Dairy Struggles with Extreme Shift in the Market

Brian German Dairy & Livestock, Industry

The average consumer might be surprised to learn about the considerable dairy struggles the industry is having to contend with outside of general concern related to COVID-19.  While milk is moving quickly off of retail shelves, other dairy products are being left behind amidst the effective shutdown of the food service industry and educational institutions.

dairy struggles

“The problem for the dairy industry in the U.S. is that a strong portion of the portfolio goes to restaurants,” said Annie AcMoody, Economist with Western United Dairies.  “With all the shelter in place orders in most states, the restaurant industry has been really struggling.  So, all these wholesale orders going to restaurants basically came to a screeching halt with this crisis occurring.”

Not only has the demand slowed down significantly from a lack of need coming from the restaurant industry, but the types of dairy products that grocery stores purchase are not the same of those sought after by restaurants.  The dairy supply chain is working to try and accommodate the extreme shift in the market, however making drastic changes to infrastructure and logistical planning is not an easy undertaking.

“The problem with dairy processing facilities is that they can’t just switch lines easily, sometimes it requires changing the equipment and I think that’s what the industry is trying to figure out,” AcMoody noted.  “In the meantime, we’re going to have some growing pains in the industry just because of all the accumulation that’s occurred of product that’s currently not needed.”

Dairy struggles are being reported throughout the U.S. with producers in New York and Wisconsin having to dump significant amounts of milk.  Farmers in California have also been forced to dump some of their milk, although AcMoody noted that is has not been a tremendous amount yet.  To address the major disparity between supply and demand, producers are being asked to slow down production. 

“The problem as you can imagine is that a cow can’t just be turned on and off from one day to the next.  So, there’s measures that dairy farmers can take to reduce the milk output of a cow – changes in feeding and things like that – but it doesn’t happen overnight,” said AcMoody.  “Progressively now, producers are reducing their production and so hopefully we’re going to get to an equilibrium.” 

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Brian German

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Ag News Director, AgNet West