After years of low prices and trade disputes, 2020 was finally supposed to be a better one for U.S. dairy farmers. But now it could be what drives many of them out of business for good.
Many hope some government relief will keep them afloat as they dump countless gallons of milk they would have sold to restaurants and schools now shuttered by the coronavirus pandemic.
The last several weeks have proven an unexpectedly challenging time for the entire agricultural sector, as the country’s food service supply chain struggles to adjust to life in an unforeseen and unprecedented situation.
But dairy farmers have to figure out what to do with their extremely perishable product when about 50% of the industry’s demand from restaurants, school cafeterias, and other food service is cut off.
Things were already not easy for dairy farmers going into 2020. The dairy industry was just coming off five years of low prices on milk brought on by stiff global competition. Dairy farmers have also been hurt by trade disputes. And then there is the long-term decline in milk drinking, although consumption of cheese and other dairy products has risen over the last several decades.
Beginning in November 2019, two major names in the industry filed for bankruptcy within a few months of each other. The first was Dean Foods, a Texas-based dairy process that sells its goods under 50 different brands around the country. Then in January, Borden Dairy, a 160-year old producer, also filed for Chapter 11 bankruptcy protection.
Prices were finally beginning to rise again as 2019 came to a close and farmers thought this year would bring some relief to balance sheets. Then coronavirus hit.
There are new opportunities for U.S. milk producers abroad, in the growing markets of Africa and Asia. But farmers from Europe, New Zealand, and other mature dairy markets are jockeying for that business as well.
And U.S. milk producers first need to survive.
By Robert Ferris,
–CNBC’s Amelia Lucas contributed to this story.