In this column, Progressive dairy products summarizes current issues and attempts to describe how they might affect dairy farmers. Look for more detailed information and details at www.progressivedairy.com.
Items in this column are compiled from Progressive dairy products staff information sources. Send news to dave natzke.
FMMO DEAN PAYMENTS
In January, Dean Foods was ordered to pay more than $29 million it owed federal milk marketing orders (FMMOs) for milk purchased last spring before the company was sold in bankruptcy. The amount represents approximately 90% of Dean’s past due payments for milk marketed through FMMOs from April 1 to May 4, 2020.
The order requires Dean to make the $29.1 million payment within 30 days, according to USDA’s Agricultural Marketing Service (AMS).
Upon receipt of payment, the USDA will remit monies owed to FMMO-regulated handlers and dairy and fluid milk promotion boards. Once handlers receive payments from the USDA, FMMO regulations require that the money be promptly returned to producers. Procedures for payment from Managers to Producers will be communicated by the respective FMMO Market Administrators.
Dean’s $16 million pre-petition debt to the USDA is not covered by the order. The USDA will continue to pursue payment of these claims through the bankruptcy proceeding.
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On November 12, 2019, Southern Foods Group LLC, et al., (Dean Foods) filed for Chapter 11 bankruptcy. Among several “day one moves”, the company requested and was granted access to debtor financing in Possession (DIP) to continue operations and pay “critical suppliers”, including dairy farmers supplying milk. At that time, Dean had 43 factories regulated by the FMMO system.
In May 2020, however, several FMMO administrators sent letters to milk handlers stating that Dean had failed to make payments from the producer settlement fund in a timely manner. According to the USDA Ag Marketing Service, Dean was fully regulated on nine FMMOs – all except Arizona and the Pacific Northwest. The office confirmed that payments had not been made in any of these nine orders.
In addition, Dean owed money to FMMOs for producer marketing services, transportation credits, and administrative services, as well as the National Dairy Research and Promotion Program and the National Fluid Milk Processors Promotion Program. . The total owed was more than $32.3 million, according to court documents.
When payments from the Producer Settlement Fund are not made, FMMO regulations state that the distribution of available money is distributed evenly among all milk handlers, including cooperatives, of the FMMO, who then distribute money to producers. Handlers have been advised of the non-payment and the pro-rating of monies available for settlement of producers. This resulted in lower payments for milk to all dairy farmers grouped in each FMMO concerned.
CALIFORNIA QUOTAS IMPLEMENTATION PLAN (QIP)
In an order signed by California Department of Food and Agriculture Secretary Karen Ross on Jan. 25, California dairy farmers will vote on a plan to end the Quota Implementation Plan (QIP ) of State.
The referendum will take place from March 4 to June 1. For the referendum to pass, 51% of eligible producers must vote. Last fall, there were 948 eligible voters, which means about 485 producers will need to vote on the referendum for it to be valid, according to Geoff Vanden Heuvel, director of regulatory and economic affairs for the California Milk Producers Council.
Of those who vote, 65% of voters producing 51% of the vote milk (or) 51% of voters producing 65% of the vote milk must vote yes for the referendum to pass.
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The referendum follows a multi-year legal and administrative effort that Progressive Dairy has covered extensively in the past. The plan equalizes regional quota adjusters so that the quota premium in all counties equals $1.43 per quintal (cwt). The PAQ would then be terminated, effective March 1, 2025. Read Vanden Heuvel’s collection of PAQ-related articles at www.milkproducerscouncil.org/quota.
CHAPTER 12 BANKRUPTCY DEPOSITS
Based on district bankruptcy court caseload statistics, the number of Chapter 12 bankruptcy filings fell to 552 in 2020, down 43 (about 7%) from 2019, according to analysis by the chief economist of the American Farm Bureau Federation, John Newton.
Going forward, cash receipts from the sale of crops and some animals are expected to increase in 2021. This is not the case for dairy products, where milk prices are expected to be lower, expenses to increase and the federal support should be lower.
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Continued financial support from the government and the recent rise in commodity prices have likely slowed the pace of Chapter 12 farm bankruptcy filings in 2020. However, the decline should not be taken as a sign of recovery. agricultural economy. In addition to farm financial factors, non-farm income has also been a challenge given the restrictions related to COVID-19.
Another condition can be taken into account in the drop in the number of bankruptcies in 2020: due to the COVID-19 pandemic, only online filings were made.
Among the top 24 dairy states, Chapter 12 filings totaled 364 for the year ending December 31, 2020, down 34 from the previous year. (The total does not necessarily mean that all of the filings were for dairy operations.) Chapter 12 bankruptcies in two Wisconsin districts totaled 69 in 2020, up 12 from 2019; bankruptcies in other dairy states increased slightly in Colorado, Indiana, Iowa, Oregon, New Mexico and South Dakota.
DMC PRODUCTION HISTORY
The COVID-19 relief package, enacted in late December, created a provision for additional Dairy Margin Coverage (DMC) program payments for small and medium dairies each month DMC indemnity payments are triggered.
The USDA Farm Service Agency (FSA) must establish a registration period for eligible growers to make DMC production history adjustments. Registration details were not yet available on Progressive dairy products last deadline.
The Adjusted Milk Production Reference Level is in effect from January 2021 for the duration of the current Farm Bill and DMC program, ending in 2023, and is not retroactive to 2019-20. The January 2021 DMC margin will not be announced until February 26.
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While the original DMC program established an eligible baseline for milk production from the years 2011 to 2013, some producers can now use actual milk production in 2019. During the months when DMC benefits are triggered, the additional payments would cover 75% the difference between historical production established in 2011-2013 and actual milk production in 2019. No additional payment will be made on milk production above the DMC Tier I production limit of 5 million pounds. Those eligible to make production history adjustments must be registered with the DMC for 2021. Any increase in coverage also means the producer will have to pay the additional premiums on that milk. All 2021 DMC compensation payments are subject to a 5.7% sequestration withholding.
The USDA has adjusted the number of enrollments in the 2021 Dairy Margin Coverage (DMC) program upwards. enrolled in the 2021 DMC program. Enrolled milk production for 2021 was estimated at 161.3 billion pounds, approximately 79.6% of established history.