Pandemic Market Volatility Assistance Program Payments Are on Their Way
January 19, 2022
Through the Pandemic Market Volatility Assistance Program (PMVAP), USDA will provide up to $350 million in pandemic assistance payments to dairy farmers early this year. This initiative will partially reimburse producers for unanticipated losses created during the COVID-19 pandemic when federal dairy food box purchases weighted heavily toward cheese, combined with a change to the Class I mover formula created the unintended consequence of significant financial losses.
Payments will reimburse qualified dairy farmers for 80 percent of the revenue difference per month on up to 5 million pounds of milk marketed and on fluid milk sales from July through December 2020. The payment rate will vary by region based on the actual losses on pooled milk related to price volatility. As part of the program, handlers also will provide virtual or in-person education to dairy farmers on the program and other dairy topics.
What are the eligibility requirements?
Producers who ship to handlers, including cooperatives, and are regulated under the Federal Milk Marketing Order (FMMO) system will be eligible for PMVAP reimbursements if their average Adjusted Gross Income (AGI) is less than $900,000 or if 75 percent of their AGI comes from farming and ranching activities.
How are payments calculated?
The amount of money from USDA due to a cooperative is determined by the volume of the cooperative’s milk regulated by the FMMO during July to December 2020. The monthly payment rate during that time is 80 percent of the difference between the previous and the current Class I price formulas. Because prices change every month and there are 11 FMMOs, USDA is using 66 different payment calculation rates to determine how much money is due to producers.
Many variables affect an individual producer’s actual payment. A program-wide, uniform producer payment rate is impossible because so many variables go into a producer’s payment. And significantly, eligible milk per producer or farm entity is limited to 5 million pounds of milk marketed, or 833,000 pounds per month during the period of July through December 2020. Milk produced beyond this cap is not eligible for payment. Other variables include:
- Total pounds of pooled milk
- Producer AGI eligibility
- Producer participation declination
- Applicable Order-specific monthly rate
- How a cooperative originally paid its producers
USDA is working closely with cooperatives and other handlers to determine producer payments based on the factors described above. In addition, USDA will verify that each handler made producer payments correctly.
How and when will money be distributed?
USDA is establishing individual agreements with cooperatives and other handlers, who are responsible for paying dairy farmers. Once a handler receives their PMVAP payment from USDA, they have 30 days to disburse monies to producers. USDA anticipates that eligible dairy farmers will receive PMVAP payments during the first quarter of 2022.
Significant issues remain with how payments are distributed, making additional funding necessary to close gaps in the program, which arose from the efforts of NMPF and its member cooperatives but fell short of what the organization advocated. Caps on the production amount covered by the program will limit assistance in ways that create inequitable outcomes among dairy producers. NMPF is engaged in efforts with Congress to remedy this shortfall. At the same time, NMPF is continuing discussions about the Class I mover to end the disproportionate risk borne by dairy farmers under the current formula that creates disorderly market conditions.