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Supply and Demand Imbalance Leads to a lot of Dumped Milk in April

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COVID-19 has hit the U.S. dairy industry hard in 2020. Amanda Durow is a Vice President and Dairy Specialist with CoBank, as well as an active dairy producer. She says the one-two punch of milk dumping and panic buying made some unique news headlines.

“COVID-19 has caused a very unique dilemma in the dairy industry. On the same day that you could find headlines that dairy farmers were dumping tanker loads of milk, grocery stores were limiting consumers in how many gallons of milk they could buy. Why did this happen? The dairy industry supply chain could not evolve fast enough. The dairy industry is both unique and complicated. Milk is always being dumped at some level, every month. Dumping milk is not a new headline.”

She says the imbalance between supply and demand was a key part of the COVID challenge.

“There is some imbalance in our milk supply and demand due in part to the seasonality of milk production, and then layer in the limitations of our processing plant capacity. Four of the 11 Federal Milk Marketing Orders report how much milk is used for animal feed or disposed of, which we’re calling ‘dumped milk.’ The four federal orders comprise approximately 55 percent of our U.S. milk supply. The amount of milk dumped in April 2020 is unprecedented and was nearly three times the historic amount.”

U.S. dairy farmers dumped a lot of milk in April, especially in the Northeast U.S.

“The volume of milk in April specifically was 187 million pounds, or 22 million gallons, and I would point out that the northeast federal order reported dumping about 15 million gallons of milk in the month. But the 22 million gallons of milk dumped only represent about two percent of April’s milk production from these four federal orders.”

The dumped milk cost U.S. producers a lot of money. Dairy farmers are still feeling the impact of COVID-19 even today, thanks to continued cutback orders from some processors.

“The impact of dumping milk was felt widespread across the industry. Most dairy producers had a COVID deduction in their May milk checks, with some seeing a $2 per hundredweight decrease. Furthermore, many cooperatives and processors are asking their dairy producers to cut milk production. In an environment of volatile dairy prices, dairy farmers are being asked to voluntarily cut their paycheck up to 15 percent. I know no one that would like to give up two months of their salary like dairy farmers are being asked.”