Restaurants are starting to recover, many grocery stores have stopped limiting dairy product purchases and it appears most states have reopened following the COVID-19 pandemic. However, the dairy industry has and will continue to recuperate from the impact of the virus.
Farm Credit recently held a webinar about COVID-19’s effects on the dairy industry, which included financial professionals and dairy farmers with their insights on the pandemic.
Amanda Durow, vice president and dairy specialist at CoBank, said the coronavirus caused a unique dilemma for the dairy industry.
“On the same day you saw headlines that dairy farms were dumping tanker loads of milk, grocery stores were limiting consumers with how many gallons of milk they could buy,” she said. “Dumping milk is not a new thing, and it’s being dumped at some level every month due to milk’s seasonal nature and the capacity of processing plants. However, the amount of milk dumped in April 2020 was unprecedented.”
Ben Gingg is managing partner on a 4,000-cow and crop-farming operation called Triple G Dairy in Buckeye, Arizona. Unfortunately Triple G Dairy was in one of the regions that was forced to dump milk.
“In our co-op, the first two weeks of April, we dumped close to 20 million pounds of milk and by-products,” he said. “The big bottleneck in our situation was our cheese customer decreased their production without the demand from restaurants. We suddenly had close to 2 million pounds on our hands that we couldn’t run through our dryers.”
According to the U.S. Department of Agriculture, dairy producers dumped over 200 million pounds of milk that month. Although not all dairymen were forced to dump milk, the impact of this wasted dairy was felt across the industry.
John Knopf of Fa-Ba Farms in western New York, who sells 15 million pounds of milk a year from a 575-cow dairy and also raises 800 acres of forage crops, said although he was never forced to dump milk, he has felt the decrease in price.
“Most dairy producers had a COVID deduction in their main milk check, with some seeing a $2 per hundredweight decrease,” Durow said. “Furthermore, many cooperatives and processors are asking their dairy producers to cut milk production, which means dairy producers are being asked to voluntarily cut their paycheck up to 15%.”
Gingg, a member of a milk cooperative, was asked to cut back 10% in production in April when the coronavirus was in full swing.
Greg Sabolik, a fourth generation dairy farmer at Bred and Butter Farms, a 500-cow dairy and 1,600-acre crop-farming operation in west central Minnesota, said although his cooperative never gave a direct order to their members to reduce their milk production, he admits the future was uncertain in the middle of the pandemic.
“In the heat of COVID-19, I don’t think any of us knew what was going to happen tomorrow morning, much less a week from now,” Sabolik said. “We’ve came out of this fairly unscathed economically, but take that with a grain of salt because May futures dropped over $7 from their high pre-COVID to where they closed.”
Where do we go from here?
If the pandemic demonstrated one thing, it was that the dairy industry has some short-comings when it comes to adapting and meeting unique market demands in a pinch.
“We shifted food consumption 50% at home and 50% at restaurants to 75% or more at home and 25% or less at restaurants in a very short period of time,” Durow explained. “This resulted in a vast number of food dollars being purchased at grocery stores. This had a dramatic effect on the dairy supply chain.”
According to Durow, grocery stores typically have a three-day food supply, so they were not prepared for panic buying like we saw in March and April, and the more consumers cleaned out the grocery shelves, the farther the dairy industry fell behind as processors scrambled to meet the demand shift.
However, export markets were a saving grace during the pandemic. Durow said the amount of milk the U.S. exports is equivalent to one day a week of a dairy cow’s milk production.
“If we didn’t have exports we would dump seven times the amount of milk we dumped in April,” she added.
Durow said she knew of only one material dairy plant shut down due to COVID-19 outbreak. She said this is because milk is liquid and processed through stainless steel and human hands never touch it. However, Durow acknowledged the dairy industry did see many plants reduce capacity and output resulting in the milk dumps.
“National Milk has estimated the dairy industry is going to lose $9 billion in 2020 due to the coronavirus, and dairy producers are also impacted by the losses in the beef market as they sell cull cows and young stock.”
This devastating prediction is especially disheartening considering the dairy industry was bouncing back last year. Knopf believes the damage will amount to a lot more than losses this year.
“In my personal opinion, this has a three-year negative impact,” Knopf said. “That’s a wild guess, and it’s hard to determine at this point because about half the supply chain goes through institutions and food service and it’s hard to predict how fast and at what level that will recover. I think we’ve put a tourniquet on what’s happening right now, but I think it’s going to have a lasting damage. The dairy industry is not going to go away, but it certainly might look a lot different in the future. I’m predicting a lot of retooling and innovation will come to the dairy industry as a result of the pandemic.”
Sabolik hopes a more nimble, agile and streamlined food system will emerge from the pandemic to better deliver food to consumers. “No farmer wants to see food wasted, regardless of whether we are being paid for it or not,” he said. “There’s a lot of passion, labor and heart going into it and we want to get it to the people who need it. Hopefully we can develop a system so that this doesn’t happen again.”
Lacey Newlin can be reached at 620-227-1871 or email@example.com.