Farmers upset over missed DMC payment for July

Jan Shepel
Wisconsin was among states with the largest percentage of dairy operations that enrolled in the Dairy Margin Coverage program in 2020 DMC is designed to promote stable revenues and protect against financial catastrophe a farmer’s milk.

As a dairy farmer, imagine planning your monthly budget based on your milk income and expected margin payments from the Dairy Margin Coverage (DMC) program through the USDA’s Farm Service Agency. That’s the safety net program that was improved and recreated in the latest Farm Bill. It’s like crop insurance, only for dairy farmers.

Then imagine your county FSA office telling you there are no funds to pay that planned-for margin payment.

For Sauk County dairy farmer Tim Ryan that was the reality. He told Wisconsin State Farmer that he and his wife Ann keep track of the monthly margin calculations and can come pretty close to figuring out what their DMC payment is going to be.

Payments coming to farmers in September are based on July’s milk and feed margin calculations.

Now he’s trying to figure out how to pay all his bills minus the $15,000 or so that he was expecting in his last DMC payment. He and Ann had to talk to their bank to try to figure out ways to cover the automatic payments that were scheduled to come out of their account. The banker told him they weren’t the only ones that missed their DMC payment and had these so-called ACH payments go uncovered.

When he called his county FSA office, he said a staffer that he often works with told him “they don’t have it. That they are waiting for funding.”  They also told Ryan that the DMC isn’t an “insurance” program. He took issue with that since he knows he paid premiums so his farm would be included in the program for all five years that the program is scheduled to run – the duration of the current farm legislation.

When we called his Sauk County FSA office and asked for the person the Ryans work with, we were passed along to her boss. When he understood what we were asking, he told us we had to talk to someone at the Wisconsin State FSA office in Madison. After numerous attempts (and failures) to find the right person through the telephone directory we left several voice messages over the course of four days and did not get any response.

(Note: In most telephone answering systems, if you dial “0” you can get to a receptionist or “gatekeeper” but this did not work either. The State FSA office telephone message said that this part of their system was not working.)

In desperation, we called sources at the Wisconsin Department of Agriculture, Trade and Consumer Protection who got us the extension number of the program specialist we were directed to at Wisconsin’s FSA office. He was unaware of any problems with farmers getting their DMC payments.

We then talked to another farmer who called his county FSA office for us.  A helpful staffer there told him that the agency had not allotted as much money as they had needed for making all the DMC payments and that additional funding to make payments to farmers like the Ryans has not been restored yet.

The money is still coming. Farmers who were shorted on those payments will get them, this farmer was told by his FSA staffer. It wasn’t then known when that was going to happen.

“We have producers who got their payments and others who didn’t,” the staffer said, and they aren’t sure how that cutoff was made – why some farmers got their DMC payments and others didn’t.

“We are watching for news releases throughout the day, every day,” the staffer added.  “If something like this happens it usually only takes a day (for funding to be restored.)  We’re waiting for this to be resolved. We’re hoping we get our DMC money as soon as possible to get these farmers paid. This isn’t just here, it is a national issue.”

The program specialist we eventually reached at Wisconsin’s FSA office, Greg Biba, said that the problem of some farmers getting paid and others not getting their DMC payments could be one of timing – he said these payments tend to be processed in batches. When asked to connect us with a national FSA person we could talk about the situation, he was told to direct us to an email drop box for questions.

Statewide, national problem

The Wisconsin State Farmer confirmed that the Ryan’s predicament wasn’t an isolated incident. Several dairy farms in Rock County reported that they didn’t get their DMC payments while one Ohio dairy farmer confirmed that some of his neighbors didn’t get theirs. No one could quite figure out if farmers were paid in alphabetical order or some other method that determined who got paid while others did not.

Mark Stephenson

Mark Stephenson, director of Dairy Policy Analysis at the UW-Madison said he’s talked to a lot of dairy farmers and some got their payments while others didn’t. “It’s a real thing,” he confirmed.

His understanding is that it is being caused by a glitch in software at the FSA and that it “won’t take very long at all” for the problem to be fixed and for farmers to get those expected payments.

He also commented that the federal government is in the process of tapping a pot of money that was allocated for pandemic relief and they are trying to use that up and not go beyond what was in the funding – and that could be the reason there’s a problem getting money to farmers. “When that pot of money is gone, it’s gone. It’s a finite amount of money. Normal DMC payments come out of the Treasury.

“They’re trying to be careful to use up that capped amount of money without overpaying. These are complex calculations and they want to exhaust that pandemic fund.”

He also noted that changes in the ration value portion of the calculation for the DMC means the program will be paying more out to dairy farmers. All of that goes into the calculations and those changes could potentially be retroactive to a certain point in the pandemic and its related disruption of the dairy supply chain.

An ag lender in Wisconsin who provided background information on this situation, said they were aware of several farmers who didn’t get their expected payments. This lender wondered if the problem stemmed from the agency running short on funds at the end of this fiscal year. The FSA’s new fiscal year starts on October 1.

Lenders who work with various FSA loan programs – for example the Beginning Farmers Loan Program – have often experienced a lag on approvals in August and September. Those loans will often end up getting approved after the new fiscal year begins in October, in the experience of several of these commercial ag lenders who work with the guarantees offered by USDA.

Teleconference for dairy

In a teleconference Tuesday (Sept. 14) sponsored by the Pennsylvania Center for Dairy Excellence, Cynthia Walters, Pennsylvania’s Dairy Program Director for USDA was asked about the missing DMC payments to farmers. She said it was “unfortunate” that some farmers had their July DMC payments delayed.

“Some went through and others didn’t,” she said. Walters attributed the missing payments to a lack of funding for the program because payments went out of the fund faster than had been anticipated.

According to Walters, on Sept. 13 (Monday) the funding had been restored enough to enable the FSA to get those DMC payments out to all those farmers who had been expecting them.

Many farmers across the U.S. are perturbed that a program that is supposed to serve as a safety net is letting so many farmers down at the moment.

Direct deposit payments were expected to be out to farmers within two business days, she said.

In addition, she spoke on changes being made to the DMC formula with significant improvements to the feed cost calculations. The price of premium and supreme alfalfa will be put in the formula to more accurately reflect the cost of feeding dairy cows. That change will be retroactive to January of 2020 and will be a permanent change to the DMC calculations.

It is estimated that this change will be worth $100 million for farmers who had DMC coverage in 2020 or 2021, she said.

Walters said that this change will become official when the rules for the program are published; then payments can begin to go out to farmers when the FSA’s software gets updated. No action is needed by farmers to get these feed-calculation retroactive payments, she added. Farmers who had a payment generated in 2020 or 2021 will be eligible for these payments.

She explained that these payments will come to farmers in lump sums, one for 2020 and a separate one for 2021. Different program codes will differentiate the two payments.

As for Tim Ryan, when he could get no good answers from the staff at his county FSA office, he talked with an FSA board member. That board member talked to agency officials and told Ryan that payments should be processed this week (Sept. 13-17) for farmers who hadn’t yet gotten them – which coincides with the story from the Pennsylvania official.

Ryan is perturbed that a program that is supposed to serve as a safety net is letting so many farmers down at the moment. “How do you interpret the word ‘service’?” he asked rhetorically.