In 2019, US dairy farmers produced around 2018.4 billion pounds of milk. The figure represents a trend of increasing production that has been consistent over the past decade. This is more milk than Americans can consume, meaning that the dairy industry is currently grappling with overproduction. For farmers, too much milk in the market means low prices that put their businesses on the edge.
Dairy Farmers Are Making Losses
While the dairy industry is reaching record milk production numbers, many farmers struggle to keep their dairy businesses afloat. Since 2014, the income from milk sales has not been enough to cover the cost of production. Meanwhile, retaliatory tariffs by countries such as China have complicated the problem, leading to extremely low milk prices.
Statistics from the USDA indicate that bankruptcy rates at dairy farms are at a ten-year high. Despite the losses, milk production per cow has grown by 10.8% since 2010 while investors are creating large farms, leading to more milk and even lower prices.
Farmers Are Dumping Excess Milk
In the face of persistent overproduction, several American farmers are dumping their milk. Dumping means disposing of milk instead of delivering it to processors or turning it into dairy products.While the situation was already bad for most farmers in 2019, the coronavirus pandemic made it worse in 2020.
Farmers experienced a drastic drop in demand from local customers, such as schools, food service providers, and restaurants forced to close or scale down operations. Dairy farmers dumped 2.7 to 3.7 million gallons every day because it was the most viable option. In an effort to stabilize prices, dairy farmers did cut production and the government’s food assistance program kicked in, which reduced surpluses and helped rally milk prices. Still, the pandemic left many farmers in an even more fragile financial position, and cases of failed firms are bound to rise.
The current market environment is remains very difficult for dairy farmers. Many farmers address the crisis by considering or filing a Chapter 12 bankruptcy. If you need help negotiating with your creditors or considering a Chapter 12 Bankruptcy (for family farmers and fishermen), DeMarb Brophy is the firm you should call.