The closure of restaurants and other foodservice outlets is taking a toll on dairy farmers and processors, with the damage coming in phases.
“The first phase, when people knew they’d be staying at home, wasn’t so bad. Pizza orders surged and people went to grocery stores to stock up on all the milk, butter and cheese they could get their hands on,” Matt Gould, editor and analyst with the Dairy Market Analyst, told Capital Press.
That made up for the loss in foodservice sales, he said.
But a week ago, fluid milk bottlers started getting their first order cancellations as retailers realized they had over ordered. The anticipated dumping of milk began a little over a week ago and became more severe this week.
Retail sales of all dairy products are moderating, and demand for dairy at grocery stores is no longer enough to outweigh lost sales in foodservice, he said.
Milk dumping is taking place all over the country — “east to west and north to south,” he said.
“It certainly seems to be in the hundreds of truckloads a day,” he said.
Foodservice closures are hurting cheese sales. Consumers eat more cheese when they go out to eat — think cheese dips, mozzarella sticks and parmesan on pasta dishes, he said.
“It’s resulted in some pretty severe demand disruptions,” he said.
The entire country changed habits at the same time, and the move was violent. That led to reduced schedules at plants servicing the foodservice industry, he said.
Before coronavirus, 46% of cheese sales were at retail, 16% were for pizza and 38% were for foodservice and other channels.
In the coming weeks, retail sales will grow only about 20%, pizza sales might be up slightly, and other foodservice sales are down 80% to 90%, he said.
He expects domestic cheese consumption to be down 21% in April. That’s a decrease of 214 million pounds and equivalent to 2.1 billion pounds of milk, which means the U.S. will have an excess of 1,100 tankers of milk a day, he said.
The industry has moved to the next phase in the situation, with dairy cooperatives asking producers to reduce milk production and figuring out the cost share for dumped milk, he said.
“It’s some pretty serious financial challenges going on,” he said.
If the dairy farm sector and cheese processors suffer large financial damages, it’ll take a long time to recover, he said.
Officials in Washington, D.C., are being lobbied hard for such things as assistance for exports, government purchases, direct payments to dairy farmers and reimbursement for dumped milk, he said.
It would cost $300 million a month to compensate dairy farmers for dumped milk, he said.
The $2 trillion stimulus package can go a long way in helping, but the government hasn’t announced any decisions yet.
It’s a near certainty USDA is going to intervene, but no one knows yet details, he said.
Nothing is going to change the current situation until restaurants are back in business or the government takes action on assistance.
“We haven’t yet seen a light at the end of the tunnel,” he said.