Dairy Disaster Assistance Payment Program

1. Dairy Disaster Assistance Payment Program DDAP-III Module 3 - Calculating DDAP-III Benefits

2. Estimated Base Year Production Determined based on NASS data: • For milk production per cow • In the State in where disaster county is located • During the applicable base period. Module 3 - Calculating DDAP-III Benefits

3. Calculating Base Year Production Base year production is calculated by taking: • average number of cows in the operation’s herd during the applicable base period Multiplied by (X) • Applicable NASS State average Module 3 - Calculating DDAP-III Benefits

4. Determination of Losses Losses are determined according to the following: Actual marketed production (-) Minus Estimated base year production (=) Equals Loss Module 3 - Calculating DDAP-III Benefits

5. Loss Adjustments COC may make adjustments to production losses to the extent the reduction in production is: • Not certified by producer to be disaster-related • Determined by FSA to not be disaster-related Module 3 - Calculating DDAP-III Benefits

6. Loss Adjustment Calculation Production adjustments are calculated by: Determining number of ineligible cows per month (x) Multiplied by Milk produced per cow according to NASS data (=) Equals production adjustment If NASS data for State is unavailable, the annual State average will be divided by 12 for a monthly value Module 3 - Calculating DDAP-III Benefits

7. Loss Adjustment for Dairy’s No Longer in Business • Dairies that do not resume operation during the applicable claim period are only eligible for benefits through the end of the last month the operation commercially marketed milk. • Production for the average number of cows for ineligible months must be: • Adjusted from the estimated base production to not calculate as a loss • Recorded on FSA-747, Part D, Item 8 Module 3 - Calculating DDAP-III Benefits

8. Example of Adjustment for Dairies No Longer in Business ABC Dairy operation went out of business in Sep 05 after the hurricane. The operation maintained an average of 100 cows during 2005. An entry of 100 should be made in Part D item 8 for the months of Oct thru Dec to account for the production from those cows that will be subtracted from the calculated loss. 100 100 100 Module 3 - Calculating DDAP-III Benefits

9. Payment Rates • Payment rates for production losses are based on the average mailbox milk price according to the applicable State Marketing Orders where the eligible disaster county is located, during the eligible period. • Payment rates for unregulated States have been determined based on a contiguous or nearby State’s mailbox price Module 3 - Calculating DDAP-III Benefits

10. Calculating Payment Calculated by taking: The applicable payment rate (x) Multiplied by Dairy operations total eligible loss (=) Equals Loss quantity (-) minus • Production adjustments • Amounts received for the same loss from other DDAP programs for the same period Module 3 - Calculating DDAP-III Benefits

11. Determining Payment Method If at the conclusion of signup the total value of eligible losses: • doesNOTexceed the available funding, less any reserve payments will be issued at the maximum payment rate. • exceeds the available funding at the maximum payment rates, payments will be made according to an alternative payment method. Module 3 - Calculating DDAP-III Benefits

12. Alternative Payment Method DDAP-III benefits will be based on a 20% loss threshold of the total estimated base period production for each applicable claim period. Module 3 - Calculating DDAP-III Benefits

13. Loss Threshold Example 620,000 (total est. base period production) -485,000 (actual marketed production) 135,000 (total eligible loss) 620,000 x 20% = 124,000 135,000 -124,000 = 11,000 Calculation results in losses equal to or less than 20% paid at a factored rate Calculation results in losses above 20% paid at maximum payment rate Module 3 - Calculating DDAP-III Benefits

14. 95 Percent Cap • Total assistance may not exceed 95% of what the value of the production would have been in the absence of a loss. • Total assistance includes: Example • DDAP-III payment $19,488 + + • Value of production not lost $277,600 $297,088 Module 3 - Calculating DDAP-III Benefits

15. 95 Percent Cap Calculation 95% cap is calculated by multiplying: Example • Operation’s cows, times 100 cows • Annual NASS for State, times 21,404/cow (CA) • Mailbox price, times $0.1388 (CA/05) • 95 percent $282,233 Module 3 - Calculating DDAP-III Benefits

16. Applying the 95% Cap Example • Total calculated assistance $297,088 (DDAP-III payment + Production) • 95% Cap $282,233 • Amount above cap $14,855 Module 3 - Calculating DDAP-III Benefits

17. Net Payment After 95% Cap Example • DDAP-III Payment $19,488 • Exceeds cap - 14,855 • Net Payment Due $4,633 Module 3 - Calculating DDAP-III Benefits

18. APPLICABLE: Offset Assignment Withholding PPI Direct deposit NOT APPLICABLE: Gross revenue Production limit Advance payment Payment Provisions Module 3 - Calculating DDAP-III Benefits