On dairies across the country, the scene six months ago is still fresh in farmers’ minds. Farm after farm was forced to dump perfectly good milk, all because it didn’t have a home. At the same time, shoppers were being limited on the number of gallons they could purchase at the store.
Today, the picture isn’t perfect, but it has drastically improved.
“Things are a lot more stable,” says Paul Hartman, a dairy farmer in Pennsylvania. “We’re not feeling the pressure like we were.”
Dairy farmers like Hartman were feeling pressure as the chaos in March and April caused farmers to like Hartman to dump milk for the first time ever.
“It’s getting better,” he says. “The milk price looked good on the computer, but then when we got our milk check, the negative PPD had a big effect on us.”
The questions flooding in this spring weren’t just about how the dairy industry would pivot after a 50% reduction in restaurant demand, but how farmers would financially recover.
“The price of milk when COVID hit was trending around 18 to $20/cwt,” says Chris Noble, a dairy farmer in New York. “When COVID hit, prices came down to about $10 to $11. It has since come back up, but it’s sort of on this roller coaster.”
“The federal stimulus money has been a huge benefit for dairy farmers all over the country,” says Hartman. “Here in Pennsylvania, our state has also had some programs to give us money for that dump milk. So, that was good.”
While things have improved, the demand picture from restaurants hasn’t fully recovered
“With the takeout, the quick serve restaurants and the eating outdoors, we’ve seen an increase in what the restaurants are doing, we’ve seen that come back significantly, but we’re not back to where we were by any means,” says Michael Dykes, CEO of International Dairy Foods Association (IDFA).
IDFA represents 90% of the milk, cheese, yogurt and other dairy products marketed in the U.S. He says there’s a major reason the dairy industry was able to pivot so quickly when restaurant demand dropped, while retail needs grew.
“The producers realized that overnight we saw half of our market evaporate as the food service side collapsed,” says Dykes. “We were in a situation when we last spoke where we had about 10% of our milk supply didn’t have a home and we were looking at about a $10 billion loss. Dairy producers, milk handlers and farmer coops came together and reduced supply.”
Dykes says working on a unified front allowed some processors to start delivering milk directly to retailers, a segment of demand that’s still seeing a positive trend.
“We are seeing about a 10% increase in retail sales across all categories, and for dairy that’s been sustained,” adds Dykes.
As more people are eating breakfast, lunch and dinner at home, fluid milk sales are making a comeback. Now, dairy farmers know they need to cater to a growing demand.
“I think over long-term, we’re going to be shifting to value added milk products, the extended shelf life products that that people can buy off the shelf and not have to throw in their fridge when they get home, as well as can be shipped,” says Noble. “Those types of products are meeting a consumer demand, so I think we’re basking in the glory of the old days of fluid milk demand. I think over time, as an industry, we’re shifting to other products that are going to meet consumer demand.”
The growing hunger for dairy doesn’t just sit within the U.S borders, Dykes says dairy exports are also thriving.
“We’ve seen a 14% increase in exports, year over year, compared to this time last year,” says Dykes. “That’s both 14% increase in volume and 14% increase in value.”
The export interest includes a rebound from some of the United States’ biggest buyers.
“The good news is that the Chinese made the decision to continue removing the retaliatory tariffs on whey, so we’re competitive [with prices],” says former Secretary of Agriculture Tom Vilsack, who is now CEO of the U.S. Dairy Export Council.
The growing appetite for products like whey is helping boost demand abroad, and a welcome sign for those in the dairy business.
“One day’s milking out of every week goes to the export market,” says Dkyes.
From athletes, to families finding ways to spend more time at home, it seems the nostalgic food and beverage is finding a way to shine.
“If I look across agriculture, I think our dairy industry has done, as well as any if not better than most,” says Dykes.
From direct payments to producers and help for processors in the HEROES Act, to USDA’s Farmers to Families Food Boxes loaded with dairy, the dairy supply chain is still in the spotlight, even as the future of domestic demand is still unknown.
“Uncertainty is still there,” says Hartman. “I think a lot of our prices are being propped up by by the government, with the purchases of food products, and since restaurants are still shut down, the uncertainty is still there.”
Hartman and others are wading through the pandemic with increased caution.
“We’re being cautious, because what dairy farmers do when they have a half decent prices, they make too much milk,” says Hartman. “Then things kind of collapse and I feel like this price we have may be a little artificial, so I would be a little cautious instead of aggressive right now.”
As dairy farmers look at better prices, there’s hope the final few months of 2020 continue to flush out better prices and supply chain continues to find new ways to thrive.
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