Still No Detail rom USDA on COVID-19 Dairy Relief Package

Geoffrey Vanden Heuvel, Director of Regulatory and Economic Affairs Milk Producers Council

Geoffrey Vanden Heuvel

It has been 37 days since the U.S. Senate voted 96-0 to borrow $2.2 TRILLION to shore-up the productive capabilities of the U.S. economy. America was deliberately shut down by the government to keep the health care delivery system from being overwhelmed by the effects of the coronavirus. Some of the billions of dollars in that relief package were sent to USDA help the dairy industry deal with the massive destruction of dairy product demand in the food service sector caused by the shutdown.

On April 18, USDA made an announcement that they were going to send money to dairy farmers. There was no detail about how much they were going to send other than the fact that payments would be capped at $125,000 per facility. Since that time, there has been an outcry of concern by the industry – and more importantly members of Congress – directed at USDA officials to point out that if help is limited to $125,000 per facility it will fail to accomplish the intended purpose of the money, which is to protect the productive capacity of the U.S. dairy industry.  This is because a majority of the milk produced in this country is on farms where $125,000 worth of assistance is not sufficiently meaningful to make a difference.

There are some who claim that the $2.9 billion USDA allocated to dairy is not enough money, and therefore, a per facility cap is necessary to ensure that all dairy farmers receive support. This is NOT factual based on the math.

There are about 175 million hundredweights of milk produced on U.S. dairy farms every month. A $3 per cwt payment per month for every one of those hundredweights would cost $525 million per month. $2.625 billion would cover 5 MONTHS of help for every dairy farmer in the country without a cap. The cap looks like a political decision, NOT an economic one. At this point we have no idea on whether this messaging to USDA Secretary Sonny Perdue is having any effect. But we can pray that it is.

Congressman Jim Costa, Chairman of the Livestock Sub-committee of the House Agriculture Committee, is leading an effort to have Congress include in any future COVID relief legislation, what he is describing as a three-pronged effort to support dairy that includes 1) allocating funds to dairymen with higher or no caps, 2) implementing an incentive program to pay producers to temporarily reduce production, and 3) greatly ramping up USDA food purchases to provide to people in need.  The three major cooperatives in California and the three California dairy farmer trade associations provided Congressman Costa with a strong support letter for his efforts this week that you can read here.

Meanwhile, there are significant production reductions being imposed on producers across the country by their cooperatives and proprietary handlers. In addition, the price that is being paid for milk being produced right now has completely collapsed. It is a crisis and Congress did provide USDA with the dollars and the discretion to make a difference. Unfortunately, USDA’s slow and inadequate response is going to maximize the damage and pain dairy families will suffer as a result of this government mandated shut down of the economy. While Congressman Costa and other Congressional leaders on a bi-partisan basis have been saying and doing the right things, and the National Milk Producers Federation and the International Dairy Foods Association also rapidly stepped forward with critical guidance to USDA on what was necessary to mitigate the disaster that is unfolding before our eyes, USDA leadership has so far failed to deliver a response equal to the challenge.

Whether there will be another opportunity for Congress to provide more explicit direction to USDA in the future remains to be seen. After passing over $2.7 trillion worth of COVID related dollars in a rapid and bi-partisan fashion, it now looks like politics as usual has resumed with political posturing and pandering reemerging on the evening news. As the pandemic eases and America comes out of its shelter, the political circus that is a Presidential election year appears on the verge of resuming. Unfortunately for us in dairy, the worst is just starting to be seen. Massive shortfalls in milk and beef income look to linger for months to come. We will hope for the best, but to describe this as difficult is a gross understatement.

 

 

Editor’s note: This article appears in the May 1 edition of the Milk Producers Council newsletter and is used here with permission.

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