Dairy farmers have experienced a lot of disappointment over the past year.
For Brad Biehl, the latest installment came this week as he watched the milk from his bulk tank run down the driveway into his pasture.
Biehl, of Kutztown, Pennsylvania, is one of a probably modest number of farmers whose buyers asked them to dump milk this week as the dairy market convulsed in response to the coronavirus pandemic.
Panic buying at the grocery store had cranked up retail milk sales in recent weeks, but processors say a glut of milk has developed as consumers finish stockpiling, and as the continued closure of schools and restaurants leaves a hole in demand.
Processors have adapted by changing their production schedules or by letting inventory build up.
But there’s still more milk than capacity at processing plants right now, and raw milk has a limited storage window, said Kristen Coady, vice president for corporate communications at Dairy Farmers of America.
“We continue to work with our customers to explore additional options to retain as much value from our farm families’ milk as possible and to exhaust all possible avenues to find a home for their milk,” she said.
The national cooperative has recently asked some farmers to dispose of milk on the farm, but said it couldn’t estimate how much might have been dumped.
Biehl, who ships to Clover Farms Dairy in Reading, Pennsylvania, said he was told to get rid of two days’ worth of milk this week.
“It’s really frustrating,” said Biehl, who milks 131 cows and has never had to dump milk before.
Biehl milks with robots that are available to the cows 24 hours a day. The milk goes into a buffer tank while the milk truck pumps out the bulk tank and the tank is cleaned.
But draining the main tank was a lot slower than pumping it out, and the buffer got full in the meantime.
That meant Biehl had to suspend milking and run the milk down the driveway instead of down the milkhouse drain.
Clover Farms shipper Paul Hartman was also dumping for the first time.
Hartman said the processor has generally done a good job of managing its milk supply over the years, though he hopes he doesn’t have to dump again.
He said he felt “a little angry, I guess, just looking at all that food go down the drain. And a little confused, I guess, a lot of questions. What happened? Why did we have to dump that milk down the drain?”
Hartman said he had to dump the milk from about 400 cows for two days at his Reading farm, and like Biehl, he had been told that all Clover Farms shippers were affected.
“If it was sincerely every producer, I mean, that’s a huge amount of milk,” Hartman said.
Cheryl Caruso, milk accounting director at Clover Farms, said the situation is changing hour by hour and she wasn’t authorized to say more.
Until he had to dump the milk, Hartman wasn’t sure the COVID-19 pandemic would affect his farm too much, other than by dragging down futures prices.
The farm’s employees are still coming to work, but the same two people are always put on a given milking shift to minimize interaction with other people, he said.
Hartman, a member of the Pennsylvania Farm Bureau’s dairy committee, said he spoke to an aide for his U.S. representative to make him aware that dumping had occurred.
Rob Barley, a Dairy Farmers of America member from Conestoga, Pennsylvania, started dumping on Saturday and was still going on Wednesday, though he gathered the end was in sight at that point.
Barley hated to see the milk from his family’s 1,500 cows not get to a processing plant, but he recognized that the circumstances were extremely unusual.
“You’ve had major demand destruction and certainly no supply destruction,” Barley said.
To handle the excess product, Barley thinks the federal government may need to purchase butter, powder and cheese, something it has backed away from in recent years.
As chairman of the Pennsylvania Milk Marketing Board, Barley said he’s open to suggestions for improving the situation at the state level.
The board has already made some adjustments, such as briefly suspending minimum-price enforcement on half-pints to reduce the backlog of those containers that developed because of the school closures.
Some processors were hit hard by the sudden loss of the school and restaurant markets, while others were actually OK at first because of the high retail demand.
“Unfortunately, just as quickly, the retail demand has completely dropped off the cliff,” said Todd Rutter, president of Rutter’s Dairy in York.
The surplus could become a big problem for processors if it persists past mid-April, Rutter said in March 31 testimony to the Milk Marketing Board on behalf of the Pennsylvania Association of Milk Dealers.
Christopher Wolf, a Cornell University ag economist, said he’s heard anecdotal evidence of people dumping milk, but as of Wednesday, he didn’t think the practice was widespread.
“It seems apparent that cooperatives and others in the dairy supply chain are preparing for these contingencies but intending to squeeze all efficiencies out of the system to avoid dumping if possible,” he said.
Given the uncertainty about the virus, Wolf said, it’s impossible to say how processors will have to adapt, and for how long.
Dean Foods and Maryland & Virginia Milk Producers Cooperative Association had not asked farms to dump milk as of Wednesday, though it hasn’t been easy to make things work.
Maryland & Virginia’s plant operations, milk marketing and logistics teams have been meeting twice and sometimes three times a day, said spokeswoman Lindsay Reames.
“The marketplace has been tumultuous the last few weeks, and we’re seeing supply and demand fluctuate like never before,” Reames said. “The dairy industry, not just Maryland & Virginia, is trying to rationalize and balance out the seesaw of supply and demand.”
That could get even harder as the spring flush comes on, she said.
In the meantime, the co-op has donated over 100,000 half-pints of milk to food banks in Virginia and North Carolina. That milk would normally have gone to schools.
In a Tuesday interview on the Fox Business channel, Land O’ Lakes CEO Beth Ford did not mention dumping, but she said that the co-op’s plants have expanded their cleaning regimens and increased pay during the pandemic.
“Our dairy processing plants are working well, and our staff is showing up,” Ford said.
Though their milk went to waste, Biehl and Hartman will likely get paid for producing it.
Clover Farms’ plant is pooled in Federal Milk Marketing Order 1, which covers a territory from New Hampshire to Maryland.
To help the industry weather the market upheavals, the federal agency, an arm of USDA, announced a number of rule relaxations on March 27, such as allowing for the pooling of dumped milk.
These actions, by no means unique to the coronavirus outbreak, help spread out the burden when milk can’t be marketed, said Andrew Novakovic, a Cornell University ag economist.
When a farmer’s milk cannot be used or delivered, the federal order allows that volume of milk to be pooled and valued at the lowest price class, usually class III or IV.
The co-op, which doesn’t get paid for this milk, pays its members their regular pay price. In the co-op’s favor, the blend price that underpins the pay price is reduced because the entire pool shares in the loss.
“What this boils down to is that the loss is spread across all farms so that the specific farmer(s) whose milk was lost can be paid,” Novakovic said.
Similar actions have been taken elsewhere in the federal order system, including Federal Order 33, which takes in most of Ohio, and parts of West Virginia and western Pennsylvania.
Reflecting on Spilled Milk
Like most of the nation’s dairy farmers, Hartman has more risk exposure at this uncertain moment than he might have had.
That’s because he decided not to sign up for Dairy Margin Coverage.
During the sign-up period late last year, 2020 prices were expected to be decent, and the key dairy safety-net program wasn’t projected to pay much.
“We decided, ‘Oh, we should be all right’ — not expecting a pandemic to occur,” Hartman said.
Indeed, only a third of licensed dairies nationwide signed up for 2020 coverage. The National Milk Producers Federation is asking that enrollment for the program be reopened in light of the coronavirus.
For Biehl, the economic pain goes beyond just the milk. He is the president of AMS Galaxy, which supplies milking robots and other farm automation equipment.
The company had been doing quite well for the last six or eight months, but one by one new projects have been put on hold, and some customers have asked for their deposits back.
“Everybody’s running scared,” Biehl said.
Biehl has also been thinking about what the lost milk meant to him, about the time spent raising calves and growing alfalfa that went into it and the low margins that would ordinarily have come out of it.
Knowing his first task on Wednesday would be dumping the milk, he was none too eager to get out of bed.
“We feel like we’re working for nothing all the time, and now it’s not even feeding anybody, so now it feels like just a bigger loss than anything,” Biehl said. “At least we had a purpose.”
The pandemic is proving to be one more test of dairy farmers’ morale.