More Clarity on CFAP Direct Payments for Dairy Farmers

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On Thursday, May 21, USDA completed its training for FSA offices across the country on the direct payments portion of CFAP.  USDA released a set of rules for use by State and County FSA offices that serve as the guidelines for the program and address some commonly asked questions which are detailed below based on that information and contact with FSA personnel. FSA will administer CFAP and is the organization which serves as the authority on questions related to CFAP. Please direct specific programmatic questions to your FSA contact and understand they have the final authority on CFAP.

For now, here’s the skinny you need to know beyond what I posted on Tuesday:

  • Signup period begins on May 26, 2020 and runs through August 28, 2020. Call your local FSA office and schedule a phone appointment to sign up for CFAP as soon as the signup period begins – don’t wait!
  • CFAP direct payments come from two funding sources and in two separate installments, but require a single application. The two funding authorities allow for the first installment to be processed quickly (in theory, as early as June 1), while the second one will be held until at least after July 1 and could be pro-rated, depending on program participation.
  • CFAP for Dairy
    • January, February and March 2020 is the coverage period for dairy coverage for which producers will certify milk production.
    • Producers will certify their own production for January, February and March 2020; suggested documentation for audits or spot-checks include milk check stubs, milk marketing statements, co-op-verified records of dumped milk, etc.
    • Payment Formula
      • The first payments will be determined by multiplying 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)
      • Second quarter production will be calculated by multiplying first quarter production (same as above) by 1.014 (which is the calculated percentage change in milk production for quarter 2 compared to quarter 1) by the payment rate of $1.47. (This second payment rate was calculated as 25% of the decline in prices during the second quarter 2020 as determined by USDA.)
      • Example:  250 cows produced 1,312,500 lbs of milk in Jan-Mar 2020 on John’s single owner operation. [(13,125cwt x $4.71) + (13,125cwt x 1.014 x $1.47)] x 80% =  $65,106.09 first payment. A second payment of up to $16,276.52 could come later, but could be pro-rated, depending on funds availability.
  • CFAP for Livestock
    • A single payment for livestock will be calculated using the sum of the producer’s number of livestock sold between January 15 and April 15, 2020, multiplied by the payment rates per head, and the highest inventory number of livestock between April 16 and May 14, 2020, multiplied by the payment rate per head.
    • Based on today’s information, cull dairy cows sold for slaughter and bull calves sold as feeder calves (not for dairy purposes) will be eligible under the livestock section of CFAP. Cull dairy cows will likely be categorized as “Slaughter Cattle: Mature Cattle,” while bull calves would be categorized by weight as “Feeder Cattle.’  Suggested documentation includes check stubs or sales statements from stockyards/packing houses/processors where cull cattle or calves were sold.
  • CFAP payments are subject to a per person or per legal entity payment limitation of $250,000, which applies across all eligible commodities (milk under dairy, cull cows under livestock, etc.)  However, there are different payment limits for corporate entities (LLC’s, closely held corporations or limited partnerships). Those entities may receive up to $750,000 based upon the number of owners (max of 3) who substantially contribute at least 400 hours per year of labor in or management of the operation.
  • Income eligibility requirements similar to other USDA programs must be met
  • A payment calculator that estimates payments and pre-populates the application for payment (Form AD-33140 will be available once signup begins. A video preview of the payment calculator, is available online now.

As always, this is my best interpretation of the information available. USDA’s news release this past Tuesday left us with quite a few questions, but today we have gotten some clarity on several items. Long story short, call your FSA office Tuesday and get yourself an appointment to get signed up for these funds. Grant them a little grace, knowing that they are working in limited settings and will be inundated with farmers, some of whom have never worked with FSA before. Hang in there, folks and keep your cinches tight; 2020 has been a pretty wild ride thus far, and we may have a few more (hopefully, smaller) adjustments to weather before any sense of “normal” is restored.