Covid-19 has put unprecedented pressure on the global food system – with producers working to keep food supplies moving while shifting to socially distanced working and dealing with huge market disruption.
The dairy industry has long laboured under price fluctuations and market volatility. Now Covid-19 has forced key markets like schools and restaurants to close, while disrupted supply chains spelt trouble for perishable products.
This prompted drastic responses in the early days of the pandemic: Dairy Farmers of America – the largest dairy co-op in the USA – asked its producers to dump milk. And there were stories from around the world of dairy co-ops donating unsold cheese, butter and yoghurt and other produce to food banks.
Beth Ford, president and CEO of US dairy co-op Land O’Lakes, told an interviewer: “This is a very challenging time for agriculture. What you see is a disruption caused by Covid. On the dairy side, restaurants and schools aren’t open, so where does that milk go? You don’t just turn the cow off.”
And while the loss of the catering market was accompanied by a huge rise in domestic consumption, it is not a simple matter for farmers to switch production to the grocery market, which has different packaging and labelling requirements.
These pressures came to a sector which has already seen high-profile
co-op casualties – with the demutualisation of Australia’s iconic Murray Goulburn in 2018. When Organic Dairy Farmers of Australia (ODFA), the country’s largest producer of certified organic milk, entered voluntary administration in May, it cited Covid-19 as one of the factors in its demise.
The coronavirus crisis unfolded against a backdrop of deeper global problems, with the dairy industry facing the daunting challenge of reducing its climate emissions.
Milking the Planet, a report from the Institute for Agriculture and Trade Policy (IATP) on the climate impact of large-scale dairy production, says pressure on producers has been increased by consolidation in the sector.
“As market concentration and production has increased in every major dairy production region, indebtedness, farm loss and bankruptcies in rural communities have also increased,” it says.
Tensions between co-ops and their producers in the dairy sector include last year’s milk-price dispute in Ireland with farmers urging co-op processors such as Lakeland and Glanbia to raise their prices in line with those in the EU and other parts of the world.
Agreements have been reached – for instance at the end of last year Kerry Group and Kerry Co-operative Creameries issued a statement that Kerry Group will make “a goodwill payment” of 3c/L.
And last month saw several Irish dairy co-ops increase their prices – including North Cork Creameries, Boherbue, Aurivo and Arrabawn. An Arrabawn spokesperson said this “reflects the recent upturn in dairy markets”.
The upturn in dairy prices around the world last month is partly a result of lost production during the pandemic. In its recent market outlook the US Department of Agriculture said: “A large decline in milk production from April to May, an increase in foodservice demand, government purchases of dairy products, and relatively high exports contributed to the rise in prices.”
This brings much-needed relief for producers and has seen many dairy
co-ops sound an upbeat note. Earlier this month the UK’s First Milk unveiled
increased operating profits of £7.5m – up 4% on the previous year – and said it was confident it could meet the challenges of Brexit and Covid-19.
And it said it was holding its milk price steady – keeping its liquid standard litre at 26.75 pence per litre (ppl), and its manufacturing standard litre at 27.63ppl, both including the member premium.
Vice chairman and farmer director, Jim Baird, said: “Even though the
Covid-19 lockdown is starting to ease both here and overseas, there remains ambiguity about how the pandemic may develop and any consequent impact on dairy markets.
“In these uncertain times, I am pleased that we have been able to hold our milk price again, demonstrating the strong performance of the business and therefore offering much-needed stability to our members.”
Arla also says it is keeping its prices steady: conventional milk will stay at 29.26 ppl and the organic price will be 37.62ppl through August. Arla Foods board director, and farmer owner, Arthur Fearnall, said: “Overall, commodity prices have stabilised after the initial impact of re-stocking, as countries started to open up after lockdown.
“Prices overall remain below pre- Covid-19 levels, with the current outlook remaining stable.”
India’s Amul – a huge state-supported dairy co-op with 3.6 million producer owners in the state of Gujarat – has also kept on an even keel and supported farmers with payments of Rs 11,000 crore to keep supplies flowing during the 11-week lockdown. It says milk procurement rose 17%, and there was a 30-40% increase in sale of milk, butter, paneer and cheese.
But Amul is one of the big players identified by the IATP as dominating the sector. The Milking the Planet report says Amul faces challenges in dealing with its rising climate emissions – which comes alongside dramatic growth in India’s milk production – which in turn has seen the size of herds growing and put pressure on supplies of feed and fodder. As input prices rise “poorer farmers are being squeezed out of the market”, warns IATP – which is also concerned over the potential environmental impact of more land being converted to pasture.
Dairy co-ops are already mindful of environmental issues – as shown by
Arla’s pledge last year to work towards zero climate emissions.
Organic producers in the sector are continuing their environmental efforts
in spite of the pandemic. In the USA, Organic Valley blogged last month about its farmer members’ stewardship of the land, their efforts to preserve old landscapes and biodiversity, and development of carbon sequestration projects.
Sustainability manager Jessica Luhning gave the example of a farm in Tug Hill, New York state. Co-op values are helping preserve the farm and its good work – but other farms in the area are being sold up and subdivided.
“Residential and commercial development, combined with a struggling agriculture economy, threaten this rural way of life,” warns Ms Luhning. “Places like this are disappearing, and fast. Places like this deserve awareness so that they can be loved and endure for generations to come.”