On the brink of crisis
Dairy farmers worldwide are facing a fraught future, and may not be able to recover
The world’s dairy farmers are facing an existential crisis. They’ve dumped millions of gallons of milk, slowed output and sold off older cows. Global governments stepped in with stimulus cash that provided some muchneeded temporary relief, helping benchmark Chicago milk futures to almost double in two months. But once the aid money starts to dry up, many producers will confront tough choices again: suffer through losses, or pack it all in and shut the farm.
It’s going to be a long time before restaurants go back to serving buttery, cheesy dishes on the scale they did in the pre-pandemic world. While lockdown restrictions are easing, slower economic growth means consumers will be cutting back on dining out and even home-delivery orders.
That’s a hit the dairy industry won’t be able to sustain.
Even with billions in stimulus, the contraction for U.S. herds will likely match record levels this year, according to the National Milk Producers Federation. Declines are also expected in Europe and Australia, two other regions key to global exports.
“Are people still at home in three to six months, ordering pizza to watch a football game? Or are they conserving their money, and will they stop ordering out?” said Matt Gould, editor at Dairy & Food Market Analyst Inc. “At no point have we seen the light at the end of the tunnel, and even now with prices spiking, we could be in the ditch in three to six months.”
Dairy is one of the world’s most important food markets.
The sector accounts for about 14% of global agricultural trade and more than 150 million farmers keep at least one milk animal, according to the United Nations. The industry is valued at about $700 billion, but it’s facing a reckoning. For years, milk demand has been on the decline in developed countries. That’s only accelerated recently as more consumers turned to plant alternatives amid climate concerns.
When coronavirus lockdowns went into place, dairy markets were among the hardest hit in the food world. It turns out, consumers the world over eat a lot more cheese and butter when they’re dining out than they do at home. As restaurants shuttered, farmers were left with an overwhelming glut. Hundreds of millions of pounds of milk got dumped.
Things still looked relatively dismal until governments stepped in to intervene. The U.S. promised $2.9 billion in its dairy bailout.