Across America, dairy farmers have dumped countless gallons of fresh,
perfectly usable milk because there is no one to buy it.
The shelter in place order is given by governments around the country in
response to the Corona virus pandemic have shuttered big customers such as
restaurants and schools and kept people at home.
About 50 percent of the milk produced in the United States goes to
restaurants and other food service operations.
And farmers are literally having to pour the milk on their fields, dump it
somewhere because there's no place to take it.
And at the same time, these farmers have got bills and they're how they're
going to come out of this and survive.
I don't know. Jim Mulheron, president and CEO of an NPF, said on April
14th that dairy's fortunes have been especially grim.
He called for more aid to the dairy industry, saying that without it, the
Corona virus crisis could be the demise of producers across the country.
Grocery stores are still open and people are still buying milk there.
In fact, early in the pandemic, supplies had run out as people had stocked
up. But the hidden demand from the virus is still battered.
America's dairy farmers, many of whom were already in a precarious
position before the virus struck the United States.
America's dairy farmers face a range of challenges.
Milk prices had been low in the five years leading up to 2020, and many
farmers were already struggling.
Texas dairy processor Dean Foods filed for bankruptcy in late 2019.
That company sells products under 50 different regional brands, including
Land O'Lakes, Berkeley Farms and true moo milk.
Consumption has also been on a long term downward slide since the latter
half of the 20th century due to changing eating habits and demographic
changes across the United States.
2020 was supposed to be a better year for dairy farmers, but that has all
gone down the drain.
Humans have been drinking milk for thousands of years.
But not everyone can drink milk for a substantial portion of human history.
Very few humans would have been able to digest the stuff at all.
Evidence from milk drinking dates back to the period of the Neolithic or
agricultural revolution, when humans began farming crops and raising
livestock. About 10000 to 12000 years ago.
It is difficult to pinpoint exactly when.
But as agriculture took off over the next few millennia, some people began
consuming milk. All mammals, including humans, can digest mother's milk as
infants. But the levels of the enzymes that make this possible.
Chiefly the enzyme lactase tended to drop dramatically as infants are
weaned. Several thousand years ago, evidence suggests that some people
begin to carry genetic mutations that allowed them to continue producing,
lactase and digest milk into adulthood.
Teams of scientists have found evidence of milk consumption in Neolithic
populations in Britain, dating back roughly six thousand years.
And in Central Europe, dating back about seven thousand five hundred
years, milk became an essential food product and source of nutrition in
many cultures around the world, especially in Europe.
But many, many other people around the world still have trouble digesting
milk. About 65 percent of the global population today have some degree of
lactose intolerance in adulthood.
For most of its history, milk and dairy production, like much of
agriculture, was small scale.
But during the 20th century, dramatic changes began to take place in
industrialized countries that drastically changed the way milk was
produced, sold and consumed.
In the 1950s, a farm in the United States with 100 cows was considered
large. But by 1997, there were many farms, especially in the western U.S.,
with 5000 cows.
As of 2020, U.S.
dairy farms average about 234 cows apiece from 1997 to 2017.
The total number of U.S.
dairy farms decreased by more than half.
While the number of dairy cows per farm more than doubled.
Changes in both law and in business practices also altered the industry.
Policies, such as the Volstead Act of 1922 allowed farmers to form
cooperatives to bargain collectively with milk processors without risking
the violation of anti-trust laws.
Over time, cooperatives made up of collections of dairy producers became
an ever more powerful force in the industry.
Cooperatives handle about 85 percent of the milk produced in the United
States, according to numbers published by the USDA in 2017.
And the four largest dairy cooperatives market 41.3 percent of all milk
produced by U.S. farmers.
The largest co-operative dairy farmers of America is owned by more than
13000 dairy farmers, representing 7500 dairy farms in 48 states.
In at least the last half century, the number of cooperatives has shrunk,
largely due to consolidation.
In 1964, there were one thousand two hundred forty four dairy cooperatives
in the U.S., but by 2017 there were just 118.
So the result is that we now have some large enterprises called
cooperatives that are really acting in the in their interest, the
interests of those who are in control of those Gore operatives rather than
in the interest of the members.
And so that's that's the contemporary problem.
Cooperatives have also begun to invest in parts of the dairy supply chain
that extend beyond marketing milk.
Most recently, the Dairy Farmers of America said it would buy the assets
of Dean Foods, a Texas based milk processor that declared bankruptcy in
late 2019.
Critics say owning a processing facility presents potential conflicts of
interest for a co-operative that is supposed to represent the interests of
milk producers who sell their product to processing plants.
In the past, cooperatives have also been accused of various
anti-competitive behaviors, such as price fixing and practices that
exclude nonmembers from markets.
During the latter half of the 20th century.
The dairy business also became more industrialized, with the development
of machines for breeding, milking, feeding and waste disposal to name a
few. Farms drifted away from raising and feeding cows on pastures toward a
newer model where animals were confined.
The way Americans bought milk also changed.
In 1950, half the milk sold in the U.S.
was delivered to the home in court sized jugs.
But by 1997, that share had declined to just two percent of the market,
with most of the rest being sold in gallon jugs at supermarkets.
During this time, milk was increasingly seen as a fixture on the American
table. It was drunk by the glass, sometimes mixed with chocolate, blended
with ice cream and poured into bowls filled with another classic American
staple. Breakfast cereal.
But over the last few decades, milk consumption has fallen.
There are a number of reasons typically cited for this, but one of the big
ones is competition from other beverages such as juices, sodas, energy
drinks, bottled water and other libations that now cram aisles in
supermarkets. Milks declining fortune has also been tied to the decline in
sales of breakfast cereals, which have seen their own competition from
other breakfast foods.
The dairy industry has mounted some famous campaigns to counteract falling
sales and to keep milk in the minds of Americans.
In 1993, the California Milk Processors Board began running another
campaign centered on the tagline "Got milk?" with a question mark.
There were humorous TV ads where people with mouths full of chocolate chip
cookies or peanut butter sandwiches found themselves grasping hopelessly
for a glass of milk.
There were also print ads featuring celebrities and famous athletes
donning a milk mustache.
The campaign was licensed to run nationally and lasted for two decades.
It was regarded in the advertising industry as one of the most iconic
campaigns in history.
But the charm of the Got Milk?
slogan could not stop the larger trend away from drinking milk.
Meanwhile, the industry has seen competition from dairy alternatives and a
small but highly visible movement urging people to quit dairy for either
health reasons or out of support for animal welfare.
Plant based alternatives made of nuts, legumes or grains are a small
portion of the market, but have grown in recent years.
From 2015 to 2019, sales of non-dairy milks rose 23 percent, according to
data from Nielsen, a firm the tracks the industry.
Plant based alternatives are still a small share of the market, only
around $2 billion over the past year versus about $12 billion for cows.
Milk trucking firm NPD Group said.
Consumption of bottled water has risen from 1.5 percent of all eating
occasions in 2001 to 7.3 percent in 2019.
Plant base is often given a little more credit for its growth than it
really should be deserving.
If you take a look at the size of the largest plant based beverage, which
is all. It isn't even as large right now as what the lactose free milk
market is supposed to be.
Imperatively, the sales are relatively small, so you see it being a
factor, but it hasn't been as big as some of those other macro factors.
Like you were like lower consumption of cereals.
The rise of bottled water and energy drinks.
Even people drinking more tea and coffee.
That's where milk has gone from.
Things were already not great for dairy farmers when reports began
surfacing in early April 2020 that farmers were dumping milk they could
not sell. Apart from a long term decline in milk drinking, the more
immediate threat to dairy farmers had been a run of several years of low
prices brought on by competition in the industry.
Milk prices can fluctuate, sometimes wildly.
Prices surged in 2014, in part because drops in supply from Australia and
New Zealand due to drought conditions created a surge in demand from Asia,
where dairy consumption has been steadily growing.
But the higher prices led farmers to boost production, which in turn
flooded the market and drove prices down.
Milk markets, as they are now, are inherently prone to oversupply, say
industry experts.
If prices rise, farmers will often put more cows into production to take
advantage of the higher price.
That, of course, boosts supply, which drives down prices.
But cows are animals with a lifespan of about five years on the average
dairy farm once a cow is in production.
It is hard to take it out if the market turns downward rapidly.
A farmer is left with an excess of cows making milk that has no buyer.
2015 brought another change that boosted global supply.
The European Union loosened restrictions on domestic milk production,
which have been put in place in 1983 to curb oversupply.
European farmers also wanted to export dairy to growing markets, including
Asia and Africa.
The ongoing trade war that gathered steam under the Trump administration
also damaged the dairy export market.
For example, China slapped tariffs on U.S.
dairy products. Commodity prices had started to bounce back in the second
half of 2019, and many in the industry were hopeful 2020 would improve
balance sheets. Then the virus struck, along with governments stay at home
orders and a subsequent serious decline in demand from the food service
industry, including restaurants, coffee shops, bakeries and other
businesses that together comprise about half the domestic demand for milk
and dairy products. The challenging period to begin with, there were
record prices and record revenues in 2014 and then you saw this five year
supply demand price slump.
2019 was the first year you saw a recovery in those prices.
And dairy farmers were looking forward to their first good year in more
than half a decade in 2020.
That did two things.
One, it meant that balance sheets were not quite healed from the last
crisis, making it making it difficult for dairy to respond to this one.
And it also meant that when farmers were looking for signing up for
government insurance program, basically for their prices, a lot of them
didn't think they needed it. This year, milk is an extremely perishable
product and most farms don't have the equipment needed to store the excess
capacity safely.
Dairy supply chains are also complex.
It is not easy for a farmer who typically delivers milk for use in cheese,
sold the restaurants to rapidly pivot to start delivering milk for sale in
grocery stores. One of the biggest obstacles to rapidly adjusting the
dairy supply chain is packaging the equipment and materials used for
packing and labelling dairy products for commercial food service is very
different from what would be found in the grocery store.
It can't be swapped out quickly.
Yogurt, as an example, comes and one pound tub at retail for food service.
There could be a 20 to 40 pound tub.
Same thing with shredded cheese.
You know, we are used to eight ounce or 16 ounce bags of shredded cheese
in a foodservice arena. Those that comes in 40 pound bags, you know, just
for food service, convenience.
And so you have a channel that's very customized for that trying to
course. Correct.
So on April 6th, the National Milk Producers Federation and the
International Dairy Foods Association to trade groups submitted a list of
proposals to the USDA detailing needed support for the U.S.
dairy industry through the COVID-19 pandemic.
The USDA said on April 17th it will distribute 19 billion dollars of aid
to the agricultural sector, including 16 billion dollars of direct aid to
farmers. The government also pledged to purchase one hundred million
dollars a month worth of dairy products to deliver to food banks around
the country. Of course, the direct payments to farmers help, but the
purchases will also help keep the supply chain in tact.
While restaurants and other businesses that would otherwise purchase milk
remain closed, it's a start.
But the effects of the corona virus have been catastrophic.
However, there are some bright spots for the industry.
94 percent of American households still have milk in the fridge and 98
percent are eating cheese, while overall milk consumption has declined.
Cheese consumption has more than doubled since the mid 1970s.
In 1975, the average American, a eighteen point eight pounds of cheese in
2018, that had climbed to 40 pounds.
Butter consumption also rose in the same time from about four point seven
pounds to five point eight.
And yogurt skyrocketed from two pounds to thirteen point four.
While Americans might be drinking less milk and eating less ice cream.
Overall, dairy product consumption has risen for the last 25 years.
We've seen per capita consumption increase domestically and globally, and
we were at record highs for butter and cheese, you know, just tremendous
fruit. You know, when you look at penetration of those products and usage
and so the mix has changed.
I like to tell people that you think of fluid milk is like that, that this
stomp on the tree.
But you've had innovation elsewhere.
This is a mixed outcome for farmers.
While overall increases in volume are good, farmers might not receive as
large a share of revenue from milk when it is used as an ingredient in
another product than they would when selling milk directly to consumers.
But there are also opportunities to export dairy products abroad.
Dairy consumption in regions such as Asia and Africa has been growing in
recent years. So export could be an option for producers and a maturing
market like the United States.
Of course, U.S.
farmers now face rivals from around the world and to address those new
markets. Farmers first need to survive.