New USDA Program Addresses Class I Shortfall, But Work Remains

NMPF’s reaction was mixed toward USDA’s new Pandemic Market Volatility Assistance Program, announced Aug. 19. While the initiative, which will distribute $350 million in assistance payments to dairy farmer, arose from NMPF and member-cooperative advocacy, significant issues remain with how payments are distributed, making improvements necessary.

Under the program, USDA will reimburse producers for unanticipated losses created during the COVID-19 pandemic prompted by a change to the Class I fluid milk price mover formula that put price risks disproportionately on the backs of farmers, burdens which were increased by the government’s pandemic dairy purchases last year. Still, caps on the production amount covered by the program will limit assistance in ways that create inequitable outcomes among dairy producers.

The plan “is an initial step in this effort that will help many producers, but it unfortunately falls significantly short of meeting the needs of dairy farmers nationwide,” said NMPF President and CEO Jim Mulhern in a statement the day of the announcement.

Congress’s change to the previous Class I mover in the 2018 Farm Bill was never intended to hurt producers, and in fact was envisioned to be revenue neutral. However, the government’s COVID-19 response created unprecedented price volatility in milk and dairy-product markets that produced disorderly fluid milk marketing conditions. Those disruptions thus far have cost dairy farmers nationwide more than $750 million when compared to what they would have been paid under the previous system.

The new USDA program 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 in each order.

NMPF has been working on approaches to right this unintended wrong to dairy farmers by recouping as much of the loss as possible.

“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,” NMPF President and CEO Mulhern. “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.”

Additional work lies ahead to remedy this shortfall more fully for all dairy producers. “We very much appreciate USDA’s persistence and efforts to find a way to cover some of these losses using existing authorities, but NMPF represents producers from all regions and of all sizes and believes that losses incurred by producers must be addressed equitably,” Mulhern said. NMPF will work with Congress to seek supplemental funding to close this gap.

NMPF also is continuing discussions about the current Class I mover to prevent a repeat of this problem.