ROSEMONT, Ill. — The impact of the COVID-19 virus has delivered a gut punch to American commodity prices.
“The impact has probably been the most significant to the dairy industry and dairy farmers with milk prices declining by 26%,” said Tom Vilsack, U.S. Dairy Export Council CEO and president, during a news conference.
“The dairy industry was recovering from a long period of difficulty with a lot of momentum on exports at the end of 2019 and beginning of 2020,” Vilsack said.
“Our February numbers showed dairy was exporting at a rate better than last year, and we had six consecutive months of growth despite the port issues at the onset of the virus.”
However, the coronavirus had the same impact on export markets as it has had in the United States.
“With food service and schools closed, the milk that would have been consumed in those places now has to find a different home,” Vilsack said. “And that product is in competition with the exports we would have otherwise been able to do.”
“On the retail front, we saw initial panic buying with fluid milk consumption going up 55%,” said Tom Gallagher, CEO of Dairy Management Inc. “Recent data shows that number down to single digits and some at or below pre-virus levels.”
In addition, Gallagher said, about 60% of U.S. butter is sold through food service.
“We sell from 40 to 50% of our cheese through food service, as well as lots of milk for coffee, in containers or in milk shake mix,” Gallagher said.
“Farmers are viewed as heroes, so we’re trying to connect heroes with consumers with some of our programs,” he said. “We believe it’s time to remove the disconnect with the consumer who is interested in the value chain back to the farmer.”
“Every day is new in terms of challenges,” said Barb O’Brien, president of Dairy Management Inc. “We are ensuring kids have access to school meals since it represents 7% of the milk supply so we are working to ensure it’s operational.”
In partnership with Feeding America, O’Brien said, the dairy checkoff is focused on marrying excess supply of dairy products with hunger programs.
“It is a very serious situation for the dairy industry, and this industry is in a unique circumstance compared to other commodities,” Vilsack said. “It’s not just about purchasing commodities and putting them in a warehouse — it’s purchasing commodities and delivering them to food banks that are in desperate need.”
“At retail we are helping to address the pinches in the supply chain to get the product out of the warehouse and into the store,” O’Brien said. “We are looking at what we can do as we understand consumer behavior.”
In Southeast Asia, Vilsack said, the Dairy Export Council made an investment to locate a Center for Dairy Excellence in Singapore.
“The team is working to plan a series of webinars and virtual classes to show how to use U.S. cheeses in a variety of ways and recipes,” he said. “They are on a curve to recover from the virus quicker than in the U.S., so we hope by maintaining these contacts U.S. dairy products will be on top of mind as the restaurants begin to reopen.”
In addition to the coronavirus, the dairy industry faces challenges in Mexico.
“Their economy is soft and hurt by the recent oil price decline and the peso is devalued,” Vilsack said. “We are keeping an eye on ways we can work with the Mexican dairy industry to encourage consumption because it is a key market for us.”
One of the main messages for the Dairy Export Council is that the United States has dairy products and the cows don’t know there’s a virus.
“Farmers continue to work to produce milk, processing plants are still making cheese and other products, so there is no need for retailers to restrict the amount being purchased by consumers,” Vilsack said. “There is no reason on the export side to believe that any order can’t be filled by the U.S. dairy industry.”
Before the COVID-19 struck the United States, from 15% to 16% of the dairy production was milk solids placed into the export market, Vilsack said.
“Southeast Asia carried us in February,” he said.
That’s why it is important for the Center for Dairy Excellence to continue working during the worldwide pandemic.
“If we were to turn off that program for a couple of months, we would have a significant decline in exports now and in the future because we would cede to the competition,” Vilsack said. “It would be very difficult for us to regain the momentum we had with higher volumes.”