Milk prices for farmers are dropping again, dairy producers are sweating, and the average consumer might be noticing higher prices for milk at the grocery store.
But the outcome may not make much sense considering these trends: thousands of gallons of precious milk are getting dumped on the ground—simply because there is no home or market for this dairy.
This means prices for consumers should be getting lower, not higher. In the meantime, in some parts of the world, it makes for a good way to demonstrate protest against these price drops.
Onlookers both inside and outside the dairy industry may be wondering: “Why?” Why do dairy farmers have to dump milk? Is there another way? Why does milk oversupply happen— wouldn’t slowing down production just fix the problem? For the former (dairy farmers), this is more of a rhetorical “why”— we all in the ag industry know too well why we cry over spilled milk but must spill it all the same.
Still, for those seasoned enough in the ups and downs of dairy farming— alongside consumers who know less about how dairy markets work— there is some insight to be gained about the market forces and practicalities that lead to milk dumping, what this means for dairy farmers, and how the esteemed producers of our milk, cheese, and other dairy products can manage and survive a milk dump slump (the last major slump taking place during the COVID-19 pandemic).
In this day and age, dumping milk may sometimes be inevitable for dairy farmers. But it doesn’t mean you have to lose money (or sleep) over it. Here’s what dairy farmers can do about it— and why milk dumping, overproduction, and oversupply can happen.
Unpredictable market forces and the daily reality of the dairy industry
Dairy farmers already know this tune. The price for selling milk per gallon can change by the week, the month, sometimes even the day. Dairy is a wild and unpredictable market.
Prices can spike, which is good news for dairy farmers, but may then lead to lower demand; then again, dairy selling prices can still plummet right alongside demand for milk, like they have been lately. The “dairy market machine” isn’t simple, with a predictable “in” chute on one end and an “out” chute on the other. There’s a legion of forces like dairy imports, seasonal demand (such as from schools), differences in markets from region to region (the Midwest vs. Texas for example), and yes, projected milk-per-cow amounts that can unpredictably influence what actually pops out of the machine, no matter what is carefully put into it.
Either way, many producers in recent years might open their barn (or facility) doors one morning to find: dairy storage space is running out. And yet, cows still need to be milked on the daily. If they don’t, they could become injured, sick, or die. The result: dairy production “on tap” that isn’t exactly easy to turn down, or off.
The reality is that dairy is a necessary daily commodity for Americans and for many citizens in other countries around the world, too. But, if the tides change and that necessity slumps in any way, even for a moment— this can mean dumped milk.
Unfortunately, the burden of meeting these daily necessities and losing product— and strategizing or adapting to outcomes when meeting these necessities isn’t profitable— falls squarely on the shoulders of the dairy farmer who must be hard working, skilled, adaptable, and provident all at the same time to diligently feed our country. (It’s not an easy job. Dairy farmers, we salute you!)
The latest problem: not enough dairy processing labor force
The above might not be news to dairy farmers or even the curious consumer looking into the industry. However, the most recent problem contributing to milk dumping: the lack of processing plants and the labor force to run them, which certainly adds another straw to the dairy industry camel’s— or more accurately, cow’s— back.
If dairy storage is limited on-farm, dairy processing plants can take on the burden, also preserving more milk into value-added commodities like cheese, yogurt, whey, or dried milk. The trouble is that dairy plants are closing at a fast rate, and the ones left over can’t keep up on the demands to process or store more milk or other dairy products.
What’s more, both dairy farms and processing plants are struggling to retain employees or find new workers amid this slump— even cutting hours which further exacerbates the overproduction of milk, or milk sitting around with no home to go to. A large portion of the agricultural industry, not just dairy, also relies on international labor in the U.S., which may be shrinking— or becoming more costly than it used to be.
What can dairy farmers do about it?
Despite all these challenges, low prices, and the oversupply of milk, the show must go on. Dairy will continue to be e a necessary commodity for decades to come, the cows will still need to be milked, and all of it will fall on the dairy farmer to figure out and make do— until better times come again.
What strategies have worked for dairy farmers in the past?
#1: Selling “back stock.” Namely: cows. In Minnesota, some small dairy farmers are selling to squeeze on through. It may not feel like business growth, but the reality may be thatdairy entrepreneurs can only take steps to grow when the market is growing, too.
#2: Transition to grass-fed dairy. An innovative approach that has worked for one dairy farmer, which can cut down on feed costs and fetch higher prices (grass fed dairy and butter are all the rage— and yes, it still helps milk production). Though you need the right acreage, and enough grass, to pull it off.
#3: Equip yourself with the right insurance. Frankly, and especially during these times, the right dairy insurance policy should be built right into your business— whether it be Dairy Revenue Protection (DRP) or Dairy Margin Coverage (DMC).
If you talk to the right insurance experts, they can tailor coverage options that perfectly suit your business, even making you money during (God forbid) those times where the milk just needs to meet the ground.
Watching dumped milk can be like watching dollar bills go down the drain. We can change that. That’s what we’re best at— give us at Colville Crop Insurance a call today!