federation (NMPF) and International Dairy Foods Association (IDFA). (Read: NMPF, IDFA propose ‘Milk Crisis Plan.’)

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Proposal differences

Under the NMPF-IDFA proposal, dairy farmers would receive monthly payments of $3 per hundredweight (cwt) above the market price on 90% of their milk production base, but only if they cut milk production by 10% from a March 2020 baseline level. The supply management program would run for six months (April through September 2020), and payments during any one of the months would be suspended if the average of the Class III and Class IV prices for that month exceeds $16 per cwt.

Under Dairy CORE, dairy farmers would receive an immediate lump sum cash infusion of $9 per cwt based on the March milk production as a starting point for financial aid. The initial payment would be equivalent of $3 per cwt for three months of production and be made irrespective of market prices.

For example, a producer which shipped 1 million pounds (10,000 cwt) in March would receive one lump sum payment of 3 x $3 per cwt x 10,000 cwt = $90,000. In June 2020, the situation would be assessed again to evaluate if another round of payments is needed for July-September 2020.

USDA funding for the proposal would be channeled through the $9.5 billion in discretionary funding received through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

To speed the cash infusion, the payments would be made assignable to agricultural lenders, who would be encouraged to offer emergency lines of credit to farmers until the actual payments are disbursed.

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Supply management addressed

According to an outline describing Dairy CORE, the proposal “does not condition direct payments on rigid, top-down, one-size-fits-all production cutbacks.” Instead, it encourages producer-owned cooperatives and private milk buyers to develop supply adjustment incentive programs which are most appropriate for their milk supply situation.

“If creameries are assured that their producers have received a large, one-off direct payment, they will be more empowered to implement situation-adjusted, effective marginal incentives to right-size their milk supply,” according to the program outline. “As [the] COVID-19 situation improves in May or June, milk buyers can immediately adjust their milk supply management programs to ensure no supply chain bottlenecks are artificially created by new government programs.”

It also suggests NMPF organize an online workshop, whereby cooperatives and milk buyers already implementing “base” programs to share their experiences and best practices.

“We need to be very careful we do not create more problems than we solve,” said Garrett Luthens, Minnesota Milk policy chair, Hutchinson, Minnesota. “By administering payments based on a historical number, keeping logistics simple and ensuring we are not altering any pre-planned marketing strategies, we believe the Dairy CORE Program is a good addition to what National Milk Producers Federation and International Dairy Foods Association laid out.”

“Dairy farmers are hurting,” said Dave Buck, Minnesota Milk president, Goodhue, Minnesota. “At the same time, our creameries cannot afford to pay more. With exports, food service and schools all operating under significantly different methods worldwide, the demand is simply not there for some dairy products. Many cooperatives and processors need to significantly alter their supply planning, and this direct payment will allow them the time and flexibility to do so.”

Other differences

While the NMPF-IDFA proposal calls for reopening the enrollment period for the Dairy Margin Coverage (DMC) program and establishes a temporary mechanism to reimburse producers and handlers for milk that must be disposed of because of supply chain disruptions, Dairy CORE does neither. And, keeping producer concerns separate, Dairy CORE also does not address proposals for increased USDA dairy product purchases or processor loans contained in the NMPF-IDFA proposal.

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According to a Minnesota Milk press release, the proposal has been presented to the USDA and has the support of U.S. Rep. Collin Peterson (D-Minnesota), chair of the House Ag Committee.

It is also being supported by other dairy organizations, including the American Dairy Coalition.

Minnesota Milk encourages dairy producers to contact their congressional representatives in support of Dairy CORE.

“We first encourage USDA Secretary Sonny Perdue to explore a Dairy CORE-type program through the $9.5 billion in discretionary funding he received through the CARES Act,” said Minnesota Milk Executive Director Lucas Sjostrom. “While no one can be sure of the future of the milk and cattle markets that affected dairy farmers over the previous few weeks, it is clear our creameries need time to adjust supply. A $3 x three-month payment seems both appropriate and necessary, and we encourage the secretary to act immediately. Please call your U.S. Senators and tell them to support the Dairy Core Program.”  end mark

Dave Natzke
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