Coronavirus shutdown sends milk prices spiraling

For some dairy farmers, government aid 'can't come soon enough'

Milk prices are crashing as the COVID-19 pandemic chokes off most of the industry’s usual customers.

Class III milk, used to make cheese and traded at CME Group, has plunged by 38 percent this year to $0.12 per pound, as “stay-at-home” orders have paralyzed the U.S. economy and crushed demand for dairy.

“With the closure of all the restaurants -- hotels, cruise ships, airlines working at just a fraction of what they used to -- school milk, school lunch programs, all of that dairy demand is gone,” Joe Schmit, dairy risk manager at Rice Dairy, a Chicago-based dairy risk-management solutions provider, told FOX Business.


“You just can't replace that demand with retail grocery store sales alone,” he added. “So that's left us with a little bit of a glut, and sadly there's nowhere for our processors to go with that milk other than to just dump it out.”

Total U.S. dairy demand has fallen by 12 percent to 15 percent since the COVID-19 outbreak, according to the Dairy Farmers of America.

About half of total demand comes via grocery store sales and the other half is derived from the food-services industry, which includes restaurants, hotels and airlines.

Estimates show that while demand at grocery stores has jumped roughly 20 percent since the outbreak, it has fallen by about 40 percent for food services.

The "biggest part of the problem has been the closure of restaurants, food service and avenues of distribution," Schmit said.

Making matters worse is that the largest export markets, including Southeast Asia and North Africa, have been shut down due to COVID-19.

The U.S. exported $6 billion of dairy in 2019, the highest in five years, according to the U.S. Dairy Export Council. Anywhere from 12 percent to 70 percent of the U.S. milk crop is exported, whether it's in cheese, dried milk or whey form.

As part of the $2 trillion CARES Act, a bill passed by Congress to aid the individuals and businesses hardest hit by COVID-19, the Trump administration allocated $2 billion to U.S. farmers.

U.S. Department of Agriculture Secretary Sonny Perdue is scheduled to hold a press conference on Friday about the relief.


“At the direction of @RealDonaldTrump@USDA is using all financial resources we have been given to develop a program that will include direct payments to farmers & ranchers hurt by COVID-19 & other procurement methods to help solidify the supply chain from producers to consumers,” Perdue tweeted on April 9.

While aid checks will help, what dairy farmers, and the rest of America, are hoping for is the economy to reopen and return to normal.

Until that happens, dairy farmers will continue to dump thousands of gallons of milk each day.

“We’re waiting to hear what the assistance is going to look like," Schmit said. "We know it’s coming, but for some of these dairymen, it can’t come soon enough."