Industry, government follow grassroots donations lead, CFAP adds to dairy demand driving markets higher

By Sherry Bunting, Farmshine, June 26, 2020

WASHINGTON, D.C. – Government and industry dairy donations and record-setting CME cheese prices all got their starter fuel from grassroots dairy producers in what has become one of the good news stories of the COVID-19 era.

Today, USDA has systemized the donating through the Coronavirus Food Assistance Program (CFAP), and dairy processors, cooperatives and checkoff organizations have partnered with food banks and non-profits to extend the reach of efforts begun originally by generous dairy producers and their agribusiness partners supplying grateful consumers.

In April, when milk dumping was at its height, and stores had purchase-limits or sparse supplies of milk and dairy products, farmers and their agribusiness partners and communities went into immediate action. Examples of milk donation drive-through events began popping up in succession – just a fraction of them featured in the pages of Farmshine.

Also in April, farmer-funded Dairy Pricing Association (DPA) purchased 228,000 pounds of block cheddar, immediately moving the CME block cheese price from its $1/lb plummet to $1.20 (adding $1.00 to Class III milk values at the same time).

This DPA move, working with charities for distribution and a Midwest processor to turn their CME-style bulk purchase into consumer-packaged goods for donation, gave a green light to other cheese market participants. Within a week of that purchase and the initial 20-cent gain in blocks that followed, block cheese continued its climb to $1.80/lb, and the upward momentum has not stopped — fueled now by huge government purchases and food-service pipeline re-stocking.

On the heels of these grassroots efforts, dairy checkoff organizations began getting involved to work with their partners and “convene” the industry to do big donations in May.

Meanwhile, the U.S. Congress had passed the Coronavirus Food Assistance Program (CFAP) in April, with $3 billion of the $19 billion set aside for the Farmers to Families Food box purchases. But it was mid-May before USDA announced those first-round contract awards totaling $1.2 billion in fresh food — $317 million of it for fluid milk and dairy products – for distribution May 15 through June 30.

This week, USDA Secretary Sonny Perdue called the food box program a “trifecta, win-win-win”, pointing out how the program is getting farmers, processors and non-profits together to directly provide fresh food to people without burdening food banks with refrigerated inventory they aren’t prepared to handle.

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In April, when block cheddar was plummeting to $1.00/lb, the farmer-funded Dairy Pricing Association based in Wisconsin with member-contributors nationwide, purchased 228,000 pounds of block cheese to be cut-down for distribution by several charities. DPA Facebook photo

This was the model of grassroots groups and individuals on their own dime and time doing dairy donation drive-throughs, milk-drops, and whole milk gallon challenges from late March to the present. It was also the model of DPA, funded by voluntary dairy farmer milk check deductions, when DPA purchased the block cheese in April for cut-down and donation. Also in April, we saw the partnership initiated in Pennsylvania between 97 Milk and Blessings of Hope. They raised funds to buy local milk for donation to families in need.

As these grassroots efforts began having an impact, Midwest Dairy got approval from USDA in May to use checkoff funds to donate cheese, and UDIA of Michigan was allowed to provide minimal funding to food banks for “handling costs” associated with receiving cheese donated in May by DFA.

Now, with USDA systemizing that smart approach — started by grassroots efforts — the department stated in a news release that as of June 23, its CFAP Farmers to Families Food Box Program had delivered more than 20 million boxes of fresh food, including milk and dairy products, to families impacted by COVID-19.

The initial round of USDA CFAP contracts ends on June 30. But this week, USDA announced it will extend “well-performing” first-round contracts for similar amounts in a second-round from July 1 through August 31 to total an additional $1.16 billion.

The share of this second-round to be devoted to fluid milk and dairy purchases was not specified in the USDA announcement. One thing USDA did note is that even though most of the second-round dollars will be spent with “selected” current contract awardees, a few new contracts may be awarded to previous applicants that had been passed over due to technical errors or to provide boxes in areas identified as “underserved.”

Throughout the USDA CFAP food box delivery process, regional dairy checkoff organizations have been involved as “facilitators.”

Week after week, Farmshine has received press releases from dairy checkoff organizations, and there have been numerous social media posts, about the CFAP milk and dairy box donations. Regional checkoff organizations say they are working with processors, cooperatives and non-profits — in conjunction with the USDA CFAP food box program — and that area dairy farmers are involved as volunteers to hand out the boxes.

According to National Dairy Council president Barb O’Brien, dairy checkoff organizations began “convening the industry” before CFAP.

“We have leveraged the checkoff’s unique ability to convene companies from across the value chain to identify a number of ways to redistribute excess milk and other dairy products to families facing food insecurity,” writes O’Brien in an email response to Farmshine recently.

In a specific cheese example she had mentioned in a media call described as block cheese being purchased and cut into consumer size portions, our inquiry for details was met with this response:

“In response to lost food-service markets and dairy farmers being asked to dispose of milk, we’ve worked to connect coops to partners that donated processing capacity for any excess milk available for food banks,” O’Brien wrote. “Many other dairy companies — such as the example I gave from DFA of cheese donations in Michigan — provided massive quantities of dairy products to food banks before the USDA Farmers to Families Food Box Program was even put into place. Moving forward, it will be important that we continue working together as an industry to target the greatest needs and find long-term solutions to our nation’s hunger crisis.”

O’Brien cites DMI’s “long-time partner” Feeding America and other relationships with local food banks and pantries. Former Ag Secretary Tom Vilsack, now a top dairy checkoff executive with DMI, sits on the Feeding America board of directors.

O’Brien also noted in her response that dairy checkoff “counseled industry partners and others on how to direct dairy products toward the greatest needs.”

She reports that, “This widescale approach enabled us to pinpoint some of the biggest barriers in getting excess dairy products to hungry families during the pandemic” and to “rapidly initiate an industry response.”

As communities began doing their own grassroots efforts through the generosity of dairy farmers, agribusiness and individuals purchasing milk or contributing milk for dairy donations in the early days of the COVID-19 ‘stay-at-home’ orders, checkoff organizations took note and began to look at what they could do in terms of refrigeration equipment and setting up refrigeration trucks for industry and governmental efforts.

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Grassroots whole milk donation events like this one just outside of Lancaster, Pa. in May, have been providing whole nutrition to families across the state and region since the height of COVID-19 ‘stay-at-home’ orders in April.  Photo by Michelle Kunjappu

While many of the grassroots-organized milk donations were comprised of whole milk purchases vs. low-fat milk, this week marked the first time a checkoff news release showed red-cap whole milk gallons or even referenced whole milk in their facilitation of USDA CFAP box deliveries. This is another win led by early grassroots efforts.

ADA Northeast (ADANE), for example, indicated in a press release this week that 200,000 gallons of milk will have been handed out in the Northeast / Mid-Atlantic region by the time June Dairy Month ends. The release stated that 20,000 gallons would be donated this week, alone, from DFA, Upstate Niagara and Schneider’s Dairy to be given out in New York and Pennsylvania through the Nourish New York state funds and CFAP food box federal funds.

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For the first time among the many news releases sent by ADA Northeast (ADANE) touting checkoff ‘facilitation’ of fluid milk and dairy donations, whole milk is in the box! Here, dairy farmer Joel Riehlman of Fabius, N.Y., and a 4-H member, hand out whole milk in mid-June at a Nourish New York and USDA CFAP Farmers to Families Food Box donation drop in Syracuse. Photo provided by ADANE

In a recent Watertown, New York drop point for these donations, ADANE board member Peggy Murray of Murcrest Farm, Copenhagen, N.Y. volunteered, and she noted in the ADANE press release that, “It was heartwarming to see their gratitude – especially for the whole milk — and to know that people really want the products that we produce on the farm.”

This has been the experience of so many farmers and ag community members involved in the grassroots distributions, as well as the industry and governmental distributions, because each event affirms that consumers love milk and dairy products, especially whole milk, and that they want to support local farms — as evidenced by their comments and long car-lines of families eager to receive these products. In some cases, recipients gave money asking it be put toward more drive-through dairy events.

In the Southeast and Midwest, CFAP contract recipients Borden and Prairie Farms have also been visible this month with Dairy Alliance and Midwest Dairy checkoff organizations often as partners, along with several state dairy producer group members joining in as volunteers and location coordinators.

Overall, the CFAP food boxes have been well-received. The program was designed by USDA to give farmers and food providers a presence within their communities, working with local food banks and non-profits without creating inventory hardships. In this way, USDA has taken what local communities were doing at the grassroots level — on their own dime and time — and systemized it with federal funds and contracts.

While dairy’s share has not been specified in USDA’s announcement of the second round of $1.16 billion in fresh food purchases in the contract extensions through August 31, it is believed fluid milk and dairy purchases will be similar to the first-round total of $317 million because several non-profits indicate they will be supplied with all their milk and dairy needs through the USDA until at least August 31.

This includes Blessings of Hope, which had partnered with 97 Milk in April, and raised over $50,000 for purchasing and/or processing local milk for families they serve in Pennsylvania.

Farms in southeast and southcentral Pennsylvania that were wanting to donate “over-base” milk for this 97 Milk / Blessings of Hope program will have to wait until after August 31, when the USDA CFAP food box program is set to end. It is possible that the CFAP program may again be extended until all $3 billion in food box funds are exhausted.

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When Dairy Pricing Association (DPA) first ran an ad in the Cheese Reporter in early April looking for 200,000 pounds of USDA-graded cheddar cheese less than 30 days of age, the calls they received could not fill the order. By requesting USDA-graded cheese, the delay in their eventual purchase of 228,000 pounds showed a void in supplies that led to the initial turnaround in the plummeting block cheese price on the CME, which fueled the advances in manufacturing milk value. CME cheese prices drive Class III milk futures, which have risen rapidly since the DPA purchase bridged the gap in April. Current market strength has been extended through the large USDA food box program demand occurring at the same time as the re-opening of the food-service sector. DPA Facebook image

A positive outcome for farmers from all of these efforts — now extended by these large government purchases — is the real impact they are having in helping drive dairy markets higher since that first farmer-funded DPA purchase of block cheddar in April turned the CME away from its $1.00/lb record-low plummet.

Block cheese is traded every day around noon on the CME spot auction, and the price has set several new record-highs in June, including the most recent record-highs of $2.70/lb on Monday, June 22 and $2.81/lb on Tuesday, June 23.

This rally has pushed Class III milk futures into new contract highs for June, July, and August, while adding strength across the board.

In CME futures trading Monday (June 22) the June Class III milk contract hit $21, up $9 from the USDA-announced May Class III price of $12.14. July’s contract topped at $22.19, and August edged into the $20s. Monday’s Class III milk futures averaged $17.98 for the next 12 months, and Tuesday’s futures trading held most of that level, even adding to the July contract.

There is a supply side to this scenario also. See the related article on USDA milk statistics, pooling, production and dumping.

Trade sentiment is mixed on how long the upward momentum in dairy markets can last.

On the one hand, cheese prices are being driven by the combination of USDA CFAP purchases now continuing through August, re-stocking of food-service pipelines as the country re-opens, and the USDA Dairy Market News reports of consumer buying strength shown in strong pizza sales throughout the Covid period, and stable to strong retail sales meeting tighter supplies of milk and cream.

On the other hand, some experts warn of weakness ahead as these record-setting prices may prompt milk production expansion by fall when demand may wane after the USDA CFAP food box purchases end and food-service pipelines are re-stocked.

Much of the future will depend on how the re-opening of America goes for families, the food-service sector, schools, sports, and the economy at-large.

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New CFAP details emerge: Dairies eligible for payments on milk, cull cows, some youngstock, some crops

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USDA Farm Service Agency has created this guide for farms applying for CFAP payments.

By Sherry Bunting, Farmshine, May 29, 2020

HARRISBURG, Pa. — When Coronavirus Food Assistance Program (CFAP)payment details were first released last week, the understanding was that payments for livestock price losses would not include dairy production cattle. Also noted at that time was that crops on dairy farms could only be claimed if they were cash crops.

This week, however, as USDA Farm Service Agency (FSA) began the enrollment process on May 26, new details about implementation have emerged, meaning dairy farms have multiple areas of assistance to apply for.

Dairy cull cows and youngstock sold for other than dairy purposes can be claimed under certain classes of livestock under CFAP.

“This was a confusing point, and some portions are still not clear yet,” said Cynthia Walters, FSA dairy programs specialist for Pennsylvania in a Center for Dairy Excellence industry call Tuesday.

“Dairy cows sold for beef from January 15 through April 15, 2020 are eligible for payment under the ‘slaughter cattle, mature cattle’ category. We are still waiting to find out if dairy cull cows can be listed in inventory for that second portion of the payment for second quarter,” she said.

Walters also explained that cattle kept on a dairy farm as beef inventory will qualify for the inventory calculation. This would pertain to animals fed for beef or youngstock intended for sale to a veal grower or beef feedlot, or fed for the beef market as part of the dairy farm operation.

As for feed crops, Walters explained that some calculations are still being worked out to convert dairy feeds grown on farms to grain rates under the “non specialty crop payments” portion of the spreadsheet.

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The Center for Dairy Excellence created this table to show examples of CFAP payments for various farm sizes based on first quarter milk production.

Milk payments

As reported in Farmshine last week, only the first quarter milk production on a dairy farm is used by FSA to calculate the farm’s total Q1and Q2 milk payments.

Walters explained that producers will “self-certify” and keep their documentation on hand in case they are pulled for spot checks. Farms will not provide this documentation to FSA but use their milk statements and other records (such as dumped milk recorded) to fill out the forms.

She confirmed that the only production information the producer puts on the form / spreadsheet are the pounds of milk produced from January 1, 2020 to March 31, 2020. This will be paid at a rate of $4.71 per hundredweight. The second quarter production will be calculated using the January through March production figure, multiplied by a factor of 1.014, and then paid at $1.47 per hundredweight.

The total payment — using these two formulas together — will then roughy equate to $6.20 per hundredweight for the equivalent of first quarter milk pounds.

Walters reminded dairy producers that all first quarter milk production is eligible, even those pounds that were enrolled in risk management programs.

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Farm Bureau created this graph to show payments for eligible classes of livestock.

Cattle payments

There are two parts to the assistance for cattle: A payment per head for cattle sold between January 15, 2020 to April 15, 2020 and a different payment per head for cattle inventory subject to price risk on a date of the producer’s choosing between April 16 to May 14, 2020.

For example, cull dairy cows sold for beef between Jan. 15 and April 15 would be listed under ‘slaughter cattle, mature cattle” and qualify for $93 per head. The inventory method for after April 15 does not apply to dairy cows that are considered dairy inventory, only beef cattle inventory are eligible for the second type of cattle payment.

For calves and heifers sold for other than dairy purposes, the Jan 15 to April 15 marketings would be listed under Feeder Cattle. In the less than 600-pound category, the payment is $102 per head. In the over 600-pound category it is $139 per head.

As for choosing an inventory date between Apr. 15 and May 14 for youngstock that are intended for sale as beef, veal or feedlot animals, they can be listed for an additional $33 per head payment.

Dairies feeding Holstein or Dairy-cross cattle for the beef market or raising / backgrounding such calves for feedlots may apply for all relevant cattle payments.

USDA confirmed in a media call that livestock payments will only go to producers with eligible livestock. Processor-owned livestock are not eligible for these direct farm payments, and a separate program will be designed for livestock producers who were forced to euthanize animals due to COVID-19 supply chain disruptions.

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Farm Bureau has created this graph to show payments for eligible non-specialty crops.

Crop payments

Included under non-specialty crops are payment rates for malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat and hard red spring wheat.

These crops, if grown on dairy farms for feed, are also eligible under inventory with conversions to grain prices — as long as these crops were “subject to price risk” or incurred market costs due to COVID-19 disruptions.

In the case of corn silage, for example, Walters said producers would use their Jan 15 inventory, the amount owned by the producer on January 15 that was subject to future price risk.

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This payment calculator spreadsheet is part of the application form for CFAP payments. It can be downloaded at farmers.gov/cfap under “CFAP Application” or at this direct link 

FSA application process

“The direct financial assistance through CFAP is for commodities with 5% or greater price decline or market costs from disruptions due to the virus,” said Walters.

She noted that farm enrolled with FSA for other programs have their eligibility already on file (AGI forms, highly erodible lands conservation, banking information for direct deposit, and contact information). This streamlines the process for filling out the application electronically or faxing or mailing it in.

Walters said FSA employees can help dairy producers walk through these categories on the calculator spreadsheet that is now available at farmers.gov/cfap.

Producers can also enroll for CFAP payments online and do not have to set up an appointment with FSA as long as they have been an FSA customer in the past and have all of the FSA forms in place. The USDA has provided a payment calculator for farmers to download at farmer.gov/cfap under “CFAP Application.” It is also available at this direct link.

This gives producers the option to print the application after entering their data, and then sign it and submit it to their County FSA Office by email, fax, or mail.

Farm consultants, such as nutritionists, can assist their clients in downloading and using these forms and in calculating relevant feed crop inventory.

FSA offices are being inundated with calls. Walters noted that a CFAP Call Center is also available for producers who would like additional one-on-one support with the CFAP application process at 877-508-8364.

The main information needed to begin the application process includes:

1) Settlement milk checks for January through March 2020,

2) Receipts of cull cows sold January 15 through April 15, 2020,

3) Inventories of grain not under contract and inventories of corn silage on hand as of January 15 paid on grain conversion,

4) Direct deposit information,

5) Farm ownership structure if needed to be eligible for expanded payment limits for larger, multi-generational farms.

Walters was quick to point out that there is plenty of time to apply for CFAP payments.

“These funds are NOT first-come, first-served. The department is paying 80% of a farm’s total eligibility to be sure there is enough funding for all farms,” said Walters. “Applications will be accepted until August 28, 2020, and the other 20% of a farm’s payment will come later.”

In addition, USDA is purchased $437 million in additional milk and dairy products, including $317 mil. so far for the Farmers to Families Food Boxes as part of the CFAP program.

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Signups begin May 26 for $16 bil. CFAP; dairies payments equate to Q1 milk x $6.20/cwt

Farmers and ranchers deemed essential to our nation’s future; bulk of payment totals under two calculations to be sent a week to 10 days after signup

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By Sherry Bunting

WASHINGTON, D.C. – President Trump and USDA Secretary Sonny Perdue released the long-awaited details on the $16 billion Coronavirus Food Assistance Program (CFAP) direct payments to farmers this week, indicating that dairy farmers will be eligible for two payment rates across first and second quarter production — and those rates pencil out to be equal to $6.20 per hundredweight multiplied by first quarter production, including milk that was dumped.

Farms using USDA Dairy Margin Coverage (DMC), Dairy Revenue Protection (DRP) or Livestock Gross Margin (LGM) programs, or certain types of forward pricing through cooperatives or brokers based on futures markets, are eligible for CFAP direct payments on all pounds of milk production, even the pounds enrolled in these types of risk management tools. Participation in other forms of government aid through the Small Business Administration does not affect a farm’s eligibility for direct payments through CFAP.

Signups with USDA Farm Service Agencies began May 26, and USDA intends to send 80% of the total calculated Q1 and Q2 payment to farms within seven to 10 days of their signups. The remaining 20% will be paid later, pending the availability of funds in the $16 bil. package after all eligible commodity applicants receive first payments.

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Screenshot of CFAP payment spreadsheet calculator across all eligible commodities. A preview video on how to use the calculator and fill out forms can be found at this link — Check back at www.farmers.gov/CFAP for the spreadsheet calculator or find it through your FSA portal.

Applications will be received until August 28, 2020. USDA has a video for signup, explaining how to use the online calculator spreadsheet, across commodities at this link.

To calculate payments, USDA is using $4.71/cwt from the CARES Act applied to a dairy farm’s first quarter (Jan-Mar) “actual” milk production and $1.47/cwt from CCC funds for a second quarter (Apr-Jun) “calculated” production that is equivalent to the first quarter pounds multiplied by a factor of 1.014 to reflect seasonal production increase for Q2.

Those two payment rates with the second quarter calculation of production push the total payment to be equivalent to multiplying first quarter production by about $6.20/cwt.

With the 80 / 20 split in how this total payment will be sent, farms shipping 5 million annual pounds of milk with roughly 200 cows could expect a payment around $60,000 by early June if they sign up at the end of May, with the balance of roughly $15,000 in a later payment, pending availability of funds.

Responding to bipartisan support from members of Congress asking for payment limits to be increased so that larger multi-generation family farms can benefit, USDA expanded the payment limits to $250,000 per farm entity even with multiple eligible commodities. The previous limit was $125,000 per commodity and $250,000 per farm.

The payment limits were increased for larger farms with multiple ownership structure. Partnerships with two owner-operators would have a payment limit of $500,000, and the maximum limit for any farm structured as an LLC, LLP or corporation with three or more owner-operators is $750,000.

These payment limits apply to the total amount of money a farm can receive even if applying under more than one commodity, such as dairy and crop or dairy and beef.

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Graphic by Center for Dairy Excellence risk management coordinator Zach Myers.

Doing the math on larger herds, it appears that a 1000-cow dairy would stand to receive around $325,000 total payment (split 80%, or $260,000, right away, and the remaining 20% later pending available funds). This puts a 1000-cow dairy over the single-owner limit but under the partnership two-owner limit.

The rough math on a 2000-cow dairy comes out to a total payment of around $650,000, which is getting close to the hard-cap of $750,000. A farm of this size or larger, with three or more owner-operators, would have a payment limit of $750,000.

Dairy economists Mark Stephenson and Andrew Novakovic at the Dairy Markets and Policy website have a more detailed paper on this that can be downloaded downloaded here.

Eligibility is limited to owner-operators who materially participated in the dairy (400 hours minimum). For those deriving 75% or more of their income from farming/ranching, there is no adjusted gross income limit for eligibility. For owners not in that category, the adjusted gross income limit to be eligible for CFAP payments is $900,000.

To be eligible for these payments, farms must also show “conservation compliance” regarding the highly erodible land and wetland conservation regulations.

The original USDA notice stated that milk priced on forward contracts would be ineligible for CFAP direct payments, and under ‘dairy eligibility’ was original language stating: “Any milk production that is not subject to price risk for any time during January, February or March is ineligible.” However, USDA removed this language about forward contracting in the final rule for May 21 Federal Register publication.

USDA has confirmed that milk pounds covered by USDA risk management programs like DMC, DRP and LGM, as well as some types of forward contracts based on futures markets through cooperatives and brokers, are eligible for the CFAP direct payments. 

Forward contracts are a gray area. An example of ineligibility could pertain to milk pounds that are specifically priced under a binding contract where pricing is determined ahead of time, such as cost-plus, and where no changes were made to reduce those contracts or charge marketing fees during COVID-19. These are not common contracts, but some larger farms have such contracts with certain processors outside of the Federal Milk Marketing Orders.

In short, the final rule as prepared for Federal Register publication on May 21 no longer contains language excluding risk-managed milk from being eligible, but a farmer applying for CFAP payments is still signing a statement that the pounds of milk certified had price losses of more than 5% and incurred other marketing and inventory costs or deductions during COVID-19.

Producers are encouraged to call their local FSA offices as soon as possible to set up phone appointments for application and to find out how to provide the information required for their applications and forms, such as tax ID number, ownership structure of the farm, adjusted gross income if applicable and pounds of first quarter milk production via milk check settlement statements Jan. through March, or other documentation for dairies doing on-farm processing.

Any milk that was dumped on farms in March due to COVID-19 supply chain disruptions that is not included in the milk check pounds can also be self-certified by a producer’s record of this dumping, according to USDA.

These CFAP payments help producers offset COVID-19-related declines in income by price loss and sales loss for dairy as well as livestock and identified specialty and non-specialty crops.

Secretary Perdue indicated that for livestock and poultry growers forced to euthanize animals due to supply chain disruptions, a different program will handle those losses once USDA has the data on these occurrences to review. These CFAP payments are only for animals sold in the first quarter and animals subject to price risk that are a part of a producer’s inventory on the date chosen in the second quarter.

Dairy producers are eligible for compensation for certain types of livestock and feed.

Included under livestock are payments per head for specified classes of cattle (excluding cattle intended for dairy production), hogs, sheep (lambs and yearlings only) and wool.

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It is clear that cattle sales intended for dairy are not eligible for cattle payments. However, dairy producers feeding Holstein or Dairy-cross cattle for the beef market, or raising / backgrounding such calves for feedlots may apply for cattle payments.

Cull cows are also eligible under “Mature Slaughter Cattle” for Q1 actual sales, but the “inventory at risk” method is not appropriate for dairy cull cows since they are dairy production animals while they are in “inventory,” not beef animal inventory waiting for a slot at the packing yards. Youngstock sold for to beef or veal growers, not dairy replacements, can be entered under feeder cattle. Check with your FSA office.

Assistance to cattle producers has two components – cattle sold between January 15, 2020 to April 15, 2020 and cattle inventory subject to price risk on a date of the producers choosing between April 16, 2020, to May 14, 2020. Livestock payments are per-head are shown in the Farm Bureau chart above by the two rates used for Q1 and Q2.

USDA confirmed in a media call that payments will only go to producers with eligible cattle and livestock, including contract growers if their contract allows them to have price risk in the livestock. Processor-owned livestock are not eligible for these direct farm payments.

CFAP_Non_Specialty_Payment_Rate_Figure_1_CorrectedIncluded under non-specialty crops are payment rates for malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat and hard red spring wheat. These crops grown on dairy farms are also eligible under inventory with conversions for silage to grain prices — as long as these crops were “subject to price risk” or incurred market costs due to COVID-19 disruptions.

Also, included under specialty crops are payment rates for a variety of fruits and vegetables as well as almonds, pecans and walnuts, beans and mushrooms.

USDA has a special webpage devoted to the CFAP program at https://www.farmers.gov/cfap

CFAP payments are not government “handouts” or “bailouts”, but rather the government’s recognition that our nation’s farmers and ranchers are essential to our nation’s future. Like other businesses receiving federal assistance during this worldwide COVID-19 pandemic and economic shut down, the losses farmers are suffering are monumental and totally outside of their control and outside of the disrupted supply chain’s ability to handle under these unprecedented conditions.

Throughout the past eight weeks of publicized empty shelves, purchase limits and dumping of milk — as well as euthanizing of livestock and plowing under of produce unable to be harvested – consumers are showing renewed appreciation for American farmers and ranchers. These much-needed funds will not make farmers whole but are a life boat in uncharted waters.

According to American Farm Bureau Federation, this program is considered “an important downpayment in helping farmers and ranchers deal with the unprecedented and unexpected economic fallout related to COVID-19.”

According to Jim Mulhern of National Milk Producers Federation, the details on the dairy payments are “more than we anticipated,” but at the same time “more is needed,” he said.

Both AFBF and NMPF – as well as other farm organizations – indicate they are working with lawmakers for additional assistance in the future as the full extent of the pandemic and crisis become known. USDA will be replenishing the CCC by $14 billion in July, and Congress is currently looking at what additional measures are necessary to assist producers of commodities not included in the CFAP package.

Mulhern noted in a PDPW Dairy Signal webinar Tuesday that the dairy industry stands to lose nearly $9 billion this year if the recently released World Agriculture Supply and Demand Estimates of 2020 milk price comes to fruition – or worsens.

He said that even with the expanded limits for CFAP, “This still leaves larger operations (over 2000 cows) without coverage for larger losses. I think there’s a good chance that additional legislation, like the House ‘HEROES’ bill, to have the payment limit issue removed.”

Mulhern also noted that one of the biggest CFAP benefits to all dairy farmers right now are the nearly $450 million in new dairy purchases that were recently announced through the $317 in dairy product awards for the new food box program May 15 through June 30 and the $120 million in additional Section 32 dairy purchases out for bid for delivery to food programs in July.

The good news is that cheese, butter, powder, and milk futures prices have been rallying over the past four weeks with near-term Class III milk contracts well into the $17s — more than $5/cwt higher than the current for May. Mulhern expects to see a volatile pattern in dairy product and futures markets for the rest of this year.

To stay up to date on information from USDA about the CFAP payments, including an FAQ, click here

The 40-page official rule on was published today, May 21, in the Federal Register. Read it here.

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