San Joaquin Valley dairy farmers see prices drop as coronavirus disrupts flow of products
San Joaquin Valley dairies are taking a hit as fallout from the coronavirus pandemic has drastically disrupted the flow of milk products.
The highly contagious virus that has killed more than 5,700 people in the U.S. has triggered the closure of restaurants, schools and slowed exports. Health officials have urged people to stay home, avoid large crowds and to stay 6 feet apart when out in public.
For Valley dairies and processors — who are leaders in the production of cheese, butter, ice cream and milk — the loss of major customers has hurt an industry already struggling with rising costs and volatile milk prices.
California is the number one milk producer in the nation, with nearly 50 percent used to make cheese. Its biggest customers are restaurants, food service and hospitality industries. The nation’s school lunch program also relies heavily on California milk to help feed millions of children.
Plus, exports to countries like China have been a bright spot for dairy producers, but that too has slowed.
Anja Raudabaugh, chief executive officer of Western United Dairies, said farmers had been somewhat insulated from the early panic over the pandemic. But once Gov. Gavin Newsom issued a statewide “shelter in place” order March 20 and restaurants and schools began shutting down, things quickly got worse.
Warehouses with cheese and butter destined for restaurants and food service operations rapidly began to fill. And the early flurry of hoarding milk has also calmed down.
“In a short time, demand diminished or just disappeared,” said Raudabaugh. “I don’t want to create panic but with the change in buying habits and the massive volatility in the market, you are going to have farms closing doors.”
With fewer buyers, milk processors are holding firm on how much milk they will buy from dairy operators. In some cases, dairy farmers are penalized if they bring in more milk than their normal supply. In other cases a dairy operator has no choice but to dump their milk because there is no place to sell it.
Raudabaugh estimates at least 20 dairy farmers have dumped milk.
Economist Annie AcMoody, with Western United Dairies, said that as dairy processors struggle to find a home for their products, prices paid to the dairy farmer have begun to slide. In December, the milk price was $19.80, per every hundred pounds of milk. March looks like it could be around the mid-$17 range, she said.
AcMoody said even more surprising is the price drop for milk used to make cheese, also known as Class III milk. In November the price was $20.45 while Class III futures market price for May 2020 just settled at $12.88.
Tulare County dairy farmer Tom Barcellos said the current dilemma is not unlike the troubles the industry went through in 2009, when dairy prices were sent on a downward spiral. In a six-month span during that year, prices dropped 50 percent, from about $20 for every 100 pounds of milk to about $10.
Barcellos has somewhat protected himself by diversifying his farming operations to include other crops, not just milk. But he is still concerned some farmers won’t be able to survive the current crisis. The state has already lost more than 1,200 dairy farms from 1997 to 2017, according to the USDA’s Census of Agriculture.
About 1,200 dairies remain in the state.
“There are people who are just tired and who don’t want to go through all this again,” Barcellos said.
Oddly enough, while the dairy pipeline has become clogged with product, the demand for dairy cows as meat has taken off. Traditionally, dairy cows that outlive their usefulness as milkers will be sold at livestock auctions to meat processors for making ground beef.
Phil Tews, who runs the Fresno Livestock Commission, a farm animal auction in Easton, has seen a 40 percent increase in sales, with much of that coming from dairy cows.
“Anytime you have a decline in milk prices our beef numbers will go up,” said Tews. “And we have seen the price for dairy cows go up 15 percent to 20 percent, and just in the last several weeks.”
Raudabaugh said the dairy industry is looking at other relief options for dairy farmers, including working with the state’s food bank to buy more cheese or to donate dairy products.
There is also a push by the dairy industry to lift the limits on how much milk a customer can buy.
The “Coronavirus Aid, Relief and Economic Security Act” that was signed into law on March 27 also offers several forms of assistance to dairy producers.
This story was originally published April 4, 2020 at 5:00 AM with the headline "San Joaquin Valley dairy farmers see prices drop as coronavirus disrupts flow of products."
