US Faces Dairy Dilemma: Surplus Milk With Nowhere to Go
In a perplexing turn of events, the United States finds itself awash with an unprecedented abundance of milk, with no processing facilities left to handle the surplus. The Milwaukee Metropolitan Sewerage District’s wastewater treatment system has been grappling with the influx of milk, as confirmed by a spokesperson, although the exact magnitude remains unverified. Farmers have resorted to dumping excess milk on their fields, an act captured in since-deleted social media videos that emerged earlier this summer.
According to Pete Hardin, editor of Wisconsin-based dairy publication The Milkweed, the state’s milk supply, bereft of a destination, could fill approximately 50 trailers per day, each capable of carrying 6,000 to 7,000 gallons. “We know that milk is being dumped in other parts of the Midwest, not just Wisconsin,” stated Laurie Fischer, the founder and CEO of the American Dairy Coalition. “At the same time, farms are making decisions as milk prices fall to their lowest levels since the worst period of the pandemic.”
The large-scale dumping of milk by American farmers, reminiscent of the early weeks of the Covid-19 outbreak, stems from the disruption caused by the sudden closure of restaurants and schools, which created a precarious mismatch in supply and demand. Unlike other products that can halt production when market conditions shift, cows cannot simply suspend milk production. Milk is a highly perishable commodity that necessitates expensive transportation, leaving farmers with no choice but to dispose of it. Furthermore, approximately 34 million people in the US experience food insecurity, yet most industrial dairy operations lack the means to process their own milk or sell it directly to consumers, resulting in the heart-wrenching decision to discard it.
Multiple factors contribute to the current milk surplus. Government data from May reveals record-high milk production across the nation. Wisconsin, recognized as the largest cheese-producing state, has witnessed its milk output increase at double the national rate over the past year. Nate Donnay, director of Dairy Market Insight at StoneX, attributes this surplus to the persistence of farmers in expanding milk production, leading to an overabundance in the region. Additionally, the conclusion of the school year translates to reduced milk consumption in cafeterias compared to the spring.
However, the capacity to process the surplus falls short. In Wisconsin, where 90% of the milk is used for cheese-making, most plants are already operating at full capacity. The issue is exacerbated by labor shortages, as highlighted by Bob Cropp, professor emeritus and dairy marketing specialist at the University of Wisconsin-Madison. The problem was further compounded earlier this summer when a wastewater problem forced the sudden closure of a plant in Hastings, Minnesota.
The predicament faced by farmers in Wisconsin and Minnesota is that other plants are unwilling to accept their excess milk due to having already reached their limit. Consequently, milk prices have plummeted. Benchmark Class III milk futures, predominantly used for cheese production, recently hit their lowest point since spring 2020. This decline is also affecting cheese prices, which are now beginning to influence consumer prices for milk, as evidenced by three consecutive months of slight decreases, according to government data. The upcoming US CPI report, set to be released on Wednesday, will shed further light on the situation.
In response, some farmers have resorted to reducing production by sending more dairy cows to the slaughterhouse. “Milk prices are far below farmer cost of production,” stated Lucas Fuess, senior dairy analyst with RaboBank. “I expect the herd size and milk production to decline in the coming months as farmers make adjustments due to the low prices.”
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