When freed from institutional food-police, what are consumers choosing?

_DSC0830Bad news meets dairy good news during COVID-19 pandemic

By Sherry Bunting, Farmshine, Friday, March 27, 2020

BROWNSTOWN, Pa. — We will get to the good news, but first, the bad news…

These are tough times for Americans, and dairy farmers are hearing from their cooperatives and industry in such a way as to put a black cloud of doom over 2020.

Farmers are getting letters and phone calls stating milk base penalties will be strictly enforced beginning this week, in the case of Land O’Lakes, MDVA, DFA — for example — which ask for “voluntary milk reductions” and make plans for dumping milk on farms and at plants as “potential plant closures” meet spring flush.

They indicate that the ability of plants to process milk could “worsen,” giving folks the sense that the ability to process all the milk is already bad. And the dairy industry is preparing its farmers for the possibility of no compensation for displaced / dumped milk.

National Milk Producers Federation’s bulletin and press releases this week state they are seeking three things from the federal government — asking to reopen 2020 Dairy Margin Coverage enrollment, to purchase additional dairy products for humanitarian feeding programs, and to compensate them for “milk disposal” they deem to be “a real possibility as logistical challenges on the farm and at manufacturing plants may create severe disruptions.”

In fact, just 11 days into the COVID-19 national emergency declaration, NMPF came out with an estimate that the dairy industry’s losses “may exceed $2.85 billion”. Analyst after analyst is coming out with new forecasts — projecting milk prices paid to farmers could fall well below pre-COVID-19 forecasts and conjuring up images of 2008-09.

While the pessimistic psychology in these letters, phone calls and industry proclamations is peppered with platitudes such as “we’re in this together” and “we’ll rise to the challenge”…  dairy farmers are already rising to the challenge all day every day producing the milk that consumers are turning to in their time of grave health concern.

The psychology in the letters and phone calls received by farmers stands in stark contrast to the good news.

Now for the good news…

A silver lining became obvious last week and is continuing this week. Consumers are reaching for the jug! In fact, they are reaching for so many jugs that some stores are reportedly limiting milk purchases to one gallon per shopper.

They are also reaching for cheese, butter, yogurt and other dairy products as stores and plants scramble to restock.

While the Dietary Guidelines Advisory Committee is poised to further clamp-down on the allowable percentage of calories from saturated fat (sources say new guidelines might drop to 7% instead of the current 10%!), what are consumers doing?

Consumers are currently free from the government’s flawed and unhealthy “food police” nonsense that the Dietary Guidelines foist upon us by dictating our nation’s institutional feeding and foodservice in schools, daycares, workplaces — even restaurants.

Those dairy farmers attending the dairy checkoff question and answer session in Chester County, Pa. on March 5 heard firsthand from DMI leaders that dairy checkoff foodservice “partners” — like McDonalds – “want to meet the dietary guidelines on saturated fat and calories,” which is why their meals, especially for children, only offer fat free or 1% milk and it’s why the cheeseburger is not on the Happy Meal board. (But you can get a slice of cheese on that kid’s burger if you ask for it, and you can get whole milk in your hot chocolate, they say, if you ask for it.)

In our collective American lives — pre-COVID-19 —  stealth-health according to government rules has been in effect more than we realized.

The point here is this: Supermarkets are where consumers get to choose what they want to feed their families when the menu is theirs to create. And consumers are learning that saturated fat is not to be so-feared, that Whole milk has less fat than they thought, and that Whole milk and dairy products provide more healthy benefits than they ever thought — including immune-building benefits.

Yes, milk education works. As soon as consumers get to choose freely, what are they choosing? They are choosing milk and dairy, and they are choosing whole milk over all other forms — when it is available.

While DMI leaders talk about “consumer insights” and “moving to where the consumers are” and “moving them away from the habit of reaching for the jug to try innovative new products”… what are we seeing when all the stealth-health controls are lifted and people are home choosing what they will feed their families during COVID-19 “social distancing” and “sheltering in place”?

We see them choosing the truly healthy comfort foods. They are choosing whole milk and 2% gallons and half-gallons, butter, full-fat cheeses and red meat for their families.

These items are quite literally “flying off the shelves.” This phrase is used in report after report this week about the demand pattern that is unfolding.

This supply-chain shift is something the dairy industry is wholly unprepared for, as the path charted for dairy processing and promotion has been so heavily linked to flawed dietary guidelines, institutional feeding, foodservice chain partners and new, more expensive, innovative products — that the concept of filling so many jugs with healthy, affordable, delicious milk is a bit off the charted path.

Even USDA Dairy Market News observed in its weekly report on Friday, March 20th what we also reported to you from our sources in Farmshine last week — that the surging demand at the retail level is more than overcoming reductions in sales to schools and foodservice. In fact, USDA DMN reports that retail milk demand is “overtaking inventories” and that retail orders are “heading into new territory.”

Pictures of empty dairy cases populate social media posts. And yes, USDA DMN confirms that Class I milk demand is ranging mostly from “strong” and “surging” in the West and Midwest, to “extraordinary” in the Northeast, to going “haywire” in the Southeast.

Given that the spring flush has begun, the current surge in fluid milk demand means less of this extra milk will go into manufacturing — as long as consumers continue the current level of fluid milk buying and as long as the milk is in the stores for them to buy.

This pattern should help the surplus butter situation, which was revealed again in last week’s February Cold Storage Report. Last year ended with inventories of butter up 18% compared with the end of 2018. The February report showed butter storage was still bursting at the seams.

But earlier this week, at a local grocery store, only a very local brand of butter was available. Zero Land O’Lakes butter could be found in the case.

USDA DMN in its March 20 weekly report stated that cream is widely available, which seemed to contradict the agency’s description of whole milk sales and its notation in the report that butter churns have strong orders from retailers for what they call “print” butter – butter for retail sale, not bulk inventory.

So what do the numbers look like?

It’s more difficult than ever to get timely information from USDA AMS about packaged fluid milk sales, but here’s what virtually every dairy analyst is reporting this week. They cite the Nielson supermarket data showing fluid milk sales were up 32% last week, that sales of whole and 2% are dominating, when available, and that retail sales of other dairy product classes were up double digits.

Milk and dairy products are a centerpiece of “comfort food” and in-home meals. Families are enjoying milk again. Will they keep enjoying it after they return to school and work? Or will they be back in rush zone of packaged carbs instead of cereal and milk, and back in the government’s “stealth-health” or “fake health” zone where fat is restricted and carbs are unlimited?

It will take some time to sort out the buying patterns that linger after the initial surge in dairy demand currently experienced at retail, but here’s some additional positive news to think about.

When consumers are educated and get the opportunity to seriously whet their appetite. When they tune-out the frivolous ‘sustainability’ banter about cows and climate and can ignore the rules about saturated fat… When they focus-in on their families, turn to milk for health, flavor and comfort, and remember or realize for the first time what they were missing… Who knows what they will choose going forward – when they are allowed to choose?

Even when families return to work and school, they may remember coming to dairy for immune-building properties, for comfort, for health.

Nielson has a chart at its public website tracking key consumer behavior thresholds in six quadrants: Reactive health management, pantry preparation, quarantine preparation, restricted living, and living a new normal. It shows their consumer insights on how buying patterns evolve during a health emergency of the scale of COVID-19, and how this peels away some of the frivolous drivel and constraints that influence consumer behavior in ordinary times.

In the sixth phase, “living a new normal,” Nielson describes how “people return to daily routines of work and school, but operate with a renewed cautiousness about health.” It goes on to state that this creates “permanent shifts in the supply chain.”

Citing the use of e-commerce and hygiene practices as examples, this sixth phase of “living a new normal” when returning to daily routines could also apply to food and beverage purchases as consumers returning to true health and comfort during the first five phases may continue to prioritize true health and comfort after those phases have passed.

What do consumers really want? Where are consumers moving when they are free to move?

Without institutional control of daily diets and promotion, we are seeing a glimpse of the answer to that question within the context of COVID-19 pandemic buying patterns. Real whole nutrition, foods that build immunity, awareness of Vitamin D deficiencies in our population affecting immune system response, the role of other elements in milk for immune-building, preference for local food that doesn’t travel so far, and a revitalized awareness of how regional food systems are critical to our food security — these are perspectives that could prevail to influence buying patterns into the foreseeable future.

Uncertainty prevails right now, but hope is alive, and the good news is that milk and dairy have much to offer.

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Dairy industry navigates uncharted territory amid COVID-19 pandemic

By Sherry Bunting, Farmshine, Friday, March 20, 2020 (updated March 24)

BROWNSTOWN, Pa. — The ‘new normal’ brought on by the novel Coronavirus / COVID-19 global pandemic evolves rapidly as the U.S. is partway through the 15-day “flatten the curve” effort deemed critical by health officials. Federal, state and local governments worked together to launch the 15-day mitigation strategy early last week to blunt the trajectory of viral transmission so that it does not overwhelm medical and caregiving infrastructure when the virus is expected to reach its peak in 45 days.

The effort led to closures and cancellations of non-essential activities, with some large cities and highly affected states moving to “shelter in place” strategies.

National state of emergency

A national state of emergency was declared March 13. Alongside the more restrictive guidelines, new drive-through testing sites became available in all 50 states, and the Trump Administration cleared the way for certain anti-viral therapies used for other illnesses to move forward through FDA after trials showed positive results.

A 2 trillion-dollar response and aid package is also moving through Congress, and by March 18, President Donald Trump had invoked war powers to utilize military medical resources and ramp up private sector production of items needed to combat the virus.

A key difference from Influenza, say scientists, is COVID-19’s much more rapid rate of transmission and the current lack of management tools like vaccines and anti-viral therapies, making its burden to medical infrastructure a key concern.

Meanwhile, hospitals and health systems adopt strict visitation rules, take stock of bed and equipment capacity, and work through triage plans.

Markets and trade

Financial markets had steep losses again this week in response to the economy slowing to a virus-induced crawl. Travel restrictions and lack of availability of shipping containers are reported as just some of the disruptions to U.S. trade, including dairy. But remember, these disruptions are based on a viral epidemic that current steps are aimed at curtailing, so the longer-term impacts on human and economic health are hard to predict.

On March 18, President Trump and Canadian Prime Minister Trudeau announced the closing of the U.S-Canadian border to non-essential travel. Both leaders assured that trade crossings, especially food, fuel and medicines, will not be affected.

The dairy futures markets suggest that the brunt of the impact on product prices and farm-level milk prices will be felt after May, but this depends largely on what happens over the next two months.

Milk and dairy in demand

Meanwhile, gallon and half-gallon sales of Whole Milk and 2% — as well as cheese and butter and other dairy products — are experiencing surging demand at the retail level, more than overcoming reductions in sales to schools and restaurants to the point of retail milk demand overtaking inventories with retail orders heading into “new territory.”

Pictures of empty dairy case shelves populate social media posts, and USDA Dairy Market News reports Class I milk demand ranging mostly from “strong” and “surging” to “extraordinary” and “haywire.” Given the reported butter surplus in cold storage, the current surge in fluid milk demand means less milk for manufacturing to add to inventories as the spring flush builds.

Milk and dairy products are a centerpiece of “comfort food” and in-home meals. In fact, as families settle into a period of greater isolation, more families are sitting down to eat together. Children are relaxing in the absence of extra-curricular activity schedules, and we may just find milk coming back to tables.

Schools, supermarkets, and restaurants adjust 

State governors have closed schools for at least two consecutive weeks, and now restaurants in many states are closed, except for takeout meals.

As the overall economy grinds to a virus-induced stop, uncertainty prevails even as essential services gear up for what may lie ahead. Amazon, for example, seeks 100,000 additional workers while limiting their warehousing and shipping to be focused on medicines and high-demand essential items.

Supermarkets are working to restock essentials, and there is a universally-reported surge in demand for milk and dairy foods that started March 13 and has accelerated nationwide since then. Stores are modifying operations, and relaxed rules for USDA meal reimbursement allow schools to provide grab and go meals to more families as children are home, and many adults find themselves suddenly out of work.

Supply chain planning and liquidity

Anticipating demand surges to be followed by periods of pull-back, milk plants and cooperatives are monitoring and planning for rapidly changing milk dispatch conditions. Many are looking ahead to make milk and dairy products available to food banks, as they are able, and especially if school half-pints are in inventory and as the product mix in demand is dramatically changing from foodservice to in-home use.

Concerns about liquidity have prompted The Fed to reduce the target interest to zero to 0.25%, and at the agricultural level, Farm Credit and other lenders sent communications Tuesday about working with customers impacted by COVID-19 as the full effects are not yet known in terms of Ag marketing and supply chain challenges.

Dairy market forecasts

Some analysts are going public with forecasts that dairy markets will suffer an average decline over the next 12 months that could be anywhere from 3 to 8% or 20 to 25% below the industry’s pre-COVID-19 milk price forecasts. Some have gone so far as to say milk prices paid to farmers could fall to 2008-09 levels as global and U.S. recession concerns emerge.

However, the underlying fundamentals of the U.S. economy are strong and will prevail unless both the fear and reality of the virus have a deep and long-lasting impact – something that cannot be forecast at this juncture.

Global Dairy Trade (GDT)’s price index is down 8% since COVID-19 fears became prevalent when the situation in China became known and Europe’s cases emerged. And yet, trading volumes have not declined in the biweekly GDT auction. This suggests global dairy demand is holding up.

A big supply-and-demand swing is always China, and there is a bright spot on that score.

Dairy is essential

Dairy is essential to a healthy diet, especially in times like these, and Milk’s immune-building properties are being recognized. For example, in China, where the virus is reported to have peaked and may be leveling off, Chinese dairy associations worked with the Chinese government to issue guidelines to “increase dairy consumption to build immune resistance,” saying “fight COVID-19 with dairy.”

A report this week in Food Navigator details these new dairy consumption guidelines in China as well as specific elements in milk that help boost the immune system. The formal stated: “Milk and other dairy products are an excellent source of high-quality protein and can also provide a source of Vitamin B2, Vitamin A, calcium and other nutrients essential for the human body. So a higher intake of these products for those low in protein, especially when higher immune resistance is required to fight the novel coronavirus, will be very beneficial.”

Dairy industry navigates ‘new normal’

Meanwhile in the U.S., four dairy processors and three milk cooperatives reported in email responses to Farmshine this week that even though all schools, some daycares and many restaurants are closed or curtailed, sales of fluid milk are surging to more than compensate.

“Quick changes in demand require a different product mix (whole gallons instead of 1% chocolate half-pints, for example). From a production standpoint, we have been reinventing the wheel every day for almost a week,” writes Carissa Itle Westrick of Valewood Farms Dairy, Loretto, Pa.

Another western Pennsylvania milk bottler indicated there are no sure answers to any questions just now, but that retail demand is higher, and the hope is that the school grab and go meals in most communities will be able to consume half-pint inventories.

In short, everyone is figuring out their “new normal”, and the industry is shifting its product mix from foodservice and institutional-style demand to in-home use demand.

In the Southeast, where fluid milk sales have been “lackluster” over the past several months, the situation changed dramatically since Friday, March 13.

“Up until last Friday, we had not encountered any changes in overall routing of milk to our regular fluid customers,” notes SMI’s CEO Jim Sleper.  “Then beginning Friday and ever since, it seems like all of our customers have added on additional milk to keep up with the surging demand resulting from customers stocking up, and we are seeing these extra loads far exceed the number of loads lost from schools being out.”

This observation is national in scope as confirmed by numerous industry sources, including Dean Foods, nationally, and other processors in the Northeast.

The concern in the balance is how long will this continue as home-bound refrigerators become full but also have the people at home to consume it?

Supply chain management?

Concern was expressed by some sources as to how the demand pattern will unfold if schools remain closed beyond two weeks right into the spring flush, especially if plants are short on labor or unable to remain open for a time.

According to a notice shared with Farmshine this week, Land O’Lakes informed its eastern members that beginning March 23, its base program will be strictly enforced, assessing members $10/cwt for their production over their individual base allocation, and asking members to “voluntarily” reduce their milk production as well as to prepare to dump milk.

The accompanying letter from Land O’Lakes indicated “business as usual” otherwise, for the moment, but that the cooperative is “preparing for a potential reduction in employee availability at plants across the country,” citing the possibility of having to dump milk. The letter also indicated that daily recorded messages would be sent to members in each milk shed about each milk shed’s respective situation.

All industry sources interviewed expressed heightened levels of emergency preparedness to bring some stability. As SMI’s Sleper put it, “We are treating this uncharted territory similar to our regular Hurricane Preparedness planning.”

Like the daily governmental briefings, milk processors and cooperatives are doing daily, even multiple times a day, conference calls among staff and board to navigate.

Transportation, labor and pricing

In a paper released this week by Dr. Andrew Novakovic of Cornell, the key points of vulnerability for the dairy industry are transportation and labor.

“Transportation disruptions could quickly scale to an industry problem,” he writes.

He also noted that the health of the labor force in milk plants affects the availability of milk more quickly than that of an individual farm.

American Farm Bureau also expressed to USDA that labor, supply chain issues and possible price manipulation top the list of immediate issues farmers are raising.

Optimism and commitment as food providers

In a letter to Secretary of Agriculture Sonny Perdue, AFBF president Zippy Duvall pledged that, “America’s farmers and ranchers will be with you every step of the way, doing all that we can to help you win this fight and to ensure the health, safety and prosperity of all America.”

Sleper also expressed positivity. “Uncertainty seems to breed pessimism especially with the stock market and dairy commodity pricing,” he wrote in an email. “We will endure this like we have other situations.  For SMI, we encountered extremely low milk prices over the past four-plus years, a shortage of available labor, two major bankruptcies, and hurricanes. I’m amazed how resilient (our farmers) have become.”

Novakovic cites a few positives to think about: “Overall, I am optimistic that the food industry, beginning with farmers, will rise to this challenge,” he writes. “Given the longstanding concern and emphasis around animal health and food safety, I think agriculture and food businesses have a leg up in doing what is needed now.”

In fact, FDA released information this week stating that COVID-19 is NOT a foodborne pathogen, confirming that there is no evidence of food or food packaging being associated with any transmission of COVID-19.

“We are lucky in the dairy industry that the sanitation and food safety practices we have in place every day protect us from a variety of outside threats. We have expanded these plans, with an eye toward the unknown,” writes Itle-Westrick in an email. “But as a small business, the possibility of one employee becoming ill is something that would have a big impact on our production and distribution capability, so we are protecting against that.”

Even though schools are closed, their needs continue at a smaller, though increasing, scale. Numerous mainstream media outlets are picking up stories showing how schools are providing these grab and go meals (without congregating) in communities across America.

Krista Byler head chef of Union City Schools in Erie County, Pennsylvania says inventories allowed them to feed participating students for one week, and that they’ll need items like bread, rolls and milk for next week.

“We had sufficient milk on hand to handle breakfast and lunch for one week of service, and will be placing a milk order on Friday for the week of March 23rd,” said Byler in a Farmshine interview.

“I think every foodservice employee in this district is a mom, a grandma. We definitely have a heart for the children here, and we just want to make sure they have the food they need.”

Resources for dairy and agriculture

While there are likely many resource bulletins being put together for farmers and dairy producers,  two good ones include Pennsylvania’s Center for Dairy Excellence at https://www.centerfordairyexcellence.org/covid-19-farm-resources/ and Indiana’s Purdue University at https://www.purdue.edu/newsroom/releases/2020/Q1/a-guide-for-local-producers-to-navigate-the-covid-19-outbreak.html

Gratitude

AUTHOR’S NOTE: Instead of pessimism, a can-do spirit prevails as farm-to-table sectors navigate these unprecedented challenges, including restaurants that are on the front lines as vulnerable small businesses taking a huge hit but in many cases providing takeout meals, even at discounted prices, with an eye on the situation.

As dairy farmers continue their important work each day, we thank you — and all involved in the food supply chain — for your essential contributions

May God bless the medical professionals, caregivers, first-responders… and the farmers who feed us. Stay safe, have faith, and be well as we all pull together to stay apart and curb transmission to starve the enemy COVID-19.

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