US dairy farmers welcome pandemic aid as recovery continues & consumption hits 60-year high

20 Aug 2021 --- US dairy farmers are breathing a sigh of relief after the government says they are eligible for pandemic-related financial help after months of struggling with the impacts of COVID-19.

The US Department of Agriculture (USDA) has unveiled a Pandemic Market Volatility Assistance Program – but its promised package of US$350 million in pandemic assistance might not be enough in some cases, according to Alan Bjerga, senior vice president of communications for the National Milk Producers Federation (NMPF). 

“Federal disaster assistance that addresses the unique challenges dairy farmers have faced from the COVID-19 pandemic is welcome. The improvements to Dairy Margin Coverage will better serve farmers for years to come, and the Dairy Donation Program is an exciting opportunity that helps not only dairy, but food insecure families nationwide,” he tells FoodIngredientsFirst.

“We do have concerns about how some of these additional funds are distributed among dairy producers. The low limits on milk production volume covered by some of the assistance means many family dairy farmers will only receive a portion of the losses they incurred on their production last year. Disaster aid should not include limits that prevent thousands of dairy farmers from being meaningfully compensated for unintended, extraordinary losses,” Bjerga stresses. 

NMPF members market more than two-thirds of the US milk supply.Market abnormalities caused by COVID-19
As in many other food sectors, the US dairy industry has seen its margins squeezed throughout the pandemic. 

The government’s disaster aid program is designed to help producers who have been left behind and build on progress towards economic recovery.

The disruptive impacts of the COVID-19 pandemic on the US agricultural system have been broad and varied. They also follow several years of trying production and market conditions for US farmers. 

In 2017 and 2018, several hurricanes pummeled US farms; 2019 brought historically poor planting conditions and retaliatory tariffs cut potential for our agricultural exports compared to 2017.

But despite all this turmoil, Bjerga says the future of dairy is bright. Despite a move for some consumers into plant-based beverages and the growing number of people following a vegan diet, this is not significantly impacting the US’s appetite for dairy. 

Dairy’s role to people and the planet
There have undoubtedly been some structural changes over the past decades, the two main ones being the consolidation into fewer dairy farms and the consumer shift in dairy consumption away from fluid milk and more toward cheese and other products. 

“Much gets written about fluid milk’s decline, but in reality, per-capita US dairy consumption is at its highest in six decades and shows no signs of abating,” continues Bjerga.

Meanwhile, the share of US dairy production that’s being exported is at record levels, making US dairy products of increasing global importance, he notes.

“At the same time, dairy has also done a good job of proactively meeting concerns about climate change and agricultural stewardship, with an industrywide commitment for net-zero carbon emissions by 2050. The world is evolving, but dairy continues to be a crucial part of diets, as it should be given its health benefits and commitment to sustainability.”

He also adds that success to net-zero is achievable – but it depends on further technological development, followed by the widespread adoption of these technologies. 

“That means the market and public-sector incentives will be needed, and that’s become a major focus of our work representing dairy cooperatives.”USDA will provide about US$350 million in pandemic assistance payments to dairy farmers who were impacted by the pandemic.

“Fluid-milk consumption has been slowly declining for four decades, with or without plant-based beverages,” Bjerga continues. “Such beverages play their role, but consumer research shows that actually, it’s not the biggest role – most fluid-milk consumption has gone to bottled water, sports drinks, and so on.”

“There’s been a dip in demand for fluid milk, of which plant-based beverages have played some role, but not a dominant one.”

Last month, FoodIngredientsFirst reported that dairy demands are as diverse as the consumers themselves, with Innova Market Insights highlighting that attitudes and opinions can vary widely from one category to the other. 

The market researcher also flags that growing competition from plant-based alternatives will increase pressure on the dairy industry to understand consumers’ needs and target them accordingly.

Last September, statistics for dairy consumption in the US hit a “rate never seen before.” 

Bjerga adds that “There hasn’t been a dip in demand for dairy – that’s at a 60-year high.”

According to data from the USDA Economic Research Service, strong domestic demand for cheese, butter, and yogurt notably is driving growth for the sector.

Notably, while some dairy representatives are reassured by the data and believe it shows sustained resilience amid the COVID-19 pandemic, others say the statistics do not fully represent total milk consumption.

Rising from the pandemic’s effects
NMPF is “hopeful” that the pandemic experience has encouraged the re-assessment of consumer values that will only reinforce the importance of dairy. 

Butter sales rose sharply during the pandemic, as did consumer purchases of fluid milk, adds Bjerga. 

“Consumers were baking. They were feeding their children at home. They needed the affordable, convenient package of nutrition that dairy provides. We hope that continues. Dairy’s sustainability commitments predate the pandemic, and consolidation is likely to continue.”

At the heart of dairy remains relevant to the public, and the pandemic only underscored the continued relevance of US dairy, he affirms. 

“Fluid-milk consumption has been slowly declining for four decades,” Bjerga comments.The road to economic recovery
The pandemic assistance is part of a larger package, including permanent improvements to the Dairy Margin Coverage safety net program.

“Family dairy farmers have been battered by the pandemic, trade issues and unpredictable weather and are the life-blood of many rural communities throughout Vermont, the Northeast and many other regions. This targeted assistance is the first step in USDA’s comprehensive approach that will total over US$2 billion to help the dairy industry recover from the pandemic and be more resilient to future challenges for generations to come,” says US agricultural secretary Tom Vilsack.

Outside the pandemic assistance, USDA will also improve the Dairy Margin Coverage safety net program updating the feed cost formula to better reflect the actual cost dairy farmers pay for high-quality alfalfa. 

This change will be retroactive to January 2020 and is expected to provide additional retroactive payments of about US$100 million for 2020 and 2021. 

Unlike the pandemic assistance, this change will also be part of the permanent safety net, and USDA estimates it will average about US$80 million per year or approximately US$800 million over ten years for dairy headed into the upcoming Farm Bill. 

By Elizabeth Green