Producer payments will vary by handler eligibility, specific Federal Order data, how producers were paid during the covered time period, and are delayed to Q1 2022. Only those handlers and cooperatives that pooled any portion of their milk on a Federal Milk Marketing Order at any point during the July-Dec. 2020 time period are eligible.
By Sherry Bunting
WASHINGTON, D.C. – Dairy farmers are wondering about the PMVAP payments. They were expecting to see roughly $350 million in Pandemic Market Volatility Assistance Program funds disbursed by USDA through eligible milk handlers by the end of 2021.
According to Erin Taylor at USDA AMS Dairy Programs, those payments will be delayed until the end of January or into February or even March because of the unique and complicated handler-specific internal clearing process being used.
During a recent Center for Dairy Excellence dairy industry call, Taylor said USDA has been working diligently with eligible handlers and cooperatives since the program was announced on August 19, 2021.
It is a complex process of USDA AMS dairy program staff meeting with milk handlers and cooperatives that pooled any milk on any Federal Milk Marketing Order at any point from July through December 2020 to formulate specific payment agreements on an individual handler basis that include the calculated lump sum to the handler and specify how the producers affiliated with that handler are to be paid.
“We have started sending out these agreements and expect to get them all out to handlers for signing and returning by early January,” said Taylor. “Once approved, we will distribute payment dollars to those handlers. Then, they have 30 days to disburse the funds to their eligible producers.”
In short, she said, USDA is striving to get the money sent to handlers in early 2022. Later this spring, she said, USDA will audit handlers to verify these payments were made correctly, in full, to their producers.
It is important to know that not all handlers and cooperatives are eligible to participate, not all eligible handlers will choose to participate, and therefore, not all producers will receive PMVAP payments.
Who is eligible for PMVAP payments?
Only those milk handlers and cooperatives that participated in a Federal Order system during some or all of the July through December 2020 time period are eligible, according to Taylor.
Eligible handlers must also obtain from each producer the verification of meeting the Adjusted Gross Income (AGI) limits USDA has for its farm programs.
“You should have been contacted by your handler by now, if you are eligible, because they need to verify that you meet the AGI requirements,” said Taylor, noting that any producer who has not been contacted by their handler but thinks they are eligible for PMVAP can contact their handler and directly ask if they are participating.
“If that doesn’t work, or if you would rather ask USDA, then email email@example.com or call 202.384.3417. Tell us who your handler is, and we can look it up,” she added. These email and phone contacts can also be used by producers who have other questions about the PMVAP.
During the Center for Dairy Excellence call, producers asked if there was a formula for how they can expect to be paid per cow or per hundredweight. Taylor explained there is no general formula for many reasons.
First, she said, there are requirements in this program that will be met differently by different handlers according to their Federal Milk Marketing Order data.
Also, payments to producers are limited to payment of 80% of losses on up to 5 million pounds of production and only on milk that was pooled or in cases of non-pooled producers who were paid by their handlers based on the pooled volume – together with the pooled producers.
“Each factor is different for every handler,” said Taylor. “We are working with handlers to ensure the milk pounds to be paid on and the methodology for payment are correct according to the program.”
She said doing it this way was deemed “the easiest way to do it through handlers that have this payment relationship with (dairy farmers), to get the money out quickly and with USDA oversight.”
In short, these are targeted payments based on Federal Order pooling fund losses as reflected by a much lower Class I base price under the new average-plus formula compared with the old ‘higher of’ formula for the July through December 2020 time period.
“A lot of these factors differ by handler in terms of how producers were paid in aggregate,” she said. “In the FMMOs, handlers don’t have to pool all of their milk. Some don’t pool any, and those that didn’t pool any milk are not eligible.”
For other handlers, the payments are based on the pooled portion, but if they paid all their producers the same way (pooled and non-pooled), then their payments to their producers will be done in the same way over all the milk in aggregate, not just the pooled milk.
“Otherwise, it would be the luck of the draw because a producer is not the one who decides on what milk is pooled and what milk is not pooled,” Taylor explained. “We compute the payment rate (for each handler) in a way that ensures fairness and equity in how the payments are distributed (based on how the producers were originally paid) for those months.”
Taylor said each eligible handler will have received workbooks pre-done by USDA with their approved data for covered milk pounds and the payment methodology so they can simply do the calculations and distribute the payments to their producers accordingly.
FMMO staff will audit and verify with handlers after these payments are made, according to Taylor.
The eligible and participating milk handlers will be reimbursed to administer these payments, which includes providing an educational component for their producers. These funds do not come out of the producer payments but are calculated separately.
She noted that handlers do not receive their administration reimbursement until after USDA verifies producers have been paid in full and the educational component is met.
When asked what percentage of U.S. milk production will be covered by PMVAP payments, Taylor said it depends on the percentage of handlers pooling milk and choosing to participate in the PMVAP. Normally, she said, about 70% of U.S. milk production is pooled on Federal Orders, but in 2020 this percentage was lower (due to massive de-pooling of milk in many Federal Orders in the face of severely negative PPDs).
Producers also asked if there is any chance that a Class III producer that was not paid that higher Class III price during the July-Dec 2020 period may be able to receive PMVAP payments.
“This program pays on pooled milk and depending on if the handler pooled any milk at all will determine if that handler’s producers get a payment,” Taylor replied. “Those that didn’t pool any milk during those months are not eligible under the current program rules.”
While these PMVAP payments are meant to assist against the losses influenced by pandemic volatility in 2020 exacerbating issues with the Class I formula change, the payments will be received by producers in 2022, and it will be considered earned income for that tax year, according to Taylor. Handlers will be sending 2022 Form 1099 Misc. Income statements to producers receiving these payments.
The educational component of the PMVAP requires handlers to outline their plans and to verify they have met them. USDA AMS has provided links at the special website with educational resources on an array of federal dairy policy topics that meet the requirement. Handlers can also choose to use other resources to provide education on one or more areas that include dairy markets, risk management, how FMMOs work, how marketwide pooling works, Dairy Margin Coverage and other topics via a variety of methods, including in-person meetings, webinars, newsletters, emails distributions and mailers.
USDA has a special website devoted to the PMVAP program that includes explanations, webinars, resources and contacts at https://www.ams.usda.gov/services/pandemic-market-volatility-assistance-program