Dairy industry is slowly recovering

Posted 10/30/20

In the first half of 2020, dairy farmers around Okeechobee were forced to dump their own product down the drain due to the economic fallout of COVID-19.

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Dairy industry is slowly recovering


OKEECHOBEE — In the first half of 2020, dairy farmers around Okeechobee were forced to dump their own product down the drain due to the economic fallout of COVID-19.

The sudden closure of schools, theme parks and some restaurants led to a dramatically smaller demand for milk products. That decreased demand resulted in a situation where dairy farms had containers and tankers full of milk with no one to sell it to. That forced farmers into the unenviable position of having to watch their hard work go spilling out onto their fields and down the drain.

Milk futures plummeted. Prices that were stagnant at best before the crisis had now crashed. Dairy farms had already been using every bit of equity they had, doing things to save money and cut costs for the four years leading up to the pandemic.

Since that low in the summer, milk prices have swung back and forth.

“They have certainly improved from the lows we saw in May and June,” said Southeast Milk’s Travis Senn, “but the markets have swung wildly back and forth this year. The price of bulk fluid milk in June dropped nearly 40% from the price farmers received in January, bounced back up 73% from June to the yearly high in August, and then fell 23% from August’s price in October. Just recently, November’s price was released and jumped up 18% from October. In all commodity marketing, some level of volatility is to be expected — whether you market milk, corn, cotton or any other crops — but the level dairy farmers have seen this year simply has no modern parallel.”

Some of the supply chain issues that led to milk being dumped while at the same time there was a shortage in grocery stores have been resolved.

When many of the bulk buyers of milk suddenly closed, such as schools, theme parks, and hotels, the supply chain was disrupted on a level not seen before in the industry. Many of those customers bought their products in bulk, which requires different packaging and different equipment to process than retail milk products. With that demand gone in an instant, the milk scheduled to go to those facilities had nowhere to go. That forced farmers to watch their work go down the drain.

The news of farmers dumping milk caused confusion among those who were having trouble finding the product in the grocery store. And if a customer did find milk, it was likely that the store had a limit how much one could buy.

“Fluid milk plants saw a surge of milk purchasing starting around the middle of March, when the initial “panic-buying” period began,” explained Senn. “It caught the industry a bit off guard at first, but we have adjusted to similar occurrences in the lead-up to hurricanes before. This event was different, though. The panic buying lasted several weeks, and milk plants struggled to find what their ‘new normal’ would look like. While the plants tried to keep up, consumers piling 8 to 10 gallons of milk at a time into their grocery carts cleaned stores out before the shelves could be restocked — hence the implementation of store limits. Plants only have a limited amount of volume they can run into their gallon milk lines — the increased demand and glut of milk looking for a home created what we refer to as a bottleneck situation. Think of it like traffic on a highway — when an accident blocks off two lanes of I-75, all the cars try to move to the open lane, which then backs up traffic for miles. It’s the same concept.”

“With only so many ‘lanes’ for the milk to go to, the supply piled up,” continued Senn. “We can only hold milk for so long before it becomes unsafe to use and must be dumped.”

Now with restaurants and schools partially opened, those operations have returned to something near normal. USDA’s Farmers to Families food box program has also been beneficial to dairy farmers.

“The adoption of the government food box program has also assisted in not only keeping milk demand solid but also keeping food going to those who need it,” Senn said. “In fact, we have almost seen a flip of the script for us, as demand for cheese products in the northern parts of the country affects our supplemental supplies here in the Southeast. Our milk production is very seasonal here. The summer heat and humidity is very hard on the cows, so milk production falls to the lowest totals in August, September and October. In these months, we typically bring milk down from the north, but this year’s demand for milk going to cheese has been so great that finding extra milk has proven difficult and costly.”

dairies, milk