CFAP Information For Dairy Producers

Mark Stephenson, Chris Wolf and Andrew Novakovic have provided details in an informational letter on the Coronavirus Food Assistance Program (CFAP) on the Dairy Markets and Policy website at: https://dairymarkets.org/PubPod/Pubs/IL20-02.pdf

Highlights include:

• CARES Act funds will be used to partially compensate producers for price losses from the first quarter of calendar year 2020. USDA estimates that total farm payments will be about $9.5 billion under the CFAP program. The Commodity Credit Corporation will be used for the support of production in the second quarter of 2020. USDA isallocating$6.5 billion of its existing funds for these second quarter payments.
• USDA will make an initial payment of 80%of an eligible 2020 CFAP participant’s calculated 2020 CFAP payment. This strategy serves two purposes. It gets checks to farmers quickly, but it also gives USDA some flexibility to assess the total payments for all applicants and compare that to their statutory spending limits. Thus, the final payments (20%) may be subject to some pro-rationing to ensure that USDA does not exceed its budget.
• For dairy producers, payments under the CFAP program will be determined by multiplying a producer’s milk production for the first quarter of calendar year 2020 by $4.71. This payment rate was calculated as 80% of the decline in prices as determined by USDA during that quarter
• “Milk production” will likely be established in a manner the same as was used for Dairy Margin Coverage (or Margin Protection Program). Typical documentation would be marketing’s of milk as verified by a cooperative or processor. Dumped milk that was pooled under a federal order will be automatically included in those reports.
• Second quarter production will be calculated by multiplying each producer’s milk production for the first quarter of calendar year 2020 by 1.014(the percentage change in milk production for quarter 2 compared to quarter 1. The payment rate is set at $1.47.
• CFAP payments are subject to a per person (or legal entity) payment limitation of $250,000. This limitation applies to the total amount of CFAP payments made with respect to all eligible commodities.
• Different payment limits apply to LLC’s, closely held corporations or limited partnerships. These entities may receive up to $750,000 based upon the number of owner-members (not to exceed three) who are contributing substantial labor or management with respect to the operation of the corporate entity.
• A person (or legal entity), other than a joint venture or general partnership, is ineligible for payments if the person’s or legal entity’s average adjusted gross income (AGI), using the average of the adjusted gross incomes for the 2016, 2017 and 2018 tax years, is more than $900,000, unless at least 75%of that person’s or legal entity’s average AGI is derived from farming, ranching, or forestry-related activities.
• As is always true, the Farm Services Agency is the final arbiter of how this program works and how producers can apply. USDA will be providing a CFAP payment calculator with which producers and growers can estimate payments and pre-populate the application for payment—form AD-3314—once signup begins.
• Final note, milk covered with DRP, DMC plus forward contracted milk qualifies for CFAP payments. This is a change from the initial explanations of the program.
•  According to National Milk Producers Federation, dairy farmers are also eligible for payments on dairy beef and cull cows under the category of “Slaughter Cattle: Mature Cattle”.