In 1983, a movie came out that shocked America. It was called “The Day After,” and it depicted what happened on several family farms near nuclear missile silos in the Midwest after the United States and the Soviet Union launched a full- scale nuclear war against each other. I was only 10 years old at the time, but I still remember my parents, teachers and others talking about that movie and what would happen if something like that would play out in real life. The thought of it was almost unfathomable.
Earlier this week I was looking up market information from this date in 2020, and the headline in the Daily Dairy Report was “Virus Could Take Toll on Dairy Demand.” In some ways, it seems like we are living in “The Year After.” I remember back in March 2020, I was at a meeting in Alexandria, Virginia, when I got the call that my son who was a freshman at Virginia Tech would be completing the spring semester online. Almost simultaneously, I got an email that we would have to transition to remote offices for an indefinite time period.
I remember suddenly being very aware of the people around me and wondering whether their cough or sneeze or hand gesture would cause me to somehow contract this deadly disease. Looking back, even with everything that was running through my mind at that time, I could not ever have imagined all that has happened and the impact it would have on our families, our society, our food system, and even our industry in this past year.
COVID’s Impact on PA Farms
In June 2020, the Center for Dairy Excellence initiated a Pennsylvania Dairy Producer Survey to study the impact that the pandemic had on our dairy farm community. We also wanted to document current demographics and trends among our dairy farm families. We received 711 surveys back, with 83 percent of those being from dairy farms currently in business at the time of the survey. Those who completed the survey represented just over 10 percent of our farms in Pennsylvania and had an average of 136 cows, with 107 heifers. The farmers completing the survey represented 55 of Pennsylvania’s 67 counties, and their annual herd average was 20,068 pounds, very close to the state’s average reported by USDA.
A portion of the survey focused on the effects of COVID. One challenge with this survey, though, was the date it was completed. No one knew the pandemic would continue to lag on months after responses were due. So those completing it did not fully understand the extent which the virus would impact their families and their farms. Still, the results were telling. Sixty farms indicated that they had to dump milk due to the pandemic, with respondents collectively dumping a total of nearly 2 million pounds during the March – May period. Farmers were also asked to indicate whether they plan to exit the business in the next 3 – 6 months due to the pandemic. Nearly 4 percent, or 22 farms, said they were likely to exit, with economics being listed as the number one reason why.
USDA just released its annual assessment of dairy farm numbers in the US and in Pennsylvania last month. The survey’s estimate in farm losses came out very close to USDA’s assessment. Pennsylvania lost 300 farms last year, or 5.3 percent, with about 5,430 dairy farms remaining in Pennsylvania as of December 2020. Farm numbers fell harder across the US, with total US dairy farms falling 7.5 percent to 31,657 farms. Pennsylvania remains ranked second in the total number of dairy herds, but our average herd size is nearly the lowest in the nation at 89 cows per dairy.
A Long Tailwind
With the pandemic having a huge impact on the marketplace, shutting down restaurants and food service and creating huge disruptions on our supply chain, dairy product stocks have been building through 2020. In the latest USDA Cold Storage Report, butter stocks in cold storage are up 81 million pounds from a year ago, or 33 percent, to 800 million pounds. Total cheese stocks are also up, with January total cheese storage up 44 million pounds, or 3 percent, to 1.398 billion pounds.
These mounting product stocks continue to weigh heavily on milk prices in 2021, especially with restaurants and food service still at limited capacity due to the pandemic. A growing milk supply also continues to weigh on market prices, with the nation’s dairy herd now at its largest level since 1995 and milk production up 1.6 percent from a year ago. Class III milk future prices on the CME for the next four months average around $17.50 per hundredweight before they are expected to rebound above $18 for the remainder of the year. Class IV prices remain low, with Class IV futures prices on the CME averaging right around $16 for the remainder of the year.
With any milk price recovery expected to be slow as our nation continues to rebound from the pandemic, dairy farm families should have a plan in place to manage your dairy through the tailwinds we face ahead. Whether that is sitting down with your family to do a business plan for the next 3 – 5 years, working with your employee team to identify areas to improve efficiencies, or developing a risk management plan to mitigate ongoing milk price volatility, that step in ensuring your own future in this, “The Year After,” will be critical to your business success.
The Center recently rolled out two new grant offerings to assist you in that effort. The first is called the “Dairy Excellence Grant,” which is a competitive grant that offers up to a 50 percent match level of $5,000 for improvements that will result in enhanced efficiency and productivity on your farm. The deadline to apply for that grant is March 31. The second is the Business Planning Grant, which offers up to $1,000 for farms to work with a consultant to create a business plan. For more information about either of these grants, contact the Center at 717-346-0849 or firstname.lastname@example.org.
Editor’s Note: This column is written by Jayne Sebright, executive director for the Center for Dairy Excellence, and published monthly in the Lancaster Farming Dairy Reporter.