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.
