Cash and safe
May 29, 2020

Dairy Top in CFAP Benefits

 |  By: Jim Dickrell

Dairy fared as well as any commodity in the benefits offered through the Coronavirus Financial Assistance Program (CFAP).

“This is a very generous program,” says Marin Bozic, a dairy economist with the University of Minnesota. “Dairy farmers can be thankful to USDA for the way CFAP was designed and implemented. And they should be thankful to the National Milk Producers Federation and the Minnesota Milk Producers Association for raising payments caps….

“Of all the sectors, dairy did the very best or near the top of all commodities,” he says.

Bozic notes that dairy farmers will be eligible for $6.20/cwt for milk produced in January, February and March. They will receive additional benefits for dairy cattle sold and corn silage and high moisture corn they held in feed inventory January 15.

Bozic notes that the $6.20/benefit paid for each of three month’s production, totaling $18.60/cwt, is either more than or equal to what trade association groups had requested. MMPA, for example, asked for a one-time $9/cwt payment. NMPF asked for $3/cwt over six months.

Farmers can now sign up for benefits through their Farm Service Agency offices. Once they do, they should receive a check in about 10 days for 80% of the benefit they are due. For milk, that benefit is $4.96/cwt. The remaining 20% of benefits is being held back to see how many total benefits are applied for. USDA had strict budget limits. If money is left over, remaining benefits will be paid out as a proportion of the amount of money left. Dairy farmers could get the full $1.24 benefit remaining, some or none of it, says Bozic.

Bozic also predicts that going forward, dairy farmers will do much more risk management. As they sign up more frequently for the Dairy Margin Coverage program, the Dairy Revenue Program or other risk management tied to or hedged on the futures market, they will be less inclined to want government programs to bail farmers out.

The reason: These aid programs that buy dairy products and donate them to feeding programs typically send future prices higher, but that means benefits from risk management programs decline. Farmers won’t want to pay for risk management programs that are then hindered by government aid.  

“I also don’t want farmers to learn the lesson that government will always be there [in times of crisis],” he says. “The first shift in this thinking is the Secretary not reopening the DMC program this year.”

You can hear all of Bozic’s comments on a MMPA Facebook webinar here.