NMPF President’s Update – June 26, 2020

NMPF Asks USDA to Reassess CFAP Payment Limits

After working hard to successfully change the initial CFAP program payment limits proposed by USDA, we’ve now had to raise concerns about the way USDA’s county FSA offices are interpreting the revised payment limits that were included in the final plan.

This week we wrote to Agriculture Secretary Sonny Perdue, asking that USDA expand its interpretation of the three entity/$750,000 total payment limit. We remain concerned that a strict interpretation is hurting the ability of family dairy operations to fully benefit from the CFAP, as we continue to hear reports that local Farm Service Agency offices are not accommodating some farm business structures, including those established as trusts.

The letter reminds USDA that there is no statutory provision to require any payment limitation due to farmers having more complex operating structures. We also reiterated our concern that seasonal dairy operations are disadvantaged by the use of the first three months of the year as the production base for the payments. We hope USDA will revise some of the restrictive interpretations being implemented across the country, and if not, it is possible Congress may weigh in to direct the agency to reassess its CFAP procedures.

In USDA’s weekly update from Monday, the department reported that it has now distributed one-quarter of the total $16 billion allocated for the CFAP program. Just over 15,000 dairy farmers have received nearly $900 million of the $4 billion being paid to date for all commodities. Other livestock producers split $2 billion, with farmers of row crops receiving about $1 billion.

In addition to good news in the form of the direct payments, the markets are suggesting that the worst of the coronavirus-induced plunge in the dairy economy may be over. The next steps in the recovery are the subject of this month’s NMPF Dairy Market Report, which tracks the rebound that began in May and is continuing into June. This market turnaround has been caused by actions that have reduced milk supply and strengthened dairy product demand.

The author of the Dairy Market Report, our chief economist Peter Vitaliano, further explains in this podcast that the rebound in cash market prices was driven by the dramatic cutbacks in farm-level milk output earlier in the spring, coupled with retail store demand and government product purchases supplanting the drop-off in foodservice sales. He said the continued spread of the coronavirus and whether milk production increases remain in check are significant questions that will affect dairy’s further recovery.

New NMPF Task Force Considers Ways to Improve Producer Payment Guarantees

The latest effort National Milk is undertaking to shore up the economic situation of farmers and their cooperatives is exploring what changes may be needed to ensure that in the face of a processor bankruptcy, co-ops and Federal Milk Marketing Order (FMMO) producer settlement pools can recover money not paid to them.

The task force was set up by NMPF Chairman Randy Mooney at the June NMPF Board meeting in response to concerns from member co-ops that had been shorted by Dean Foods failure to make final payments for April 2020 milk to co-ops and FMMO pools. We convened the first meeting this week of the new task force to examine what can be done to ensure payments to producers in the event of handler bankruptcies.

The task force will examine options and offer recommendations for our Board to consider, both about the immediate concerns regarding the Dean Foods situation, and also on opportunities to work with USDA or Congress to prevent farmers from being harmed in the future by handlers failing to meet their payment obligations.

Growing Climate Solutions Bill Earns Positive Marks in Senate Hearing

The new bill intended to help establish the terms of a carbon credit market for agricultural producers received positive responses during a Senate hearing Wednesday. Witnesses ranging from Land O’Lakes/Truterra to the American Farm Bureau to the National Farmers Union agreed that having USDA play a central role in verifying farm-centered carbon reduction practices is essential to establishing a viable carbon credit market.

A bipartisan coalition of senators introduced the Growing Climate Solutions Act earlier this month, and a House companion version debuted this week as well. The bill is designed to accelerate the growth of ag carbon credit trading by authorizing USDA to certify third-party verifiers and technical service providers. The third-party verifiers will in turn certify the validity of credit-generating farm practices.

NMPF supports the bi-partisan legislation and provided the committee a statement for the hearing record. Several lawmakers stressed the need for the carbon credit system to benefit farmers, not just carbon brokers or food marketers seeking a marketing advantage. NMPF supports this approach, as a well-regulated carbon market will play an important role in the dairy sector’s goal of achieving net-zero emissions by 2050.

U.S., UK Finish Second Week of Talks

Trade negotiations between the U.S. and the United Kingdom continued this week, as trade negotiators attempt to reach a consensus on dozens of contentious issues to achieve a bilateral free trade agreement. As we wait to see what progress is being made, here’s a reminder of the dairy-specific issues we have asked our government to address:

  • Remove geographical indication restrictions preventing the U.S. from selling common cheese types with names in wide-spread usage to the UK and establish robust safeguards for the use of common food names.
  • Recognize the safety of the U.S. dairy product system and eliminate unscientific requirements that unduly burden commerce without a genuine food safety basis.
  • Establish enforceable commitments for sanitary and phytosanitary standards and technical barriers to trade.
  • Simplify and streamline border administration measures for dairy tariff rate quota management and licensing procedures.
  • Establish rules of origin that focus the benefits of the agreement on the dairy sectors of the U.S. and the UK and do not allow for the EU dairy industry to utilize the UK as a processing hub for exporting their milk to the U.S.
  • Provided non-tariff concerns addressed, eliminate dairy tariffs in a coordinated manner.

We continue to provide input to the U.S. Trade Representative’s office about the need to favorably resolve these issues as the talks continue.

Thanks for reading and I hope you have an enjoyable weekend. Since next Friday is a holiday I’ll resume my weekly communication on July 10.