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Stephenson: Reducing Milk Supply is Solution to Dairy Glut Issue
Wisconsin Ag Connection - 04/08/2020

With so much milk being produced in the United States this spring coupled with the sudden halt for dairy product demand, Dr. Mark Stephenson says one of the best solutions for saving the industry is to cut production as quickly as possible. The director of Dairy Policy Analysis at the University of Wisconsin-Madison discussed the idea on Tuesday during the inaugural Dairy Signal program, an online educational initiative launched by the Professional Dairy Producers of Wisconsin.

Dr. Stephenson says there has been a larger than normal spring flush in milk production in the U.S., though Wisconsin's output has been down because of last year's poor feed quality. He feels it will be difficult to stop the market price free fall without action on the farm level--which he estimates would require a 5- to-10 percent reduction in supply.

"Farms can either dry up cows that have mediocre performance or cull some of the herd," he suggested. "However, the meat sector is also seeing its own share of disruptions because of labor shortages and a flood of animals going to market. In fact, last week one of the region's largest meat processing plants closed down because of COVID-19 spreading within their workforce."

He also indicated that farmers should be prepared for the unexpected for months to come.

"Markets hate uncertainly and we are in the midst of a pandemic not seen in over 100 years. If that's not uncertainty, then I don't know what it. That's causing limits up and limits down in the market as people are trying to figure this out."

When looking back at other volatile market swings of the past, Stephenson noted that even a small one-percent change in production or consumer buying trends had a seismic effect on farm-paid prices. With the Coronavirus turning the entire world upside down, everyone from the producer to the consumer will need to hold on for a wild ride, he said.

Chad Vincent, CEO of Dairy Farmers of Wisconsin, also appeared on the online program Tuesday. He hopes to see state and federal programs help move some of the surplus products to people in need, which includes people just now applying for unemployment benefits.

"We just saw a 70 percent drop in dairy sales in past few weeks as more than half of all restaurants have closed their doors," Vincent said. "We need to face the fact that our eating habits are different at home than when we go out to eat. This is affecting our market as it's not easy for processing plants that make cheese to convert over to fluid milk to supply grocery stores."

Before concluding, PDPW Director Shelly Mayer gave an emotional statement to consumers in an effort to help them understand the crisis taking place on many dairy farms.

"When you think of words like 'dump' or 'dispose,' we often associate these words with 'garbage' and that makes us feel very sad. We as farmers harvest nutrients from the fields... in the form of corn, soybeans... and our cows turn that into nutritional food for our bodes. If we need to dump our milk, we are basically putting those nutrients back into the soil and not just throwing it away like garbage."

Dr. Stephenson also encouraged farmers who are feeling down and depressed to talk with someone; whether it be a family member, a professional councilor or the Wisconsin Farm Center.

"Farmers are the most resilient people we know. This is really difficult timing because we just concluded five years of low prices and 2020 was supposed to be the year we saw a turn-around. But you need to understand that this is not your fault."

The Dairy Signal line-up continues at noon on Wednesday with presentations by Dr. David Kohl, professor emeritus with Virginia Tech, and Jason Karszes of Cornell University's PRO-DAIRY program. They will talk about economic strategies dairy farmers can use to manage their businesses during challenging times.

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