Demand for milk has evaporated by almost half, a dairy specialist said
By Diego Flammini
American dairy producers are having to dispose of perfectly good milk because of a lack of demand during the coronavirus pandemic.
In Wisconsin, for example, some dairy farmers are being advised to dump milk.
Jason Leedle milks about 480 cows in Lake Geneva, Wis. and received a call from Dairy Farmers of America advising him to start disposing of his milk.
“It’s just gut-wrenching,” he told Reuters on April 3. “All I can see is that line going down the drain.”
Leedle estimates he’s dumped almost 5,000 gallons of milk.
And in Arizona, dairy farmers are dumping about 125,000 gallons of milk each day.
“We have so much milk that doesn’t have nowhere to go so we’re dumping it down the drain,” Bill Kerr, chairman of Arizona Milk Producers, told Fox 10 Phoenix on Sunday.
The coronavirus outbreak has wiped away a large portion of domestic and international demand.
Most of that demand comes from the restaurant sector, said Marin Bozic, an ag policy specialist from the University of Minnesota who specializes in dairy.
“About 30 per cent of U.S. dairy production was going to the food services sector, and that demand has all but vanished,” he told Farms.com. “In addition, there are signs that exports have been slowing down as well, and exports represent about another 15 per cent of milk production.
“Between those two sectors you have a huge demand destruction virtually overnight.”
Markets have seen a surge in retail demand, but it won’t be enough to make up for the other market losses. There’s also a domino effect where cold storage facilities and warehouses are almost at capacity, Bozic added.
Dairy prices are at a point the industry hasn’t seen in many years.
The prices during the pandemic are similar to what dairy farmers received during the 2009 financial crisis, Bozic said.
“Class IV milk, the milk that’s used to make butter and powder, prices from April to July are between US$11 and US$11.50 (per cwt),” he said. “You don’t really reach US$16 until September of 2021. For comparison, price of production is around US$15 to US$17.”
The Trump administration has pledged money to the ag sector in its COVID-19 response plan.
In its US$2-trillion stimulus package, about US$9.5 billion will be used to support a group of producers including dairy farmers. And the Commodity Credit Corporation was replenished with US$14 billion to help it administer programs like Dairy Margin Coverage.
Between Dairy Margin Coverage, a Farm Bill program, and Dairy Revenue Protection, a private insurance program, total indemnities could be almost US$1.5 billion, Bozic said.
But this assistance still may not be enough for some producers, he added.
“Between those two programs you still have about 60 per cent of milk without any protection,” he said. “There will be monumental losses and probably thousands of producers out of business in the United States.”