Count dairies among the many businesses throttled by the coronavirus shutdown.
Milk prices have plunged by more than $3 per hundredweight since late February as demand from schools, restaurants and exports have dried up. Dairy farmers are dumping milk in several parts of the country.
“Our co-op hasn’t dumped any in Minnesota, but I’m a council person for the central area which is basically the Midwest, and we’re dumping about 30 to 40 loads a day,” said Charles Krause, a dairy farmer near Buffalo with 250 cows.
A truckload of milk contains about 6,000 gallons, and across the U.S., Krause’s co-op, Dairy Farmers of America, is dumping 175 truckloads, or about 1 million gallons, per day, he said.
An initial surge of pandemic-driven milk-buying at grocery stores has subsided and consumption has gone back to normal. The reality of too much milk with not enough demand is again grinding away at dairy farmers, as it has for several years.
Schools typically buy 8% of the milk produced in the U.S., said Lucas Sjostrom, director of the trade group known simply as Minnesota Milk. Exports account for roughly another 15%. The big buyer is cheese producers, who use up about two-thirds of the nation’s milk production, and the food-service industry is the biggest buyer of that cheese.
“Everything that’s closed so far is what uses our processed cheese,” Sjostrom said.
The National Milk Producers Federation estimates supply outstrips demand by 10%, “a gap that could widen as supply increases to its seasonal peak and as ‘shelter in place’ conditions endure.”
Several processing plants nationally are “curtailing or ceasing operations,” the federation said.
The shift from wholesale to retail end-users has been a challenge for the dairy industry. Just as the supply chain for pork is set up to produce 20-pound boxes for restaurants who are no longer buying anything, so the supply chain for milk is set up to produce half-pint cartons for elementary schools that have no students.
Farmers get their milk checks on the first of the month, and the April 1 checks were “moderately bad or moderately good,” Sjostrom said. He expects the checks on May 1 to be very bad.
“The dairy farms have not felt the full effect yet in Minnesota,” he said.
The national federation last week asked the federal government to “use every financial tool in its arsenal to bring balance to the dairy industry as quickly as possible,” including forgivable loans and $3 per hundredweight payments to dairy farmers for the first 90% of their milk if they cut production by 10% from a March 2020 baseline.
The National Milk Producers also asked the government to purchase milk for food banks to drive demand and eliminate all milk restrictions in the WIC program through calendar year 2020.
Krause, the dairyman near Buffalo who farms with his son and father, said smaller cooperatives might not survive the current demand shock.
“If you’re a small co-op with one plant or three small plants, and your key customer stops buying for two months, what are you going to do with all that product?” he asked. “You have to keep paying farmers.”
Farmers are getting compensated for the milk they have to dump, Krause said, but dairy farms were already winking out of existence across Minnesota and Wisconsin in 2019 before prices rose at the end of the year. Those gains in milk prices have been erased and then some.
“I don’t want to complain too much, because everybody’s suffering,” Krause said. “But that’s the dairy part of it.”
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Adam Belz • 612-673-4405 • Twitter: @adambelz