Early in the year, experts were predicting the dairy industry would begin its recovery from a difficult five-year slump. The arrival of the novel coronavirus in the U.S. meant that recovery would have to wait.
Still, Mark Stephenson, director of dairy policy analysis at the UW-Madison’s Center for Dairy Profitability, said there are signs things could begin going the right way for the dairy industry.
By looking at futures markets from Jan. 24 — just before the outbreak began in the U.S. — and again on April 20 — a date that incorporates market disruptions due to COVID-19 — and subtracting 50 cents per hundredweight to account for some destruction in premiums between those times, Stephenson estimates the impact of COVID-19 on dairy farms at about $10 billion in the U.S. and $1 billion in Wisconsin alone already in 2020.
“We don’t know what losses are going to be going forward, but it’s important to know it’s been substantial,” Stephenson said May 5 during the Professional Dairy Producers of Wisconsin Dairy Signal webinar.
As of May 1, Wisconsin was down another 124 farms since the beginning of the year, according to data released May 5 by the Wisconsin office of the U.S. Department of Agriculture’s National Agricultural Statistics Service, dropping the number of dairy farms in Wisconsin to 7,168.
Despite the losses, Stephenson said the news hasn’t been all bad for the dairy industry. U.S. product prices remain competitive in world markets, retail dairy sales remain strong, and the federal government has announced $120 million worth of dairy-product purchases, bringing some welcome good news to the industry.
“The sales for dairy are up substantially over the same week last year, more than 16%,” Stephenson said. “This has all been good news.”
Stephenson also said futures markets have shown increasing prices over the course of the next couple months.
“I think we’ve seen the bottom of some of the negative pressures we’ve seen on prices,” he said. “We’ve still got a long way to go to make up that $6 or $7 drop we’ve had since January, but I think we’re past the severe grumpiness on prices and they’re starting to rebuild a little bit.”
John Umhoefer, executive director of the Wisconsin Cheese Makers Association, said recent retail data shows a $2.2 billion increase in dairy sales over last year, half of which is accounted for by cheese products.
“It’s a good sign,” Umhoefer said. “People are learning how to use cheese at home in a way that they’re spending a billion more dollars on cheese at home.
“Even as we hope and look for restaurants and schools to open, perhaps a little bit of that cheese use at home will carry over and they’ll be eating at restaurants and they’ll be eating more dairy at home. Maybe we’ll actually see a net rise in dairy use.”
Umhoefer said restrictions on restaurants and loss of food-service opportunities has led to a net decline in dairy use, but he remains hopeful that in-home use continues once those opportunities return.
“It’s not that people have turned away from dairy, it’s just that we’ve closed the door on their favorite restaurants,” he said. “When we reopen that door, I really hope that we’ll see a net gain for dairy products.
“People are rediscovering dairy as they are at home.”
PDPW Executive Director Shelly Mayer said food pantries and U.S. Department of Agriculture food programs have helped industry partners create partnerships that could increase demand for dairy products in the future.
“It’s remarkable what we can do on Wisconsin farms, and, when times get tough, I’ve never in my life seen the collaboration we’ve had,” Mayer said. “Maybe some of these partnerships will see us through and create a demand we’ve never had before.”