The Coronavirus Food Assistance Program: Applications for Direct Payments Open with Your Local FSA Office on May 26, 2020

By Gary Anderson, Animal and BioScience Specialist, University of Maine Cooperative Extension

The Coronavirus Food Assistance Program (CFAP) will provide up to $16 billion in direct payments to producers as relief for impacts of the coronavirus pandemic; farms can apply for direct payments with the Farm Service Agency (FSA) starting May 26, 2020. That money will come from two sources: $9.5 billion from the Coronavirus Aid, Relief, and Economic Stability (CARES) Act and $6.5 billion from the Commodity Credit Corporation (CCC) Charter Act. Of the $16 billion, $2.9 billion will be to support the dairy industry. Additionally, the USDA Farmers to Families Food Box program will purchase $3 billion in fresh produce, dairy, and meat plus an additional $120 million in Section 32 dairy food purchases. Dairy prices have seen some benefit from these food purchases.

The CARES Act money will be used to provide direct payments to dairy producers for losses due to price declines during the first quarter of 2020 and the CCC payments for ongoing market issues during the second quarter of 2020.

There are several restrictions on the money, but many of them will be for the largest herds. The limit for payments to an individual or entity was raised to $250,000. Corporations have management restrictions and a limit of $750,000 and foreign-owned businesses have restrictions. Only 80% of the payment is being made to start, in case they run out of money. If funds remain, a second payment of the remaining 20% will be made sometime in the future. I understand that the maximum payment is capped for the first payment as well at 80%.

I put together a sample farm based on my understanding of how I read the rules and it is below. I am going to detail this first example to show everyone the calculation and then provide some summary information for different herd sizes.

Here is what I believe will be the payments for this program. Payments will come from the CARES act ($4.17/cwt) and CCC Charter Act ($1.47/cwt). My understanding is in an example farm below. If you add the $1.47 and $4.71 you get $6.18 total payment per cwt. Only 80% of this ($4.94) will be in the first payment with the remaining balance paid in the future if there is enough money in the accounts. Dairy producers will get payments on the milk they produced from mid-January until mid-April, 2020. They may also get payments for cows that were culled in the first quarter and cows that were cull candidates in the second quarter. There may be a payment as well for bob calves. I have seen conflicting reports and am waiting for the final rule to be released (projected date is May 29) for clarification; check with your FSA office about all options.

The average price of milk the week of January 13-17, 2020 was $17.61; the average price of milk the week of April 6-10, 2020 was $11.72. The difference was $5.89. The payment is 80% of this difference or ($4.71/cwt) for the CARES payment covering the first quarter of 2020. The second quarter milk production is estimated by multiplying first quarter milk production by 1.014; payment for this second quarter milk production from CCC funds is 25% of the difference in milk price ($1.47/cwt). The first payment combines both of these calculations and is 80% of the total. A detailed example for a sample herd is below:

Example Farm producing 600,000 lbs milk per quarter

Assumptions:

  • The 600,000 lbs is 6,000 cwt of milk per quarter
  • The decline in milk price the first qtr was $5.89/cwt
  • The CARES pmt number is $5.89 x .8 = $4.71
  • The CCC Charter Act pmt number is $5.89 x .25 = $1.47

Calculations for the Example Farm
Milk cwt Prod Adjust Payment/cwt Total Payment 80% Payment
CARES PMT 6000 $4.71 $28,260 $22,608
CCC Charter Act PMT 6000 1.014 $1.47 $8,943.48 $7,154.78
Total $37,304.48 $29,762.78

Total 1st payment   $29,764.78   (second payment of remainder to be sent later, if the program does not run out of funds)

If you look at this payment on the yearly 2.4 million lbs, it is $1.24/cwt for the 1st pmt and $1.55/cwt for the whole payment.

Payments for cull cows (CARES $92/head and CCC $33/head) and bob calves (CARES $102/head and CCC $33/head) would be additional. Check with your local FSA office for updated information on these options.

Here are some additional summary calculations for herds producing at different levels of milk production.

Projected Payments for Different Levels of First Quarter Milk Production 2020
Lbs Milk/Quarter CARES PMT CCC PMT Total PMT 80% 1st PMT
375,000 $17,662.50 $5,589.68 $23,252.18 $18,601.74
1,000,000 $47,100 $14,905.80 $62,005.80 $49,604.64
1,500,000 $70,650 $22,358.70 $93,008.70 $74,406.96
2,500,000 $117,750 $37,264.50 $155,014.50 $124,011.60
3,750,000 $176,625 $55,896.75 $232,521.75 $186,017.40
5,000,000 $235,500 $74,529.00 $310,029.00 $248,023.20*

*I understand that in the last example, that the 80% first payment will actually be $200,000 since the individual limit is capped at 80% for the first payment as well. The remaining $50,000 would be paid as part of the second payment. This example is for an individual.

If you have questions about projected payments for your farm, please contact me at 207.581.3240 or check with your local FSA office.