Shuttered restaurants and empty schools are sending demand for milk and cheese plunging, and wholesale prices are not expected to hit bottom before summer.
Some dairy farmers in Vermont are disposing of milk because there is nowhere to take it as the supply chain backs up, according to Dairy Farmers of America, which merged with the St. Albans Cooperative Creamery last year.
"Yes, it is happening in Vermont, " DFA spokesperson Kim O'Brien said. "No one wants to ask a farmer to do this, but we're all working under really crazy circumstances that are out of our control."
Mike St. Pierre, who hauls milk throughout the northwest corner of the state, said he’s dumped some of his own milk due to a backlog at the St. Albans creamery, but nothing like his nephew’s huge 5,000-head farm.
“Instead of bringing it to the co-op, they dump a couple loads a day right in the manure pit,” St. Pierre said Friday.
The co-op is doing something similar. It’s taking delivery of whole milk, removing the cream, and then dumping five or six loads a day of the remaining skim milk in area pits, he said.
The state’s signature industry finds itself acutely vulnerable to the economic malaise the pandemic is spreading. A recent survey of 64 Vermont agricultural businesses showed that 9 percent had closed since March 19, while another 43 percent had partially shut down. All told, the businesses reported losing $8.2 million over just 11 days, Tebbetts said. Dairy represents about 70 percent of the state’s agricultural output, and its outlook is particularly grim.
The state’s 654 remaining dairy farmers are facing “dramatic” price drops in the coming months, he said.
“We’re really concerned about every single dairy farmer in Vermont,” Tebbetts said.
By June, milk prices paid to New England dairy farmers will likely have fallen 12 percent compared to this past January, while margins — or the amount farmers receive after feed costs — are expected to drop by nearly 20 percent, according to the latest estimates by New England dairy co-operative Agri-Mark.
Diane Bothfeld, the state’s director of dairy policy, said daily activity on the national commodity exchanges has her concerned that dairy farmers "are about to get hammered" in coming months.
The outlook is particularly painful given that, following the resolution of federal trade deals, 2020 had been shaping up as the year for prices to rebound from a years-long trough, she said.
As shoppers stocked up on groceries following the state’s stay-at-home orders, dairy sales initially got a bump. But the closure of restaurants for eat-in dining combined with the dismissal of schools and colleges have dried up sales of institutional milk and cheese, she said.
Diversified dairies with strong retail brands, like Cabot Creamery, may weather the downturn better, but specialty cheese makers are getting creamed.
“The projections for the next six to eight weeks indicate there could be catastrophic losses for many of our cheese makers,” Tebbetts said.
Vermont’s artisan cheeses are often sold at high-end cheese shops across the nation, but changes in shopping habits during the pandemic have foreclosed that sales channel.
“During this whole staying-at-home thing, getting to the grocery store is really important, but getting to the cheese store, well—” Bothfeld said.
Sales of cheeses that need to be cut up and individually wrapped have suffered as grocery stores don’t have staff to devote to that right now, Tebbetts said.
Access to foreign markets has also been interrupted by a shortage of dock workers and truckers, as well as restrictions other nations are placing on imports from the U.S., Bothfeld said.
Still, there are a few bright spots in agriculture in the state. Farmers with strong online sales channels, community supported agriculture programs and even some farm stands are seeing a surge as people change traditional shopping habits, Tebbett said.
The agency is working to help farmers understand what relief they may qualify for under the $2 trillion federal stimulus. Tebbetts told the Senate Agriculture Committee that he’s also asking the federal government to use some of the relief funds to set a four-month floor for milk prices at $19.50 per hundredweight, slightly above where it stands now.
The agency is also looking for ways to turn surplus milk into longer-lasting products like yogurt in the short term, and possibly make it available to Vermonters in need. Milk needs to be processed with 72 hours of leaving the farm, so a number of logistical details, including distribution and storage capacity, are needed to pull it off, Bothfeld said.
“From farm to fork, we have some sobering issues that we're going to have to deal with over the next few weeks and months,” Tebbetts said.