Producers must certify the adjusted gross income requirement to be eligible for PMVAP payments
USDA’s Agricultural Marketing Service (AMS) released a 12-minute webinar with details on dairy producers who may be eligible for payments under the Pandemic Market Volatility Assistance Program (PMVAP) . If contacted this month, a critical step for eligible dairy farmers is to certify that they meet the USDA Adjusted Gross Income (AGI) requirements with their milk manager or cooperative.
Announced in August, the PMVAP’s goal of $ 350 million is to provide financial assistance to dairy farmers who received less value for their milk from July to December 2020, due to market anomalies caused by the pandemic and resulting federal policies.
Manager, ongoing cooperative agreements
Initially, the USDA AMS is establishing individual agreements with each eligible milk handler and cooperative this fall. There are two payment calculation steps contained in each agreement that ultimately determine what eligible dairy farmers will receive.
First, the USDA calculates a lump sum payment owed to each handler or cooperative for milk regulated under a Federal Milk Marketing Ordinance (FMMO) from July to December 2020.
The amount of money owed to the handler or cooperative is determined by the volume of milk at a monthly rate that is 80% of the difference between the old (greater of) and the current formula (average of more than 74 cents) of Class I milk price.
Payments from managers and co-ops vary and are affected by multiple factors for each manager and co-op. For starters, since prices change monthly and there are 11 FMMOs, there could be 66 different payout calculation rates to determine how much money is owed to the manager or the co-op.
‘Opting in’, AGI certification
As part of this agreement process, participating handlers and cooperatives will determine whether or not each milk supplier and / or member will commit to the program. Handlers and cooperatives must also obtain AGI certification from producers who choose to participate.
According to the webinar, milk handlers or co-ops contacted producers in September and October, in writing, regarding the certification of AGI requirements.
If a producer does not respond to the AGI certification request, they are excluded from PMVAP payments.
The leaders of state and regional organizations of dairy producers contacted by Progressive dairy products reported that their members had received AGI certification requests. However, some were unaware of the importance of a payment eligibility response.
As in other USDA programs, producers meeting the AGI requirement must either have an average annual AGI of less than $ 900,000 for the 2016, 2017, and 2018 tax years; or 75% of their AGI must come from agricultural, livestock or forestry-related activities. This is the same AGI threshold applicable under the Coronavirus Food Assistance Program 2 (CFAP 2), so if producers have received CFAP 2 payments, they can use it to certify their eligibility.
For more information on USDA AGI calculations, click here.
The level of participation, the volume of milk from these producers, as well as the AGI certification will be submitted to the USDA and will determine the total amount paid to the manager or the cooperative.
Breakdown of payments to producers
The second step in the payment calculation process is to determine how the money paid to handlers and co-ops is distributed to individual producers. A dairy farmer is eligible if his handler or cooperative participated in an FMMO in July-December 2020.
Each eligible producer or agricultural entity is limited to payments of 5 million pounds of milk marketed annually, which are applied during the period July to December 2020. Milk exceeding this cap is not eligible for a PMVAP payment.
One factor to consider in determining the producer payout rate is how their co-op or manager initially paid for FMMO regulated and non-regulated milk during the month, reflected in the sale price. Handlers and cooperatives will be responsible for using the same method to distribute PMVAP funds to all of their dairy farmers.
Schedule of the program
The objective of the PMVAP is to have agreements signed with the material handlers and the cooperatives this fall. During the fall and winter, USDA will make payments to managers and co-ops. Once a material handler receives money from the USDA, payments will go to producers. The USDA anticipates that payments to producers should take place over the winter.
In all cases, whether the milk was marketed by a cooperative or an exclusive manager, the USDA will verify and approve in advance how the manager or the cooperative will make payments to individual producers.
Additionally, in early 2022, the USDA will check the records of each manager and co-op to ensure that producer payments have been made correctly.
Handlers and cooperatives must distribute all funds to dairy farmers; administration and education program costs are covered by a separate program provision.
PMVAP payments are considered taxable income and must be reported.
As part of the program, all material handlers and co-ops are required to provide an educational component, covering USDA dairy policies, milk marketing and risk management by March 2022. Educational resources or programs cannot not focus on dairy production practices, such as breeding, nutrition or general herd management, and will also be verified by the USDA.
Other general information
Although the PMVAP program uses data for milk marketed through the FMMO system, it is not part of the FMMO program. It is administered by AMS, not by a regional FMMO administrator or the USDA County Agricultural Service Agency offices.
Individual payments to producers are not part of an FMMO pool. Rather, these will be separate and separate payments from the USDA through their milk manager or cooperative.
For more information, visit the PMVAP website or email the PMVAP team.