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USDA announces Pandemic Market Volatility Assistance Program for dairy

Progressive Dairy Editor Dave Natzke Published on 19 August 2021

Editor's note: The USDA's Agricultural Marketing Service has posted additional information covering the Pandemic Market Volatility Assistance Program for Dairy. Milk handlers and dairy cooperatives whose producers are eligible to receive payments will be notified the week of Aug. 23. The USDA will host an information webinar for eligible handlers and cooperatives who will need to indicate intentions to participate by Sept. 10.

The USDA has released some details of a $350 million Pandemic Market Volatility Assistance Program, providing targeted financial assistance to U.S. dairy producers. Progressive Dairy will provide additional details as they become available.

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Here's what we do know. The program will provide payments to dairy farmers who received lower prices for milk due to market abnormalities caused by the COVID-19 pandemic. The assistance is part of a larger package that also includes retroactive and permanent adjustments to feed cost calculations under the Dairy Margin Coverage (DMC) program.

The program assists family dairy farmers “battered by the pandemic, trade issues and unpredictable weather,” said U.S. Agriculture Secretary Tom Vilsack. “This targeted assistance is the first step in USDA’s comprehensive approach that will total over 2 billion dollars to help the dairy industry recover from the pandemic and be more resilient to future challenges for generations to come.”

Under the Pandemic Market Volatility Assistance Program, payments will reimburse qualified dairy farmers for 80% of the revenue difference per month for milk marketed during July through December 2020. Payments will be based on annual production of up to 5 million pounds of milk marketed and on fluid milk sales during the period.

The payment rate will vary by region based on the actual losses on pooled milk related to price volatility. Due to Federal Milk Marketing Order (FMMO) depooling and other market disruptions, not all producers were impacted equally by negative producer price differentials (PPDs) within each order. Additionally, changes to the Class I milk pricing formula had a greater overall negative impact on uniform prices paid to producers within FMMOs with heavy Class I utilization rates.

“When Congress changed the previous Class I mover, it was never intended to hurt producers,” said Jim Mulhern, CEO and president of the National Milk Producers Federation (NMPF). "In fact, the new mover was envisioned to be revenue-neutral when it was adopted in the 2018 Farm Bill. However, the government’s COVID-19 response created unprecedented price volatility in milk and dairy-product markets that produced disorderly fluid milk marketing conditions that so far have cost dairy farmers nationwide more than $750 million from what they would have been paid under the previous system."

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According to the USDA announcement, the USDA will make payments through agreements with independent handlers and cooperatives. Handlers and cooperatives will distribute the monies on the same basis that July-December 2020 payments were made to their dairy farmer suppliers and a formula set by the USDA. The USDA will reimburse handlers and cooperatives for allowed administrative costs.

The USDA will contact eligible handlers and cooperatives to notify them of the opportunity to participate in the program. The USDA will distribute payments to participating handlers within 60 days of entering into an agreement. Once funding is provided, a handler will have 30 days to distribute monies to qualifying dairy farmers.

As part of the program, handlers also will provide virtual or in-person education to dairy farmers on a variety of dairy topics available from the USDA or other sources. A handler will have until March 1, 2022, to directly provide educational opportunities to dairy farmers.

Additional details about the program will be provided on the USDA Agricultural Marketing Service (AMS) Dairy Program website.

While awaiting those details, NMPF's Mulhern expressed some disappointment.

"Today’s announcement is an initial step that will help many producers, but it unfortunately falls significantly short of meeting the needs of dairy farmers nationwide,” he said. "The arbitrary low limits on covered milk production volume mean many family dairy farmers will only receive a portion of the losses they incurred on their production last year. These losses were felt deeply by producers of all sizes, in all regions of the country, embodying a disaster in the truest sense of the word. Disaster aid should not include limits that prevent thousands of dairy farmers from being meaningfully compensated for unintended, extraordinary losses."

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More aid to come

According to Vilsack, the Pandemic Market Volatility Assistance Program is part of $6 billion of pandemic assistance the USDA announced in March to address a number of gaps and disparities in previous rounds of assistance. Other pandemic assistance to dairy farmers includes $400 million for a new Dairy Donation Program to address food insecurity and mitigate food waste and loss, and $580 million for Supplemental Dairy Margin Coverage for small and medium farms. Details of those programs were not yet available at Progressive Dairy’s deadline.

DMC changes: Updating alfalfa feed costs

Outside of the pandemic assistance, the USDA will also make changes to the DMC program, updating the feed cost formula to better reflect the actual cost dairy farmers pay for high-quality alfalfa. (Specific alfalfa hay price calculation details were not released at Progressive Dairy’s deadline.) However, the USDA said this change will be retroactive to January 2020 and is expected to provide additional retroactive payments of about $100 million for 2020 and 2021.

Unlike the pandemic assistance, this change will also be part of the permanent safety net, and the USDA estimates it will average about $80 million per year.

Full details on these additional actions to support dairy farmers will be provided when regulations are published in the coming weeks. Dairy farmers should wait until these details are available to contact their local USDA Service Center for more information.  end mark

Dave Natzke
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