Dairy farms worry about staying afloat during pandemic

Milk prices are low, and largest customers — restaurants and schools — have drastically cut orders

Published April 16, 2020 by Sydney Lake

With milk prices dropping to the lowest point in years during the COVID-19 pandemic, Virginia dairy industry representatives fear that as many as 30 to 40 of the commonwealth’s 450 dairy farms could be forced out of business by the end of the year.

The dairy industry in Virginia has been in decline for several years now, with more than 100 dairy farms closing in Virginia since 2018. In 2019, nearly one Virginia dairy closed per week, said Matthew Nuckols, a former Virginia dairy farmer who now works for the Virginia Farm Bureau Federation as a grassroots membership and fundraising specialist.

“This is coming at a challenging time for dairy farmers, to say the least,” Nuckols said.

Virginia dairy farmers such as Rhonda Ware of Triple R Dairy Farm in Crewe are concerned about how this will affect their businesses in the long term. About 98% of dairy farms are family-owned and -operated operations like hers.

“The futures prices, like the stock market and everything else, look absolutely horrible,” said Ware, a third-generation dairy farmer. “We’re all just holding our breath, hoping that we all come out of this.”

Due to the sudden downshift in demand from restaurants, schools and other institutions, many dairy farmers have been forced to discard huge amounts of milk before it could be delivered to processors to be pasteurized as fluid milk or be processed into cheese, yogurt, butter or other dairy products.

The time it takes for milk to be harvested from cows to getting sold at grocery stores is a quick, 48-hour turnaround, with no wiggle room to alter production cycles. Not all dairy farms have equipment to produce milk that can be used for cheese, yogurt or other dairy products, so it has been impossible for those dairy farms to pivot to produce other products. And that’s not to mention the fact that demand for those products is also down.

Meanwhile, dairy production isn’t stopping. “You can’t just turn off a cow,” said Brittany Jones, a dairy farmer at Blacksburg-based Richlands Dairy Farm. “It doesn’t work like that.”

And because the milk supply doesn’t stop, dairy farms aren’t able to furlough employees, said Eric Paulson, executive director of the Virginia State Dairymen’s Association.

Despite the declining demand, Virginia dairy farms haven’t been forced to dump their milk supplies yet, but some dairy co-ops in the commonwealth have been forced to discard milk due to over-capacity at manufacturing facilities, Paulson said.

Although grocery stores continue to purchase milk, roughly 40% of dairy products are bought by food-service establishments, Paulson said.

“At the grocery store level, they’re obviously selling a lot more product, but it’s not enough to offset the food from restaurants,” he said. And although many restaurants continue to offer takeout and some school systems are running meal pickup programs from designated sites, these sectors have reduced their dairy orders by 80% to 90%, Paulson adds.

Giant Food, which has 59 grocery stores in Virginia, has been increasing its milk orders by 30% to 60% depending on the week, Giant Food spokesperson Daniel Wolk said.

“We are ordering unprecedented amounts of [dairy] product and we are going to extraordinary means to get product to our stores,” he added. “We have daily calls with our regional milk supplier, and we have worked together to ensure we meet our customers’ needs.”

Wegmans Food Markets Inc., which operates 12 grocery stores in Virginia, hasn’t changed the way it orders dairy products, despite the pandemic.

“We continue to place [dairy] orders at the same rate as before the pandemic,” said Wegmans spokesperson Marcie Rivera. “We understand demand has decreased in other areas, like schools and food service.”

At Ellwood Thompson’s, an organic grocery store in Richmond, the story is a bit different. Grocery manager Jordan Montero said that his shop’s usual dairy source — the Wisconsin-based Organic Valley co-op — has been out of gallons of whole and 2% milk, although Ellwood Thompson’s has been able to order half-gallons in recent weeks.

Organic Valley is a cooperative of 1,800 U.S. farms that produce farm products sold in regional stores. Some of its dairy farmers are in Virginia, mainly in the Shenandoah Valley.

A spokesperson said that a “shift in eating behaviors due to social distancing” has caused a decline in restaurant demand and, at the same time, increased demand from retail groceries.

“We are doing the best to redirect the milk intended for food service to retail,” Organic Valley spokesperson Elizabeth McMullen said in a statement. “We are working closely with our processors to maintain service levels to the stores … and anyone who has an issue finding a product can contact our consumer relations department.”

Ellwood Thompson’s sells about 12 Organic Valley half-gallons of whole milk a day, along with about 20 gallons of whole milk a week and 15 gallons of 2% milk per day, products that come from Mt. Crawford Creamery in Rockingham County. The store, Montero explained, mainly sells products that are produced within 100 miles of Richmond and are either designated organic or produced without GMOs.

“Right now, we’re out of gallon milk,” Montero said Wednesday, the day before the store’s next delivery. “I don’t know exactly why. Possibly panic buying.” Many shoppers are buying baking ingredients during the quarantine, another potential source of greater milk demand, he noted.

But the changes in distribution and demand are still not enough to hold up the dairy industry.

The bottleneck in dairy product sales is not because there’s not enough milk, but because the supply chain wasn’t set up to serve all grocery sales, said Jeremy Moyer, a dairy farmer at Amelia County-based Oakmulgee Dairy Farm.

“We’re just anticipating really low prices at least for April, May and June,” Moyer said. “Until processors change their packaging or what they’ve been processing to meet the grocery demand versus the restaurants and school demand, there’s still going to be low prices.”

The United States Department of Agriculture and the National Milk Producers Federation are working to purchase these excess products to redirect them to food banks and school programs, Paulson said, so that dairy farmers are able to make up for the significant losses they’ve faced.

“Unfortunately, the prices for milk were supposed to be better this year,” he said. “Maybe they still will be. Anything that’s going to suppress milk prices is just going to make it another very tough stretch.”

Kate Andrews contributed to this report.

Subscribe to Virginia Business.

Get our daily e-newsletter.