New York/London/Washington —They’ve dumped millions of litres of milk, slowed output and sold off older cows. Global governments stepped in with stimulus cash that provided some much-needed temporary relief, helping benchmark Chicago milk futures to almost double in two months. But once the aid money starts to dry up, many producers will confront tough choices again: suffer through losses, or pack it all in and shut the farm.
“Are people still at home in three to six months, ordering pizza to watch a football game? Or are they conserving their money, and will they stop ordering out?” said Matt Gould, editor at Dairy & Food Market Analyst. “At no point have we seen the light at the end of the tunnel, and even now with prices spiking, we could be in the ditch in three to six months.”
The industry is valued at about $700bn, but it’s facing a reckoning. For years, milk demand has been on the decline in developed countries. That’s only accelerated recently as more consumers turned to plant alternatives amid climate concerns. Wisconsin farmer and dairy consultant Daniel Olson is betting on retrenchment. Many producers are likely pulling in more profits now than they were pre-pandemic, Olson said, but he’s doing everything he can to lock in prices, with futures still trading near $21 for 45kg, the highest since 2014.
In 2019, there was a 9% drop in licensed US dairy herds, a record high, Vitaliano said. “I expect there will be a similar shake-out this year.”
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