From left to right: Randy, Rick, Levi, and Hank Choate with an aerial view of Choate’s Belly Acres superimposed behind them.

Demand is overshadowed by supply as dairy farmers forced to dump milk

By Christine MacIntyre
Exponent/IrishHillsLive.com staff writer

Choate’s Belly Acres, a sprawling 2,000-acre dairy farm in Liberty Township, is one of the countless state dairy farms feeling the impingement of the current pandemic. COVID-19 and a spring flush of dairy products aren’t doing the American dairy farmer any favors.

Recent news headlines regarding farmers having to dump large volumes of milk have stirred questions as to how and why, exactly, the virus negatively impacts the dairy industry.

Speculations have been made that cows are somehow affected by the coronavirus, resulting in damaged milk. This is not true, say experts. The FDA indicates in a statement released March 27, 2020, “Currently, there is no evidence of food or food packaging being associated with transmission of COVID-19.”

However, the dairy industry is being affected in a variety of ways during this unique time…none of which have anything to do with the quality of the cows’ milk.

Hank Choate, CEO of Belly Acres, was born and raised a farmer, stating, “I’m lucky I am still on my first job.” He has been an “official” farmer for going on 52 years and has witnessed the rise and fall of dairy fortunes numerous times.

Belly Acres is remnant of his heritage, having been in his family for seven generations. The operation includes approximately 500 head of Holstein cattle and grows corn, soybeans, wheat, and alfalfa; most of which feeds their herd.

Choate says the pandemic is slamming dairy farmers hard.

Backtracking to the third week of January, “the value of milk wasn’t great, but it was enough to cover my costs and allow for a margin,” says Choate. Now, only two months later, the value of milk is continuously diminishing. “You’d have to rewind 20 years to 2000 to arrive at the same value milk is at now.” Choate says his revenue is down somewhere between $70,000 and $72,000 this month alone.

While the demand for dairy products at grocery stores has increased, K-12 schools, universities, restaurants, and other food service entities are purchasing significantly fewer dairy products due to the quarantine orders set forth by state government. “These entities account for about 48% of the industry,” says Choate. The plunge in demand for dairy products has led to a surplus of supply, prompting a plunge in prices.

Milk value continues to plummet, but cows produce more milk as temperatures rise in the spring.

Spring brings warmer weather which leads to cows’ natural tendency to produce more milk; however, there is essentially nowhere for the milk to go.

Since the demand for milk is lower than normal, capacity has become an issue. Perishable products such as milk, cheese, and butter need refrigerated storage. Lack of cold storage space and limited shelf space continues to feed the surplus in supply.

Not only is supply largely overshadowing demand and limited storage ability a concern, some processing and packaging plants are either closed or limited, while others are bombarded with workload stemming from the surplus of product.

Once fresh milk leaves the farm, it is taken to the processing plant and goes through a pasteurization process, then moves on to be properly packaged for consumers. At this level of the farm-to-table process, milk surplus becomes an issue that is difficult to navigate.

Choate says that dairy products packaged for consumers at the store is not in alignment with the packaging used for distribution to restaurants, hospitals, and schools. This means the excess can’t simply be sent to grocery store shelves. “What I can say is that this is a complex situation, with a lot of variables,” said Choate.

Restaurants account for a high percentage of dairy sales, but restaurant closures has led to manufacturers left with excess products that aren’t properly packaged for grocery store shelves. “A large segment of the food chain is not consuming dairy products right now,” explains Choate.

In the face of an unfavorable supply and demand ratio, along with decreased workforce, and the logistics of packaging has led to milk being dumped.

Choate says that his farm, in particular, is able to donate approximately 250 gallons per day to a Michigan co-op to whom he made an annual commitment a few years ago. That milk is distributed to food bank systems throughout Michigan.

“The logistics have to be present—raw product needs to be processed and pasteurized for consumption to be able to be donated. Not all dairy farms are set up for that,” says Choate. Michigan Milk Producers Association, of which Choate serves on the board of directors, donates 250 gallons of milk per day to Michigan food banks. Kroger Dairy donates processing and packaging and another entity donates the transportation.

“Things are moving. [Industry leaders] are continuing to discuss plans to help with refrigeration and storage limitations,” he said.

However, Choate says the near future looks bleak, as the value of milk plummets lower each month. As a producer, he is hit with a price that he hasn’t seen in 20 years, but his expenses have increased considerably. He is losing revenue just to keep producing.

“As far as the future of the dairy industry, the formula used to calculate the value of milk is changing and prices will continue to drop,” he said. According to the Dairy Market News provided by the United States Department of Agriculture, dairy’s value is predicted to decrease further as April comes to a close. They are hoping for a better forecast once the economy starts moving again.

This can be disheartening. After about four and a half years of shortfalls, the dairy industry had finally been on the upswing until COVID-19, he says.

Like businesses in every industry, Choate says that he, too, hopes to see improvements in dairy once the economy reopens and demand picks back up.

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