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Dairy industry takes big hit as pandemic disrupts demands

Media Contact

Lindsey Knewstub

While the food supply has kept up with consumer demands during the coronavirus pandemic, the dairy industry is seeing major supply chain disruptions given the closures throughout the food service industry.

Cornell University agricultural economist Andrew Novakovic says small dairy farms and small processors are facing dire economic straits — given the food service industry disruptions and export demand destruction.

Andrew Novakovic

E. V. Baker Professor of Agricultural Economics Emeritus

“I think what we’ll find is that small farms and small processors are going to take a big hit. The longer this goes on, the more that will fail.

“Unfortunately, we are just coming into the big cheese and butter producing season and moving on the downside for fluid milk. Smaller specialty cheese plants are closing because their customer base is so heavily skewed to food service. The plants that make the base cheese that ultimately ends up as processed cheese are similarly in tough straits but not totally shut. Cheddar plants are full, but are shifting more staff to ‘converters’ who take big blocks of cheese and turn it into the little packages one buys in a grocery store. Those ‘cut and wrap’ companies are running overtime.

“Fluid milk plants had a big surge after all the panic buying but the industry is guessing it will settle down to an increase in sales of 10-15%. That being said, beverage milk sales tend to decline as the weather warms up, so this positive bump will diminish over time. 

“At its worst in the Northeast, dumped milk reached about 1% on a monthly basis and far less than that on an annual basis given dumping is very seasonal. In this case the problem will likely be larger. The dumping we see in the next 4-8 weeks will be the high-water mark for the year. Some think it could reach 10% in Wisconsin, the epicenter of the cheese industry. I think the problem in Wisconsin will dwarf what happens in New York given the nature of the disruption – food service and export demand destruction is entirely different from persistent declines in beverage milk sales.”

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