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Schools are closed, but dairy still getting high marks

Progressive Dairy Editor Dave Natzke Published on 18 March 2020

Editor’s note: Progressive Dairy reached out to several regional dairy entities affected by the coronavirus and will provide updates as they become available.

Lengthy school closings due to the spread of coronavirus (COVID-19) have the potential to negatively impact fluid milk consumption and farmer milk prices. Adding to the milk dilemma, the school closings are occurring simultaneously nationwide, instead of being staggered as typically occurs.

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For now, however, heavy demand from retail consumer buying has offset lost volumes distributed through school milk programs in some areas.

With normal delays in USDA reports related to fluid milk sales, measuring any immediate impacts on milk consumption are difficult. Anecdotally, at least, retail fluid sales have been exhibiting a temporary boost in sales as consumers rush to stockpile food and other items. Photos of empty store shelves and refrigerated dairy cases are common on social media.

In the southeast U.S., where dairy producers and processors are heavily dependent on Class I fluid sales, consumer retail demand for milk has been strong, noted Travis Senn, market research communications specialist with Southeast Milk Inc. (SMI), headquartered in Belleview, Florida.

SMI has dairy farmer members in six states, mostly in Florida and Georgia, and extending into Alabama, South Carolina, Mississippi and Louisiana. Governors in all those states have joined a majority of others nationwide in ordering schools closed or extending spring breaks in an effort to slow the spread of COVID-19.

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About the same time school closings were announced, SMI customers began to add on significant amounts of loads to meet the rapid rise in retail demand as concerns over the coronavirus grew.

“So far, this recent boost in sales more than offsets any decline in school milk,” he said. “We are currently seeing unprecedented milk volumes that some of our customers are bottling.”

There are challenges outside of school cafeterias too. Some SMI customers are heavily dependent on cruise line businesses, which are being significantly impacted by the coronavirus, resulting in less Class I sales for SMI milk, Senn said. Dairy sales through the food service industry are also taking a hit as restaurants close or face capacity and/or operating limits.

“In recent years, U.S. consumer spending in restaurants began to equal and even exceed that in grocery stores,” Senn said. “This will likely reverse for some time as consumers stock their refrigerators and freezers, limiting cheese, butter and milk performance.”

Senn noted the length of school closings and other impacts on consumer milk buying habits resulting from COVID-19 are different from short-duration, regional market disruptions from hurricanes in the Southeast or snowstorms in the North. Dairy products are perishable, and consumers will eventually have to restock their homes, he said. But whether increased retail fluid sales can be sustained for a lengthy period is uncertain.

“Many of our customers heavily service school milk,” Senn said. “While some communities are working to still offer lunch services during school closures, school milk sales are likely to slip, resulting in fewer pounds going to Class I milk. We are preparing in the event that sales begin to slip, and inventories build up again.

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“Uncertainty generally breeds pessimism and declining markets, just like with the stock markets,” Senn said. “As more news breaks, markets continue to jump up and down wildly.”

Senn said the cooperative was looking at options on how it would handle the expected surplus milk situation if or when the COVID-19 retail bubble bursts.

“Our preparedness team continues meeting regularly to discuss what our plans will be if/when the tide ultimately turns,” he said. “Our first priority will be to place such surplus in our own balancing plant in southern Georgia. We’ve been proactive and contacted other balancing plants to see if they would have available plant capacity. We’re considering other less desirable options as well, if necessary.”

Despite the uncertainty ahead, Senn remains confident SMI dairy farmer members will work through it.

“In recent history, the farmers of Southeast Milk have endured nearly five years of low milk prices, labor shortages, animal activist attacks, two major customer bankruptcies and several hurricanes,” he said. “I have no doubt our resilient farmers will also navigate the uncertainty COVID-19 brings as well.”

Supply chain assurance

“Arguably, the biggest risk to the market remains supply chain continuity,” Senn said “If any level of the chain is disrupted, it could carry serious consequences. This includes raw milk and finished product hauling, plant processing or retail stores. We must maintain a strong line of communication with government leaders in the coming weeks and months.”

In light of concern over food supply disruptions, Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF), said the dairy supply chain is equipped to make sure there’s a safe, steady supply of dairy products available.

“U.S. dairy farmers are stewards of a product that’s harvested around the clock, 365 days a year, and they understand the importance of steady production as well as steady consumption,” Mulhern said. “The U.S. food supply chain is more than capable of meeting demand, and consumers should be reassured that milk and dairy products will continue to be produced and available in the coming weeks and months.”

So far, Mulhern said, there have been no supply chain interruptions.

“Dairy supplies aren’t experiencing production interruptions at this time, and dairy farmers and processors will continue to do what they do best: produce safe, quality products every day for consumers in the U.S. and worldwide,” he said. “We will vigilantly work with all aspects of the dairy supply chain to ensure these products get to everyone who needs them and that – as has always been true – dairy will remain something consumers can count on.”

Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA), said staff with his organization are working closely with government agencies to ensure the safety and availability of dairy products throughout the nation during this time of emergency.

"Our members, who represent the full dairy supply chain from the dairy cooperatives to dairy processors to the retailers, report at this time that the nation’s dairy industry is experiencing no interruptions and is continuing to supply American consumers with affordable, healthy milk and dairy products even as demand surges,” Dykes said in a statement released March 14.

"Our association is in close contact with federal agencies and the White House to ensure transportation routes and supply lines in different regions of the country remain free of disruption. These routes are crucial to commerce and public safety and must remain unobstructed. At present, at retail facilities across the country, milk – a nutritious family staple – remains affordable and available.

“We are working closely with the USDA to remain flexible in how dairy processors get milk to schools and school districts who are continuing to provide meals to the millions of children who need them each day, despite closures, through distribution at schools, churches, parks and other community sites,” Dykes said.

IDFA is also working to ensure dairy processors have up-to-date information about COVID-19, including the latest guidance on prevention, so they can continue to protect the health and safety of their workforce, their goods and customers.

"In times like these, we are most grateful for our dairy farmers and dairy processors for their great efficiency, commitment to safety and ability to get affordable, nutritious milk where it is needed,” Dykes said.

As noted by Dykes, the USDA has taken action to make school lunches available to students in the event of school closures by waiving some restrictions and adding flexibility to feeding programs. And on March 17, U.S. Secretary of Agriculture Sonny Perdue announced a public-private effort will begin next week to ensure children are fed. Under that initiative, the Baylor Collaborative on Hunger and Poverty, McLane Global, PepsiCo and others will deliver nearly 1 million meals per week to students in a limited number of rural schools closed due to COVID-19. The food boxes will contain five days’ worth of shelf-stable, nutritious, individually packaged foods that meet the USDA’s summer food requirements. The USDA will reimburse private sector partners for the same rate as a Summer Food Service Program (SFSP) site.  end mark

Dave Natzke
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