Dairy farmers drowning in surplus milk

Deena Shanker and Lydia Mulvany - Bloomberg

A decade ago, Greek yogurt was ascendant in America. In New York state, the hope among farmers and politicians was that their fortunes would benefit as well.

But in the years that followed, Greek yogurt began to suffer the same fate that’s bedeviled the broader dairy industry – changing tastes. And New York dairy farmers who jumped at the chance to expand their herds five years ago are now wondering whether it was the right move.

America’s dairy farmers face a growing list of challenges: The Trump administration’s trade wars have coincided with an extended period of already-low milk prices. The strong dollar is driving down exports, and consolidation has led to farm closures all across the country.

Most darkly, the long decline in American consumption of fluid milk, the dairy product that brings farmers the highest earnings, shows no sign of slowing.

The amount of milk dumped by farmers in the northeastern U.S. reached almost 145 million pounds through July, including 23.6 million pounds that month alone. Dairy cooperatives will likely be forced to heavily discount milk prices in the coming months as a result, said Dave Kurzawski, a Chicago-based broker at INTL FCStone.

“The farmers, they don’t get a break,” he said. “We probably had a surplus of milk in this country for too long – we’re seeing that unwind itself.”

And what can’t be sold – even at a discount – gets dumped. In recent years, supplies have grown faster than manufacturing capacity, said Leon Berthiaume, chief executive of St. Alban’s Cooperative Creamery in Vermont.

“We employ many tactics to find a home for our members’ milk, such as additional sales, drying, donating the milk or moving the milk to other areas where we can find demand,” said Nichole Wenderlich Owens, a spokesperson for Dairy Farmers of America.

Agri-Mark, a cooperative that serves around 900 dairy farms in the northeast, recently invested $21 million to expand one of its four plants so it can take excess milk off the market.

“When you have a free market type of system, it just shows the vulnerability that the farm price has to market conditions,” spokesman Doug DiMento said.

Richard Ball, commissioner of New York’s Department of Agriculture and Markets, said the state is trying to address the declining fortunes of New York dairy farmers. This includes investing more than $250 million in expanded processing capacity; research at Cornell University on developing a milk-based recovery beverage for athletes; using milk to help feed the hungry; and a marketing program to show consumers their milk is made locally.

“I don’t think we’ve exploited all the market share that we could,” Ball said.

Nevertheless, limiting supply – the ultimate solution to the glut – isn’t on the table.

“Dairy farmers are free market guys – they don’t want to be told how much to produce,” even as supply management programs like those in Canada gain traction among U.S. farmers, Ball said.

For now, though, the state will stick to investing in ways to sell all of this extra milk.

“It’s a lot more fun,” Ball said, “to talk about how to increase demand than restrict what they’re doing.”

Link: http://www.journalgazette.net/business/20181021/dairy-farmers-drowning-in-surplus-milk

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