Grocery related health concerns, food service outlet closings and heightened milk production during the spring flush put dairy producers in the eye of the perfect storm. While the drama of seeing milk drained from lines of tanker trucks can make even the most wasteful of grocery shoppers cringe, the real story behind milk dumping is a concept familiar to producers of any agricultural commodity.
“With the uncertainty and unprecedented situation our nation, and world, is facing due to COVID-19, we are seeing demand for dairy products change,” said Kristen Coady, vice president of corporate communications for Dairy Farmers of America. “While we initially saw increased demand at grocery stores as consumers stocked up on many products, like dairy, in anticipation of shelter-in-place orders, the retail demand has now dropped.”
Similar to the situation in declining beef markets, dropping milk demand in this scenario is driven more by the loss of food service outlets like restaurants, but especially schools, where high volumes of milk would typically be distributed every day.
Limiting on dairy products in grocery stores could certainly be a contributing factor in some areas of the U.S., but like many commodity producers are finding, retail grocery outlets are a small piece in a complex food distribution supply chain.
After the initial bump in demand at grocery stores as consumers stocked up to settle in for stay at home orders, milk prices eroded by nearly 30 percent — a decrease in dollars few producers could afford. In response to that decline, some milk cooperatives requested on-farm reduction in milk supplies until the market sees increased demand or new outlets are found for the product.
“These sudden changes in demand, are resulting in uncertainty, and are forcing some dairy manufacturers to cut or change production schedules or build inventories, Coady said. “Due to the excess milk and plants already operating at capacity, there is more milk right now than space available in processing plants. This, in combination with the perishable nature of our product, has resulted in a need to dispose of raw milk on farms, as a last resort.”
Dumping milk or pooling of dumped milk to preserve a stable market price is not a new phenomenon, in 2015 and 2016 the United States Department of Agriculture expanded milk dumping options for producers to help preserve the dairy industry amid failing milk prices.
At this time, DFA has no record of requesting milk dumping in Southeast Kansas, Southwest Missouri or Arkansas. Minimal milk disposal did occur at some DFA affiliated dairies in Oklahoma earlier this month.
USDA’s Risk Management Agency has programs in place to help ensure dairy producers aren’t penalized for dumping milk at the request of cooperatives.
As of April 10, dumped milk will count toward milk marketings for the Dairy Revenue Production or for Livestock Gross Margin for Dairy programs.
For those programs, producers will still have to provide verification from the cooperative or milk handler verifying the quantity of milk dumped.
Many dairy producers in milk dumping scenarios receive payment for the dumped milk, but obviously prices and percentages paid vary by cooperative and by region.
The big question for most farmers aware of the situation with their dairy producing neighbors is — How can we help? The simple answer is to purchase dairy products at local grocery outlets and cook with more dairy products at home.
“Honestly, one of the best ways that we could all help dairy farmers is to just add an ounce of extra cheese to your pizza, taco or sandwich or a little more milk to your morning coffee,” said Kim Obrien, DFA media relations coordinator. “These small changes could help with the added surplus that we’re experiencing right now.”
Additionally, consumers can communicate with stores limiting purchase quantities on dairy items like milk and ask that the limits be removed.
“Going forward, retailers should not be setting limits on dairy purchases – our supply chain is strong and there is no milk shortage,” Obrien said. If you see a limit at your local grocery, reach out to the store manager and express your disappointment and let them know that limits are not necessary when there is no milk shortage.”