Crying Over Dumped Milk

Over the past year, the average American has consumed an extra pound of dairy products. However, this is not a conscious decision in response to the Department of Health’s report that over 80 percent of the population’s dietary intake of dairy is below recommended levels. Consumers most likely fail to even notice their extra dairy intake, as most of this increase has stemmed from the American fast food industry, which, in coordination with the dairy marketing industry, has been sneakily substituting butter for margarine and creating cheesier menu options. This new priority for boosting dairy is a response to the milk glut that has plagued the United States for the past two years. But how could an excess of milk be unwanted? Who doesn’t love more ice cream, yogurt, and cheeseburgers? In actuality, the problem extends beyond American consumption habits. A surplus of over 43 million gallons — enough to fill 65 Olympic-sized swimming pools — has disastrous effects on dairy farming. Solutions to the glut thus far have focused mainly on how to increase consumer demand for dairy products, but to provide a more durable fix, milk processors should cooperate to limit their supply in order to raise prices and stabilize the market.

From January to September 2015, grocery store prices for a gallon of pasteurized milk dropped more than fifty cents. While this may seem like a normal, or even beneficial, drop for consumers, it actually represents a large problem for suppliers. In 2014, raw (or unpasteurized) milk prices were at a record high, which stemmed from high demand — in this case, from China. However, US production did not slow when Chinese imports of dairy fell drastically in 2015, due to the excess of powder milk inventories from previous years’ imports. The recent Russian embargo on US, European, and Australian dairy products also severely limits producers’ ability to sell their products in international markets. In response to the oversupply and decreased demand, prices have dropped 36 percent as of the fall of 2016. The fall in prices also reflects changes in domestic policy. For instance, in 2014, New York was the third largest milk producer in the US — thanks in part to Governor Cuomo’s campaign to loosen the caps on the number of dairy cows that could be part of a single operation. This statewide deregulation contributed to US overproduction.

Even though consumers only see the decreased prices at the grocery story, the problematic part of the milk surplus originates farther back on the supply chain. The surplus of raw milk overwhelms processing plants that produce yogurt and other products. Due to its short shelf-life, the unused milk must be disposed of — often dumped into the manure pits of the very same farmers who produced it. Over 43 million gallons have been dumped in fields and manure pits in 2016 alone. This constitutes a waste of one of the most precious resources in states with deep economic and cultural ties to dairy farming, like Vermont, New York, and Michigan. With the rise of big industrial farming operations and the general trend of the next generation not wanting to continue to run the family farm, the roughly 43,000 dairy farms across the country have dwindled in number. For example, Vermont’s dairy farms declined from 1,025 to 868 between 2010 and 2015, and New Hampshire has lost sixteen percent of its dairy farms in the first eight months of 2016.The current milk glut only expedites the problem, as smaller dairy farms with tighter profit margins struggle to make ends meet with prices so low.

Current policy solutions to the milk glut have generally focused on increasing consumer demand to bring it into equilibrium with the high supply. When the milk glut first became dire in the summer of 2015, schoolchildren were seen as a possible solution. The Special Milk Program aids the dairy industry and stimulates demand for milk by reimbursing schools with USDA funds for every half-pint of non-fat or 1% milk served. The dairy industry was optimistic that demand would increase and prices would rise once school began again in the fall of 2015 — unfortunately, that was not the case. The USDA, in response to these failed expectations, recently announced that it would purchase $20 million of cheddar from cheese processors. This roughly 11 million pounds of cheese will be distributed to programs like the National School Lunch Program. But this temporary solution does not remedy the issue.

This solution is not Soviet-style policy. This is industry-saving policy.

Apart from government intervention, private businesses have also proposed demand-side solutions. For instance, Dairy Management Inc. prompted McDonalds to substitute its margarine for butter, a switch which alone has increased commercial butter use by four percent. However, this solution comes with negative health repercussions for the consumer. Since margarine has less saturated and trans fat than butter, replacing it makes its fast food even fattier. Additionally, substituted butter or added cheese in crusts or tacos can make it difficult for consumers with high cholesterol or lactose intolerance to eat at certain restaurants. Though private solutions may be more efficient or less costly than public ones, they don’t have to take into account issues like public health.

While government and corporate measures have indeed increased per capita dairy consumption by a pound in the past year, consumer demand can only be manipulated so much; even with these extensive efforts, the milk glut still remains. Especially with the rising popularity of non-dairy beverages like almond and soy milk, it is very unlikely that the public and private sectors can expand dairy demand enough to counter the milk glut. Therefore, a supply-side solution is necessary.

Unfortunately, a supply-side solution is difficult because dairy farmers are facing a prisoner’s dilemma; each farmer wants to increase his production to make a bigger profit, but if all dairy farmers do this, the surplus milk drives down prices, hurting them collectively. Some form of cooperation can serve as a solution to this dilemma. If an overarching organization, like a dairy cooperative, sets a cap on each of its members’ production, the price of raw milk would increase thanks to decreased supply, and each farmer would reap gains in profit. The co-op would give an institutional backing to the supply limitation policy by facilitating a trust among members that no individual would violate the cap and increase production in order to take advantage of the higher price. During hearings for the 2014 Farm Bill, the House Agriculture Committee supported a provision to allow for dairy cooperatives to collectively limit their members’ milk production to prevent overproduction in times of low prices. There are currently around 30 dairy cooperatives in the US that collect, transport, and market the raw milk from their member farms, and provide members with industry resources and news. If these co-ops worked together to set a standard that in times of crisis, each member had to limit their production to milking a lesser number of cows a day—say, 300 instead of 400—each farmer would receive a higher price per gallon, keeping their businesses solvent in the long term.

However, former House Speaker John Boehner dismissed the proposed policy, saying it would only worsen the current “Soviet-style dairy program in America today,” as the individual farmer would lose autonomy over his own farming practices. However, this solution is not Soviet-style policy. This is industry-saving policy. While cooperation and a slight loss of individual control over farming capacity can be difficult to come to terms with, at the end of the day, no farmer wants to see his product and labor wasted through milk dumping. While customers may relish low prices per gallon or cheesier fast-food menu options, they should be aware that this is a reflection of the difficult times dairy farmers are facing. Now is the time to cry over spilled milk — before dairy farms become a relic of the past.

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