Secretary of Agriculture Sonny Perdue said his staff at the U.S. Department of Agriculture is meeting daily, collecting data and listening to all stakeholders, and holding discussions with members on Capitol Hill as it attempts to craft its response to the COVID-19 pandemic. Congress allocated $9.5 billion for livestock and specialty crop producers, as well as a $14 billion replenishment of the Commodity Credit Corporation (CCC) account.
“Our goal is to get it out sooner rather than later,” Perdue said in a media call on Wednesday afternoon. “We’re in the process of collecting proposals and ideas from every sector affected so we can be as balanced and fair in the allocation of the $9.5 billion.”
Perdue noted the CCC fund, which normally has $30 billion in funds, is down to just $6 billion, and the $14 billion replenishment “won’t come until later.” He said he is looking forward to getting that out as soon as possible too but noted a rule would be required. The Market Facilitation Program (MFP) allocations first had to be published before checks issued.
Meanwhile, agricultural groups continue to make their requests known on their priorities.
In what appeared to be a united set of recommendations from the National Milk Producers Federation and the International Dairy Food Assn., the dairy groups called for a swift, comprehensive action to support the U.S. dairy industry through the current crisis as oversupply remains the main challenge facing U.S. dairy today. Supply exceeds demand by at least 10% – a gap that could widen as supply increases to its seasonal peak and as “shelter in place” conditions endure.
The organizations asked that USDA harness the productive capacity of U.S. dairy to address the growing and widening food insecurity facing many Americans by redirecting wholesome, nutritious dairy foods to food banks and national nutrition programs. However, Perdue noted in the same press call on Wednesday of the logistical challenges in diverting large amounts of fluid milk to foodbanks. Some foodbanks also have limited cold storage capacity.
Perdue said as part of its trade mitigation efforts, USDA purchased 50 million gallons of fluid milk, but that took USDA all year long to distribute. “The challenge is the scale and scope,” he said, explaining the amount of oversupply in the dairy industry from schools and restaurants shut down is significant.
The IDFA-NMPF plan calls for USDA and the Administration to bring those resources offered under the CARES Act to bear as quickly as possible. “The dairy industry requires a response that is robust, broad and strategic enough to lift all boats in a way that prevents long-term market impacts, preserves the supply chain so the industry remains intact once the COVID-19 crisis passes, and ensures dairy remains a vital part of feeding a growing number of food insecure Americans,” said IDFA president and CEO Michael Dykes, D.V.M.
Although the American Dairy Coalition applauded the hard work by NMPF and IDFA on developing the plan, they said among its “producer initiatives” is a fatal flaw that could spur more market disruptions than it resolves: It proposes to pay dairy producers $3 per hundredweight on 90% of their production — if they cut production by 10% from a March 2020 baseline.
Unfortunately, the arbitrary March benchmark will not work, ADC said. “For the dairy industry to have a meaningful and market-effective impact, production needs a different baseline — it must be seasonally adjusted and region specific.”
Dairy production traditionally drops during the nation’s warm weather months, so supply numbers are already sloping downward and are baked into production estimates. Asking producers to trim 10% from their March numbers would essentially mean little to no change in the nation’s milk product inventory, as that amount already is built in.
“In addition, a one-size-fits-all proposal fails to account for the geographic differences built into the industry. For example, an Arizona dairyman already produces 10.1% less during the proposed subsidizing period. As such, the current proposal merely subsidizes the normal curve,” ADC said.
ADC said it strongly supports the Minnesota Milk Producers Association’s proposed Dairy CORE Program, which “emerges as a clear-headed and effective response that could provide the foundation for a strong federal stimulus,” ADC said in a notice to its members.
Among the CORE proposals:
- Instruct the USDA to pay U.S. dairy producers $3/cwt for 100% of their March 2020 baseline, for each of the months in the second quarter of the year, irrespective of market prices. The payment would be done as a single lumpsum payment in April. For instance, a producer that shipped 1 million lbs. (10,000 cwt) would receive one payment of 3 X $3/cwt for $90,000, authorized directly by the Secretary of Agriculture, and disbursed with minimum delay.
- In June, the situation would be assessed again to evaluate if another round is needed for July-September.
- Do not condition direct payments on arbitrary, top-down, one-size-fits-all production cutbacks. Instead encourage producer-owned cooperatives and private milk buyers to develop supply adjustment incentive programs, which are most appropriate for their supply/demand situation.
- If creameries are assured their producers have received a large, one-off direct payment, they will be more empowered to implement situation-adjusted, effective marginal incentives to right-size their milk supply. Instead of reopening 2020 signup for Dairy Margin Coverage or compensating processors for dumped milk, concentrate stimulus funds to a single, large lumpsum payment directly paid to each U.S. dairy producer.
“The goal is to sustain as many of our nation’s dairy farms as possible even as we work toward returning the industry to its supply equilibrium as quickly and with as little disruption as possible. The MMPA’s Dairy Core Program offers a roadmap to recovery that is flexible, measurable and achievable,” ADC said.
Andrew Jerome, spokesman for IDFA said in response to the objections by ADC, “The IDFA-NMPF plan submitted to USDA and Congress was developed over several weeks of close coordination. While no plan can wholly remedy the losses that are occurring, we responded quickly with a comprehensive, united plan that can help preserve the dairy supply chain which includes the farmer and the dairy processors during the COVID-19 pandemic. Now it is with USDA to take a comprehensive view of the impacts and implement actions with urgency,” he said.
In an email statement to Feedstuffs, NMPF President and CEO Jim Mulhern stated, “The house is on fire. Let’s make sure we get the fire trucks here first. We need Secretary Perdue to understand and help address the dire needs of our industry as a result of this pandemic. Once we have that, the specifics of any approach will evolve as they always do.”