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Producers must certify adjusted gross income requirement to be eligible for PMVAP payments

Progressive Dairy Editor Dave Natzke Published on 14 October 2021

The USDA’s Agricultural Marketing Service (AMS) has posted a 12-minute webinar with details for dairy producers who may be eligible for payments under the Pandemic Market Volatility Assistance Program (PMVAP). If contacted this month, a critical step for eligible dairy farmers is to certify that they meet USDA adjusted gross income (AGI) requirements with their milk handler or cooperative.

Announced in August, the purpose of the $350 million PMVAP is to provide financial assistance to dairy farmers who received a lower value for their milk from July through December 2020, due to market abnormalities caused by the pandemic and ensuing federal policies.

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Handler, co-op agreements underway

Initially, the USDA AMS is establishing individual agreements with each eligible milk handler and cooperative this fall. There are two payment calculation steps contained in each agreement that ultimately determine what eligible dairy producers will receive.

First, the USDA calculates a lump sum payment due to each handler or cooperative for milk that was regulated under a Federal Milk Marketing Order (FMMO) during July-December 2020.

The amount of money due to the handler or cooperative is determined by the milk volume at a monthly rate that is 80% of the difference between the old (higher of) and the current (average of plus 74 cents) Class I milk pricing formulas.

Handler and cooperative payments vary and are affected by multiple factors for each handler and cooperative. For starters, because prices change every month and there are 11 FMMOs, there could be 66 different payment calculation rates to determine how much money is due to the handler or cooperative.

‘Opting in,’ AGI certification

As part of that agreement process, participating handlers and cooperatives will determine whether each individual milk supplier and/or member will “opt in” or “opt out” of the program. Handlers and cooperatives must also collect AGI certification from producers who choose to participate.

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According to the webinar, milk handlers or cooperatives were contacting producers in September and October, in writing, regarding AGI requirement certification.

If a producer fails to respond to the AGI certification request, they are eliminated from receiving PMVAP payments.

Leaders of state and regional dairy producer organizations contacted by Progressive Dairy indicated their members had been receiving the AGI certification requests. However, some were not aware of the importance a response was to payment eligibility.

As in other USDA programs, producers meeting the AGI requirement must either have an average annual AGI of less than $900,000 for tax years 2016, 2017 and 2018; or 75% of their AGI must come from farming, ranching or forestry-related activities. This is the same AGI threshold applicable under the Coronavirus Food Assistance Program 2 (CFAP 2), so if producers have received CFAP 2 payments, they can use that to certify eligibility.

For more information on USDA’s AGI calculations, click here.

The participation level, milk volume from those producers, as well as the AGI certification will be submitted to the USDA and will determine the total sum paid to the handler or co-op.

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Payment distribution to producers

The second step in the payment calculation process is to determine how that money paid to handlers and co-ops is distributed to individual producers. A dairy farmer is eligible if their handler or cooperative participated in an FMMO during July-December 2020.

Each eligible producer or farm entity is limited to payments of 5 million pounds of milk marketed annually, which is applied during the period of July-December 2020. Milk in excess of this cap is not eligible for a PMVAP payment.

A factor to consider in determining the producer payment rate is how their cooperative or handler originally paid for both milk that was regulated and not regulated by the FMMO during the month, reflected in the pay price. Handlers and cooperatives will be instructed to use the same method to distribute the PMVAP monies to all their dairy producers.

Program timeline

The PMVAP goal is to have agreements with handlers and co-ops signed this fall. During the fall and winter, the USDA will issue payments to handlers and cooperatives. Once a handler receives monies from USDA, payments will be made to producers. The USDA anticipates that payments to producers should occur sometime over the winter.

In all cases, whether milk was marketed by a cooperative or proprietary handler, the USDA will verify and approve in advance how the handler or cooperative will make payments to individual producers.

In addition, in early 2022, USDA will verify records of each handler and cooperative to ensure that producer payments were made correctly.

Handlers and co-ops must distribute all funds to dairy producers; administration and education program costs are covered under a separate provision of the program.

PMVAP payments are considered taxable income and must be reported.

Education requirements

As part of the program, all handlers and cooperatives are required to provide an educational component, covering USDA dairy policies, milk marketing and risk management by March 2022. The educational resources or programs cannot focus on dairy production practices, such as reproduction, nutrition or general herd management, and will also be verified by the USDA.

Other background information

While the PMVAP program utilizes data regarding milk marketed through the FMMO system, it is not part of the FMMO program. It is being administered by AMS, not a regional FMMO administrator or county USDA Farm Service Agency offices.

Individual payments to producers are not part of an FMMO pool. Rather, they will be separate and distinct payments from the USDA through their milk handler or cooperative.

For additional information, visit the PMVAP website or email the PMVAP team.  end mark

Dave Natzke
  • Dave Natzke

  • Editor
  • Progressive Dairy
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