Ag groups call for USDA action during milk dumping crisis
With some Wisconsin producers dumping milk as of April 1, an online search of "dumping milk" shows dairy producers across the country - Arizona, Vermont, New York and Indiana, all facing the same challenges from COVID-19.
Ag group leaders representing dairy producers around Wisconsin sent a letter to U.S. Ag Secretary Sonny Perdue, urging his agency to use the extensive purchasing power afforded by the CARES Act to bring "much relief to the stressed American dairy industry".
Groups representing farmers include: Wisconsin Cheese Makers Association; Edge Dairy Farmer Cooperative; Dairy Business Association; Cooperative Network; Wisconsin Farm Bureau Federation; Professional Dairy Producers of Wisconsin and Wisconsin Farmers Union.
"With 80 percent of Americans under order to shelter in their homes, hundreds of thousands of restaurants, schools, and other food service outlets have closed or significantly reduced offerings, which means cheese and butter manufacturers have lost their largest market," the group wrote. "While retail sales have increased in past weeks, they are now leveling, and orders are slowing. Dairy manufacturers and processors also have seen their export markets decimated."
The group also pointed out that many circumstances faced by farmers are simply beyond their control at this critical time.
"Commodity dairy prices have plummeted and will result in milk prices lower than many farms can handle to sustain long-term viability," the group said. "Direct relief to dairy farmers and a substantial purchase of dairy commodities by USDA can ensure our industry will remain fiscally able to function in its primary role of feeding the nation and the world."
The USDA was asked to consider purchases of nonfat dry milk, butter, cheddar styles, mozzarella, and other Italian-styles of cheese, both in bulk formats and in formats purposed for use by restaurants and food service vendors.
"We are also asking USDA to look at the different means available to the department to make farmers whole for the milk they have produced, but needed to dispose, or for which they received drastically reduced payments," the group stated.
John Umhoefer, Executive Director, Cheese Makers Association; Tim Trotter, Executive Director, Dairy Business Association and Edge Dairy Farmer Cooperative and Gordon Speirs, Farmer/Owner of Shiloh Dairy in Brillion, Wisconsin shared what they knew about the crisis during a media call on April 2.
With schools and universities closed and restaurants and other food service outlets reduced in sales, the cheese industry lost a great share of the largest market as nearly half of all cheese sold in the U. S. moves through food service channels, Umhoefer explained. At the same time, cows are producing more with the spring flush and dairy exports are falling worldwide and dairy productivity is challenged with the need to keep the workforce safe.
"The dairy industry has an unprecedented challenge to find markets for milk," said Umhoefer. "As the dairy industry works around the clock to balance the supply of milk with demands, we look to the federal government to immediately begin to purchase dairy products to offer to food pantries and school feeding programs so that dairy farms can continue to deliver fresh milk and we can help America's food insecure family in these challenging times."
The crisis is unprecedented, Umhoefer added. Cheesemakers saw sales decline after 9/11 and with the banking crisis in 2009, but the coronavirus pandemic has caused more than half the restaurants in the United States to close or operate at reduced levels.
"That has never happened before and I think all commodities, including dairy, are feeling the pain of all this lost market share," said Umhoefer.
Retail demand for dairy products was strong in the last couple of weeks but has leveled off and returned to a more normal pace, Umhoefer explained. Some cheese plants had been operating at full throttle, trying to keep up with demand. But plants in Wisconsin with an emphasis on the food service markets have throttled back to less work days or less shifts worked. The food service market is "really a different pathway to the market, different products, different distribution."
As stories of farmers dumping milk in Wisconsin and in the Midwest hit social media, people wondered why milk was being poured down the drain when a week or so ago grocery story shelves in the milk aisle were bare.
Bottling plants around the country have been working at full capacity and store shelves are being replenished. Umhoefer stressed that there is not a shortage of milk in the country, but there are challenges in the transportation and distribution system.
"You may see times when milk does not reach the market at the beginning of the day, at a given store, but we do not have a shortage of dairy products available," said Umhoefer said. "We did have some buying that exceeded a daily purchase by stores. We did have a real upturn in buying in the last two weeks, but that appears to have settled out so people should be seeing milk in the store."
Many dairy farmers were looking at 2020 as a rebound year. After seeing depressed prices for the last several years, this year was to be the rebound year for farmers to see their net worth statements on their balance sheets look better, hopefully operating at a profit, Trotter said.
"Because of this devastating coronavirus, now we see even more devastating outcomes for dairy farmers," said Trotter.
While farmers are preparing to put crops in the field and are working to provide safe conditions for their staff to continue the hard work they do every day, they also face the "grim reality of realizing that the financial sustainability of their business is going to be jeopardized," Trotter said. "This is why we took swift action yesterday, asking the Secretary of Agriculture to step in very quickly, and give farmers that certainty that the government is going to be behind them, like everyone else in the in the dairy supply chain, because this, we're all in this together."
Trotter said he's confident dairy processors and farmers can work together to get through this challenge, but government support and solutions are needed. Before COVID-19, there were one in eight households with insufficient food supply, Trotter pointed out. With unemployment growing every day, there are fewer people who will have funds to buy products to sustain their lives.
"This is going to get worse and we really believe some of the dairy products that we have in storage could play a vital role in that, and also help the nation's farmers," Trotter said.
Trotter said it's important for farmers to be in constant contact with their processors and talking about "what if" scenarios to try and find common ground and hopefully "manage their way through this."
"The only way you're going to do it is to work together," Trotter added. "The last thing we don't want is farmers and processors not talking and pointing fingers because that doesn't solve the problem and we really see a good attitude so far with the farmers reaching out and having meaningful conversations with their processors."
In the last number of weeks, Speirs said farmers have lost 25% of their income through crashed markets "and now we have to face the reality of having to dump milk on top of that."
At this point, farmers who have been asked to dump milk are being paid for the lost. Golden E Dairy in West Bend was asked to dump milk and Dairy Farmers of America (DFA), the cooperative the dairy belongs to, has agreed to pay them for the milk they are dumping. However, it is unclear, if there will be a time when that is not the case.
According to Speirs and Umhoefer, some of the first farmers asked to dump milk are being paid by the processor, but another practice that may come into play is sharing the burden across a group of farms that serve a plant by debiting the milk dumped against all producers with the same processor.
Farm groups asked the USDA to step in and categorize the losses and get funds to producers, Umhoefer added.
Trotter said they are hoping to get an urgent response from the USDA, but "we want this to be right. We need it now, but yet, we need a good program so we need to work with the administration to make sure we get it right," said Trotter. "If we don't get it right now, it will be harder to correct and we don't want to make a bad situation worse."
Speirs believes the burden of economic loss resulting from COVID-19 should be shared throughout the dairy industry and not "picking winners or losers from one area or the other." Since the virus has caused a nationwide problem in the dairy industry, Speirs' believes the cost of the milk dumps should be debited "across the nation's milk supply so all farmers are sharing in the loss, of the few producers who have had to dump milk.
"Dairy farming is a 24/7 responsibility," Speirs added. "We're not the kind of factory that would just turn off the lights and say we're going to start this up again in three or four weeks when the world gets back online, or whatever that date is when the economy gets kick started again."
Colleen Kottke with the Wisconsin State Farmer and Rick Barrett with the Milwaukee Journal Sentinel contributed to this story.