The National Milk Producers Federation and the International Dairy Foods Association sent a set of recommendations to the U.S. Department of Agriculture yesterday urging the agency to take swift, comprehensive action to support the U.S. dairy industry through the COVID-19 crisis.
The plan outlines how this disaster is affecting U.S. dairy from farm to fork and underscores the main challenge facing U.S. dairy today: Supply exceeds demand by at least 10 percent — a gap that could widen as supply increases to its seasonal peak and as “shelter in place” conditions endure. NMPF and IDFA urge USDA to use as many tools as possible — as quickly as possible — to bridge the supply and demand gap without creating any long-term market repercussions.
NMPF and IDFA are grateful to Congress and the Administration for moving quickly to pass and sign into law the CARES Act. The NMPF-IDFA plan calls for USDA and the Administration to go above and beyond traditional programs and solutions to bring balance and certainty to the dairy industry in the months ahead. Through the CARES Act, Congress has deployed substantial financial resources to USDA. To ensure the U.S. dairy industry is intact following the COVID-19 disaster, NMPF and IDFA request the federal government use every financial tool in its arsenal to bring balance to the dairy industry as quickly as possible. The organizations also ask that USDA harness the productive capacity of U.S. dairy to address the growing and widening food insecurity facing many Americans by redirecting wholesome, nutritious dairy foods to food banks and national nutrition programs.
However, not every dairy group agreed. The American Dairy Coalition said in a press release, “Much about this plan deserves applause: It bluntly assesses the upheaval caused by plunging restaurant and school sales and rocketing grocery store demand. It also seeks to align the supply/demand gap as quickly and efficiently as possible.
“However, among its “producer initiatives” is a fatal flaw that could spur more market disruptions than it resolves: It proposes to pay dairy producers $3 per hundredweight on 90 percent of their production — if they cut production by 10 percent from a March 2020 baseline. Unfortunately, the arbitrary March benchmark will not work. For the dairy industry to have a meaningful and market-effective impact, production needs a different baseline — it must be seasonally adjusted and region specific.
“Dairy production traditionally drops during the nation’s warm weather months, so supply numbers are already sloping downward and are baked into production estimates. Asking producers to trim 10 percent from their March numbers would essentially mean little to no change in the nation’s milk product inventory, as that amount already is built in.
“Using the March baseline would lead to an insufficient decrease in milk inventory — one that does not account for market conditions. In the process, it would create more disruptions, not less, as the nation’s surplus would essentially remain in place. The American Dairy Coalition appreciates the hard work NMPF and IDFA have done to accomplish this Milk Crisis Plan for the USDA, but we must fix this flaw so that our nation’s dairy producers can begin healing from this horrific nightmare. “
The COVID-19 pandemic has upended the U.S. dairy supply chain in a matter of weeks, lowering milk prices, sapping demand by shutting down most restaurants and other foodservice businesses, and bringing unprecedented challenges to our dairy farms and processors.