This subpart specifies the terms and conditions for the Milk Loss Program. The Milk Loss Program will provide payments to eligible dairy operations for milk that was dumped or removed without compensation from the commercial milk market due to the results of droughts, wildfires, hurricanes, floods, derechos, tornadoes, excessive moisture, excessive heat, winter storms, freeze (including polar vortex), and smoke exposure that occurred in the 2023 and 2024 calendar year.

(a) The Milk Loss Program will be administered under the general supervision and direction of the FSA Administrator and will be carried out in the field by FSA State and county committees, respectively.

(b) State and county committees, and representatives and their employees, do not have authority to modify or waive any of the provisions of the regulations set forth in this subpart.

(c) The State committee will take any action required by the regulations of this subpart that the county committee has not taken. The State committee will also:

(1) Correct, or require a county committee to correct, any action taken by such county committee that is not in accordance with the regulations of this subpart, or

(2) Require a county committee to withhold taking any action that is not in accordance with this subpart.

(d) No provision or delegation to an FSA State or county committee will preclude the FSA Administrator, the Deputy Administrator, or a designee, from determining any question arising under this subpart, or from reversing or modifying any determination made by an FSA State or county committee.

The following definitions apply to the Milk Loss Program.

Affected farmer means an individual person or legal entity who produces milk which is removed from the commercial market any time or who produces but was unable to deliver milk to a commercial market as a result of a qualifying disaster event, which is limited to either a:

(1) Weather-related event preventing transportation of the milk; or

(2) Weather-related event causing a power outage or structural damage causing milk to be unmerchantable.

Application period means any period during calendar year 2023 and 2024 which an affected farmer's milk is dumped or removed without compensation from the commercial market due to a qualifying disaster event for which application for payment is made.

Average adjusted gross farm income means the average of the person's or legal entity's adjusted gross income derived from farming, ranching, and forestry operations, including losses, for the 3 taxable years preceding the most immediately preceding complete taxable year.

(1) If the resulting average adjusted gross farm income derived from paragraphs (1) through (13) of the definition for “income derived from farming, ranching, and forestry operations” in this section is at least 66.66 percent of the average adjusted gross income of the person or legal entity, then the average adjusted gross farm income may also take into consideration income or benefits derived from the following:

(i) The sale, trade, or other disposition of equipment to conduct farm, ranch, or forestry operations; and

(ii) The provision of production inputs and services to farmers, ranchers, foresters, and farm operations.

(2) For legal entities not required to file a Federal income tax return, or a person or legal entity that did not have taxable income in 1 or more of the tax years during the 3 taxable years preceding the most immediately preceding complete taxable year, the average gross farm income will be the adjusted gross farm income, including losses, averaged for the base period, as determined by FSA. For a legal entity created during the base period, the adjusted gross farm income average will include only those years of the base period for which it was in business; however, a new legal entity will not be considered “new” to the extent it takes over an existing operation and has any elements of common ownership interest and land with the preceding person or legal entity from which it took over. When there is such commonality, income of the previous person or legal entity will be averaged with that of the new legal entity for the base period. For a person filing a joint tax return, the certification of average adjusted gross farm income may be reported as if the person had filed a separate Federal tax return, and the calculation is consistent with the information supporting the filed joint return.

(3) The relevant tax years are:

(i) For the 2023 program year, 2019, 2020, and 2021; and

(ii) For the 2024 program year, 2020, 2021, and 2022.

Average adjusted gross income means the average of the adjusted gross income as defined under 26 U.S.C. 62 or comparable measure of the person or legal entity for the relevant tax years, which are:

(1) For the 2023 program year, 2019, 2020, and 2021; and

(2) For the 2024 program year, 2020, 2021, and 2022.

Base period means the first full calendar month prior to the claim period in which no qualifying disaster event occurred. If the claim period is multiple consecutive months, the base period remains the same calendar month preceding the start of the claim period.

Claim period means the calendar month, or months, in which milk was dumped or removed and usually is the calendar month immediately following the base period.

Commercial market means the market to which the affected farmer normally delivers milk and from which it was removed.

County committee means the FSA county committee.

Deputy Administrator means the Deputy Administrator for Farm Programs, FSA.

Farming operation means a business enterprise engaged in the production of agricultural products, commodities, or livestock, operated by a person, legal entity, or joint operation. A person or legal entity may have more than one farming operation if the person or legal entity is a member of one or more legal entities or joint operations.

FSA means the Farm Service Agency, U.S. Department of Agriculture.

Income derived from farming, ranching, and forestry operations means income of an individual or entity derived from:

(1) Production of crops, specialty crops, and unfinished raw forestry products;

(2) Production of livestock, aquaculture products used for food, honeybees, and products derived from livestock;

(3) Production of farm-based renewable energy;

(4) Selling (including the sale of easements and development rights) of farm, ranch, and forestry land, water or hunting rights, or environmental benefits;

(5) Rental or lease of land or equipment used for farming, ranching, or forestry operations, including water or hunting rights;

(6) Processing, packing, storing, and transportation of farm, ranch, forestry commodities including renewable energy;

(7) Feeding, rearing, or finishing of livestock;

(8) Payments of benefits, including benefits from risk management practices, crop insurance indemnities, and catastrophic risk protection plans;

(9) Sale of land that has been used for agricultural purposes;

(10) Payments and benefits authorized under any program made available and applicable to payment eligibility and payment limitation rules;

(11) Income reported on Internal Revenue Service (IRS) Schedule F or other schedule used by the person or legal entity to report income from such operations to the IRS;

(12) Wages or dividends received from a closely held corporation, and IC-DISC or legal entity comprised entirely of family members when more than 50 percent of the legal entity's gross receipts for each tax year are derived from farming, ranching, or forestry activities as defined in this subpart; and

(13) Any other activity related to farming, ranching, and forestry, as determined by the Deputy Administrator for Farm Programs.

Legal entity, as used in this subpart:

(1) Means an entity that is created under Federal or State law and that:

(i) Owns land or an agricultural commodity; or

(ii) Produces an agricultural commodity; and

(2) Includes corporations, joint stock companies, associations, limited partnerships, limited liability companies, irrevocable trusts, estates, charitable organizations, general partnerships, joint ventures, and other similar organizations created under Federal or State law including any such organization participating in a business structure as a partner in a general partnership, a participant in a joint venture, a grantor of a revocable trust, or as a participant in a similar organization. A business operating as a sole proprietorship is considered a legal entity.

Milk marketing organization means the marketing agency to or through which the affected dairy farmer marketed milk at the time the milk was either dumped or unable to be delivered to the commercial market due to a qualifying disaster event.

Ownership interest means to have either a legal ownership interest or a beneficial ownership interest in a legal entity. For the purposes of administering this subpart, a person or legal entity that owns a share or stock in a legal entity that is a corporation, limited liability company, limited partnership, or similar type entity where members hold a legal ownership interest and shares in the profits or losses of such entity is considered to have an ownership interest in such legal entity. A person or legal entity that is a beneficiary of a trust or heir of an estate who benefits from the profits or losses of such entity is considered to have a beneficial ownership interest in such legal entity.

Pay period means:

(1) In the case of an affected farmer who markets milk through a milk marketing organization, the period used by the milk marketing organization in settling with the affected farmer for milk, usually biweekly or monthly; or

(2) In the case of an affected farmer whose commercial market consists of direct retail sales to consumers, a calendar month.

Payment subject to refund means a payment which is made by a milk marketing organization to an affected farmer, and which such farmer is obligated to refund to the milk marketing organization.

Person means an individual, partnership, association, corporation, trust, estate, or other legal entity.

Production inputs mean material to conduct farming operations, such as seeds, chemicals, and fencing supplies.

Production services mean services provided to support a farming operation, such as custom farming, custom feeding, and custom fencing.

Qualifying disaster event means droughts, wildfires, hurricanes, floods, derechos, excessive heat, tornadoes, winter storms, freeze (including a polar vortex), smoke exposure, excessive moisture, qualifying drought, and related conditions that occurred in calendar year 2023 or 2024.

Qualifying drought means an area within the county was rated by the U.S. Drought Monitor as having a:

(1) D2 (severe drought) intensity for at least 8 consecutive weeks in the applicable calendar year; or

(2) D3 (extreme drought) or higher intensity for any period of time during the applicable calendar year.

Related condition means damaging weather and adverse natural occurrences that occurred concurrently with and as a direct result of a specified qualifying disaster event. Related conditions include, but are not limited to:

(1) Excessive wind that occurred as a direct result of a derecho;

(2) Silt and debris that occurred as a direct and proximate result of flooding;

(3) Excessive wind, storm surges, tornadoes, tropical storms, and tropical depressions that occurred as a direct result of a hurricane; and

(4) Excessive wind and blizzards that occurred as a direct result of a winter storm.

Removed from the commercial market means:

(1) Produced and destroyed or fed to livestock;

(2) Produced and delivered to a milk marketing organization who destroyed it or disposed of it as salvage; or

(3) Produced and otherwise diverted to other than the commercial market.

State committee means the FSA State committee.

(a) To be eligible, an affected farmer, the farmer must be a:

(1) Citizen of the United States;

(2) Resident alien, which for purposes of this subpart means “lawful alien” as defined in 7 CFR 1400.3;

(3) Partnership organized under state law consisting solely of citizens of the United States or resident aliens;

(4) Corporation, limited liability company, or other organizational structure organized under State law consisting solely of citizens of the United States or resident aliens; or

(5) Indian Tribe or Tribal organization, as defined in section 4(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5304).

(b) In addition to the requirements in paragraph (a) of this section, to be eligible, an affected farmer must comply with all provisions of this subpart and, as applicable:

(1) 7 CFR part 12—Highly Erodible Land and Wetland Conservation;

(2) 7 CFR part 707—Payments Due Persons Who Have Died, Disappeared, or Have Been Declared Incompetent;

(3) 7 CFR part 718—Provisions Applicable to Multiple Programs; and

(4) 7 CFR part 1403—Debt Settlement Policies and Procedures.

(a) A milk loss payment will be made to an affected farmer who is in compliance with this subpart in the amount equal to 75 percent of the fair market value of the farmer's normal marketings for the application period, less:

(1) Any amount the affected farmer received for milk marketed during the application period; and

(2) Any payment not subject to refund that the affected farmer received from a milk handler with respect to milk removed from the commercial market during the application period.

(b) [Reserved]

(a) The FSA county committee will determine the affected farmer's normal marketings of milk which, for the purposes of this subpart, will be the sum of the quantities of milk for which the farmer would have sold in the commercial market in each of the pay periods in the application period be it not for the removal of the affected farmer's milk from the commercial market as a result of a qualifying disaster event.

(b) Normal marketings for each pay period are based on the average daily production during the base period.

(c) Normal marketings determined in paragraph (b) of this section are adjusted for any change in the daily average number of cows milked during each pay period the milk is off the market compared with the average number of cows milked daily during the base period.

(d) If only a portion of a pay period falls within the application period, normal marketings for such pay period will be reduced so that they represent only that part of such pay period which is within the application period.

(e) The days eligible for indemnification begin on the date milk was removed or dumped and continue for the concurrent days milk was removed or dumped. Once the dairy operation returns to the normal marketing of milk, the dairy operation is no longer eligible for assistance for milk removed or dumped due to that qualifying disaster event unless after restarting commercial marketing of milk, additional milk is removed or dumped due to the same qualifying disaster event.

(a) The FSA county committee will determine the fair market value of the affected farmer's dumped milk, which, for the purposes of this subpart, will be the sum of the net proceeds such farmer would have received for normal marketings in each of the pay periods in the application period but for the qualifying disaster event.

(b) The base period per cow average daily milk production is determined by dividing the full month of milk marketings by the average number of cows in milk production for that month and the number of days in that month. To determine the milk loss payment, the base period per cow average daily milk production is multiplied by the number of milking cows in production for the claim period and by the number of days milk was removed or dumped in the claim period with the result divided by 100 to determine the applicable hundredweight and then multiplied by the hundredweight pay price.

(c) To determine the hundredweight pay price for milk, the FSA county committee will deduct from the gross pay price from the claim period milk marketing statement the per hundredweight hauling rate for the applicable month and the per hundredweight $0.15 promotion fee which it determines are normally incurred by the affected farmer but which were not incurred because of the removal of the farmer's milk from the commercial market.

(a) The affected farmer must furnish to the FSA county committee complete and accurate information sufficient to enable the FSA county committee or the Deputy Administrator to make the determinations required in this subpart. Such information must include, but is not limited to:

(1) A copy of the notice from, or other evidence of action by, the public agency which resulted in the dumping or removal of the affected farmer's milk from the commercial market.

(2) The specific weather or disaster event and its results on milk marketing for the claim period.

(3) The quantity and butterfat test of milk produced and marketed during the base period. This information must be a certified statement from the affected farmer's milk marketing organization or any other evidence the FSA county committee accepts as an accurate record of milk production and butterfat tests during the base period.

(4) The average number of dry cows, bred heifers, and cows milked during the base period and during each pay period in the application.

(5) The affected farmer will provide two milk marketing statements, one for the base period and one for the claim period.

(6) On the milk marketing statement the per hundredweight hauling rate and the per hundredweight $0.15 promotion fee, which are normally incurred by affected farmers who market through the milk marketing organization, that the affected farmer did not incur because of the dumping or removal of the milk from the commercial market, then the average price stated by the milk marketing organization will be the average gross price paid less these costs. If the milk marketing organization does not have this information, the affected farmer will furnish a statement specifying these costs, if any.

(7) The amount of proceeds, if any, received by the affected farmer from the marketing of milk produced during the application period.

(8) The amount of any payments not subject to refund made to the affected farmer by the milk marketing organization with respect to the milk produced during the application period and removed from the commercial market.

(9) A detailed written statement from the affected farmer regarding the circumstances of the milk removal or dumping, the type and geographic scope of the weather event, what transportation limitations occurred in addition to how and where the removed or dumped milk was discarded.

(b) If requested by FSA, the affected farmer must provide additional documentation that establishes the affected farmer's eligibility for a Milk Loss Program payment.

The affected farmer or the affected farmer's legal representative must sign and file an application for payment on a form which is approved for that purpose by the Deputy Administrator. The form must be filed with the county FSA office for the county where the farm headquarters are located no later than close of business on January 23, 2026, for 2023 and 2024 losses.

(a) Per program year, a person or legal entity, other than a joint venture or general partnership, is eligible to receive, directly or indirectly, payments under this subpart of not more than:

(1) $125,000 if less than 75 percent of the person's or legal entity's average adjusted gross income is average adjusted gross farm income; or

(2) $250,000 if not less than 75 percent of the person's or legal entity's average adjusted gross income is average adjusted gross farm income.

(b) To be eligible to receive payments based on the limitation in paragraph (a)(2) of this section, a person or legal entity must submit FSA-510, accompanied by a certification from a certified public accountant or attorney as to that person's or legal entity's certification.

(c) If a producer requesting the $250,000 payment limitation is a legal entity, all members of that entity must also complete FSA-510 and provide the required certification according to the direct attribution provisions in 7 CFR 1400.105. If a legal entity would be eligible for the $250,000 payment limitation based on the legal entity's average adjusted gross farm income but a member of that legal entity either does not complete an FSA-510 and provide the required certification or is not eligible for the $250,000 payment limitation, the payment to the legal entity will be reduced for the limitation applicable to the share of the payment attributed to that member.

(d) If a producer or member of a legal entity files FSA-510 and the accompanying certification after their payment is issued but before the deadline, FSA will recalculate the payment and issue the additional calculated amount.

(e) The direct attribution provisions in § 1400.105 apply for payment limitation and determining average adjusted gross income as defined and used in this subpart.

(f) If an individual or legal entity is not eligible to receive Milk Loss Program payments due to the individual or legal entity failing to satisfy payment eligibility provisions, the payment made either directly or indirectly to the individual or legal entity will be reduced to zero. The amount of the reduction for the direct payment to the producer will be commensurate with the direct or indirect ownership interest of the ineligible individual or ineligible legal entity.

(a) A completed FSA-376, Milk Loss Program Application, must be submitted at the time of application along with the information listed in § 760.1707 to any FSA county office by the close of business on January 23, 2026.

(b) Failure of an individual, entity, or a member of an entity to submit the following payment limitation and payment eligibility formsby January 23, 2027, may result in no payment or a reduced payment:

(1) Form AD-2047, Customer Data Worksheet, for new customers or existing customers who need to update their customer profile;

(2) Form CCC-901, Member Information for Legal Entities, if applicable;

(3) Form CCC-902, Farm Operating Plan for an individual or legal entity as provided in 7 CFR part 1400;

(4) Form FSA-510, Request for an Exception to the $125,000 Payment Limitation for Certain Programs, for producers and members of legal entities who are requesting an increased payment limitation; and

(5) Form AD-1026, Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC) Certification, for the Milk Loss Program applicant and applicable affiliates as provided in 7 CFR part 12.

(c) If supporting documentation is requested under § 760.1707(b), the documentation must be submitted to FSA within 60 calendar days from the request or the application will be disapproved by FSA.

(d) Milk Loss Program payments are limited to 30 days per year for each of 2023 and 2024.

(e) Each Milk Loss Program application is limited to the milk loss for one calendar month due to a qualifying disaster event or multiple qualifying disaster events. Milk loss that occurs in a subsequent month for the same qualifying disaster event will require a separate application.

(f) The date to apply for payments under this program may, at the sole discretion of FSA, be extended. If FSA makes that decision, the extended date will be set forth at https://www.fsa.usda.gov/resources/programs/milk-loss-program-mlp. Producers may also obtain that information from any FSA county office.

(a) FSA county executive directors and State and county committees do not have authority to modify or waive any of the provisions of the regulations in this subpart.

(b) The FSA State committee may take any action authorized or required by the regulations in this subpart to be taken by the FSA county committee when such action has not been taken by the FSA county committee. The FSA State committee may also:

(1) Correct, or require a county committee to correct, any action taken by such county committee which is not in accordance with the regulations in this subpart; or

(2) Require a county committee to withhold taking any action which is not in accordance with the regulations in this subpart.

(c) No delegation herein to a State or county committee will preclude the Deputy Administrator or designee from determining any question arising under the regulations in this subpart or from reversing or modifying any determination made by a State or county committee.

(a) A receiver of an insolvent debtor's estate and the trustee of a trust estate will, for the purpose of this subpart, be considered to represent an insolvent affected farmer and the beneficiaries of a trust, respectively, and the production of the receiver or trustee will be considered to be the production of the represented person. Program documents executed by any such person will be accepted only if they are legally valid and such person has the authority to sign the applicable documents.

(b) An affected dairy farmer who is a minor will be eligible for milk loss payments only if at least one of the following requirements is true:

(1) The right of majority has been conferred on him by court proceedings or by law;

(2) A guardian has been appointed to manage the property and the applicable program documents are signed by the guardian; or

(3) A bond is furnished under which the surety guarantees any loss incurred for which the minor would be liable had the person been an adult.

(a) If the affected farmer is indebted to any agency of the United States and such indebtedness is listed on the county debt record, milk loss payments due the affected farmer the regulations in this part will be applied, as provided in the Secretary's setoff regulations, 7 CFR part 13, to such indebtedness.

(b) Compliance with the provisions of this section will not deprive the affected farmer of any right that would otherwise be available have to contest the justness of the indebtedness involved in the setoff action, either by administrative appeal or by legal action.

If the milk loss payment disbursed to an affected farmer exceeds the amount authorized under the regulations in this subpart, the affected farmer will be personally liable for repayment of the amount of such excess.

In the case of the death, incompetency, or disappearance of any affected farmer who would otherwise receive a milk loss payment, such payment may be made to the person or persons specified in the regulations contained in part 707 of this chapter. The person requesting such payment must file Form FSA-325, “Application for Payment of Amounts Due Persons Who Have Died, Disappeared, or Have Been Declared Incompetent,” as provided in that part.

(a) The affected farmer, milk marketing organization, and any other person who furnished information to such farmer or to the FSA county committee for the purpose of enabling such farmer to receive a milk loss payment under this subpart, must maintain any existing books, records, and accounts supporting any information so furnished for 3 years following the end of the year during which the application for payment was filed.

(b) The affected farmer, milk marketing organization, and any other person who furnishes such information to the affected farmer or to the FSA county committee must permit authorized representatives of the Department of Agriculture and the General Accounting Office, during regular business hours, to inspect, examine, and make copies of such books, records, and accounts.

No assignment will be made of any milk loss payment due or to come due under the regulations in this subpart. Any assignment or attempted assignment of any indemnity payment due or to come due under this subpart will be null and void.

Affected farmers may obtain information necessary to make application for a milk loss payment from the county FSA office.

(a) Payments under this subpart will be prorated based on the sum of all payments to eligible affected farmers and available funds.

(b) FSA will not disburse Milk Loss Program payments at the beginning of the application period. However, during the application period, FSA may evaluate program demand and begin issuing payments if an initial payment factor can be established to ensure that payments do not exceed available funding. After the application deadline, a final payment factor will be determined and applied, which may or may not provide an additional or final payment, depending upon the factor.

(a) Payments made under this subpart to a participant for loss of milk as a result of a qualifying disaster event are calculated as follows:

(1) Amount of the fair market value of the farmer's normal marketings for the application period; less

(2) Any amount the farmer received for milk marketed during the applications period; and

(3) Any payment not subject to refund which the farmer received from a milk marketing organization with respect to milk removed from the commercial market during the application period;

(4) Multiplied by a program factor of 75 percent.

(b) [Reserved]