Coronavirus has hit Wisconsin dairy farms especially hard -- some farmers may even have to dump milk
Coronavirus is delivering a blow to Wisconsin agriculture at the worst possible time as milk prices that were poised for a rebound are once again sinking, export markets are threatened by global trade unrest, and some farms may not make it through the spring.
Dairy has been hit the hardest from the loss of business from restaurants, schools and the hospitality industry. About one-third of Wisconsin dairy products, mostly cheese, are sold in the food-service trade.
“The coronavirus outbreak has caused milk prices to drop down to unprofitable levels this spring, right when we need money to buy supplies for the spring planting season,” said dairy farmer John Rettler of Neosho, president of FarmFirst Dairy Cooperative in Madison.
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Dairy farmers, whose product is especially perishable, are worried about processing plants closing or curbing production, forcing them to dump milk if there’s no other buyer.
Foremost Farms, a Baraboo-based dairy cooperative, recently asked its members to reduce the amount of milk they produce, citing “the extreme nature of the coronavirus situation and the impact on the economy."
"We also need to be prepared for the scenarios that would require our members to dump milk … or dispose of (it) in some other manner,” the cooperative said in a letter to its membership.
In February, farmers’ milk prices were slowly returning to profitable levels after having been stuck in the basement for more than five years.
“Since the coronavirus pandemic began, all of that optimism has disappeared,” Rettler said. "Now, farmers are simply looking for ways to ensure their milk continues to get picked up in the coming weeks as the situation continues to play out."
From dairy barns to grain fields, farmers have endured a long stretch of low commodity prices, partly brought on by a glut in world production. About 820 Wisconsin dairy producers called it quits in 2019 alone, a rate of more than two per day, and the trend hasn’t slowed in recent months.
“I worry about additional heavy farm losses this year,” said Mark Stephenson, director of dairy policy analysis at University of Wisconsin-Madison.
Even as grocery stores rush to replenish shelves emptied from panic buying, the outlook for farmers this year has been darkened. Commodity prices on the Chicago Board of Trade slid when coronavirus began to pummel the world economy.
“Everyone is hopeful this won’t last beyond a few weeks. But if it lingers into the summer months there is no doubt that rural America will be adversely affected and there will be fewer farmers still in business,” said Jeff Lyon, general manager of FarmFirst Dairy Cooperative.
Billions in stimulus money could save farms
The $2 trillion economic stimulus package passed by Congress included $14 billion for supporting farm income and crop prices and $9.5 billion for specific producers including dairy and livestock farmers. Yet it’s still unknown how the money would be distributed and how quickly farmers would get it.
“It is hard to have perspective when the rules of how things work are continuously shifting under your feet,” said Kevin Bernhardt, a dairy economist at University of Wisconsin-Platteville.
"I have heard some call the $9.5 billion a slush fund," because how it will be spent is unclear, said Aaron Stauffacher, associate director of government affairs for Edge Dairy Farmer Cooperative, based in Green Bay.
Still, the stimulus package might be what keeps some farmers in business.
“Markets are evaporating as restaurants and schools shutter and exports stall. Farm labor is in short supply with borders closing and falling commodity prices are decimating farm income. Without this important support, many farms won’t be able to last the summer,” said Darin Von Ruden, a dairy farmer from Westby and president of the trade group Wisconsin Farmers Union.
But the stimulus package won’t resolve long-term issues such as increased global competition and trade wars that may arise from countries closing their borders to curb the spread of COVID-19.
The global pandemic has sent a shock wave throughout agriculture.
“This is exacerbating what already had shaped up to be a challenging year,” said Michael Slattery, a Manitowoc County grain farmer and economic adviser for Wisconsin Farmers Union.
Grain farmers are hurting as plummeting demand for gasoline reduces the need for ethanol, a fuel additive made from corn. Analysts say it’s only a matter of time before ethanol plants in the Upper Midwest slash production or close.
“This is crushing refineries and ethanol producers,” said Alex Breitinger, a commodities futures broker in Indiana.
U.S. farmers face “enormous volatility as markets and supply chains rapidly react to changes,” according to the American Farm Bureau Federation.
The price of soybeans, a high-value export product, peaked at $9.44 per bushel in January as China, a major importer of Wisconsin soybeans, tripled purchases in late 2019 and early this year. But now orders are at risk as China’s economy hasn’t yet recovered from coronavirus and competition from soybean farmers in Brazil remains strong.
This year will be the first time Brazil claims the title of being the world’s largest corn exporter, with other South American countries also ramping up production in an effort to compete against the United States.
China announced it would buy $40 billion in U.S. agriculture products. “But it depends on getting a competitive market price for things like soybeans,” Slattery said.
Current corn prices are "extremely disastrous" for grain farmers, he added.
Some bright spots in agriculture
There have been some encouraging signs in U.S. agriculture exports. Pork sales to China, for instance, may rise significantly as China’s hog industry remains devastated by African Swine Fever. Sales of beef, dairy and poultry may benefit from China’s efforts to address serious malnutrition in the country’s vast rural areas.
Jim Monroe, the National Pork Producers Council vice president of communications, said the federal aid bill will provide needed relief for pork producers reeling from two tough years for exports and who now have significant losses from COVID-19’s spread across the nation and world.
“We’re very pleased there are provisions to provide much-needed relief to U.S. pork producers,” Monroe said. “This is an important lifeline. Our farmers are committed to keeping kitchens stocked with nutritious pork, but they need support.”
Wheat prices hit a near one-year high on Friday after Russia announced it was going to limit grain exports through June due to concerns that the coronavirus was creating food shortages in Russia.
Russia is the world’s largest wheat exporter. Limiting its supply will push more foreign demand to other major exporters like the United States, Canada and France, Breitinger said in an email to clients.
In the U.S., sales of milk as a beverage have surged as people spend more time at home rather than eating out. The fluid-milk plants have been running at maximum capacity, said Stephenson with UW-Madison.
The dairy industry has ramped up sanitation efforts.
“Hopefully, social distancing will make a significant difference in keeping processing plant employees, dairy farmers and their employees healthy so they can keep their businesses up and running,” said Lyon with FarmFirst Dairy Cooperative.
While some dairy plants have urged farmers to curb milk production, a Dodge County company, “Just The Cheese,” has been running at full tilt to meet the demand for shelf-stable cheese snacks.
Shortly after the COVID-19 outbreak in the U.S., the company’s largest food-service customer canceled orders for five truckloads of cheese snacks. But that was offset by two retail customers tripling their orders.
About 70% of the company’s milk comes from dairy farms within 30 miles of the processing plant in Reeseville, a town of roughly 500 people.
“We’re doing everything we can to support farmers who send us milk. Turning it away essentially means those farmers would have to dump it and lose that revenue,” said David Scharfman, CEO of the family-run business.
One of the company’s largest customers is Amazon, a big plus now as shelter-at-home consumers across the U.S. order groceries and comfort food online.
“By any measure now, we are extremely fortunate, and we don’t take that for granted because it could all disappear tomorrow. One day at a time, we keep counting our blessings,” Scharfman said.