Farmers in the U.S. are pouring out tens of millions of gallons
of excess milk, amid a massive glut that has slashed prices and has
filled warehouses with cheese.
More than 43 million gallons' worth of milk have ended up in
fields, manure lagoons or animal feed, or have been lost on truck
routes or discarded at plants, according to data from the U.S.
Department of Agriculture. That is enough milk to fill 66 Olympic
swimming pools, and the most wasted in at least 16 years' worth of
data requested by The Wall Street Journal.
Desperate producers are working to find new uses for the excess,
like getting more milk into school lunches, and in revamped tacos
and Egg McMuffins. But many can't even afford to transport raw milk
to market at current prices, which have plunged 36% on average
since prices hit records in 2014.
"Everyone has dumped milk, from Minnesota to New England," said
Ken Nobis, head of the Michigan Milk Producers Association.
Dairy and meat producers in the U.S. and abroad expanded their
operations two years ago in response to a shortage, setting the
stage for the current global glut.
American farmers are in the process of harvesting record-large
corn and soybean crops, and meatpackers are now producing the most
ever meat and poultry. As a result, food prices in the U.S. have
plummeted and farm incomes this year are headed for their third
consecutive drop.
On Tuesday, the USDA pledged to buy about $20 million of cheddar
cheese to help struggling dairy farmers, the second time it has
intervened in the market in less than three months.
The Michigan Milk Producers Association, a farmer-run
cooperative, has added shifts at its dairy plants in Ovid and
Constantine and bought equipment to handle an additional million
pounds of raw milk each day. As the market has softened, the group
has donated 83,000 gallons of milk to a food bank.
Even so, over the summer, the co-op had to dump a batch of
excess skim milk into lagoons of manure because it couldn't find a
trucker to haul it to a plant with spare capacity in Wisconsin.
"Any milk disposal is a very difficult decision," said Mr. Nobis.
"No one gets any value whatsoever out of it."
Meanwhile, Dairy Management Inc., a de facto marketing firm that
is paid for by America's 43,000 dairy farmers, has invested tens of
millions of dollars in the past year to develop new milk-heavy menu
items with McDonald's Corp., Yum! Brands Inc.'s Taco Bell, Domino's
Pizza Inc. and about 10 other companies it calls "dairy
partners."
Food scientists and dietitians funded by DMI worked with
McDonald's, for instance, to replace liquid margarine with butter
in its breakfast egg sandwiches, muffins, buns and other menu
items. The new recipe was introduced at 15,000 restaurants in
September 2015. McDonald's spokeswoman Becca Hary said switching to
butter was part of the chain's "customer-led" shift to source
simpler ingredients, and contributed to "a double-digit percentage
increase in Egg McMuffin sales."
With Taco Bell, the dairy group created the "Quesalupa," a
cheese-laden cross between a flat quesadilla and a firm-shelled
chalupa that made its debut in February.
DMI ramped up spending on strategic partnerships last year to
over $30 million, more than double the investment six years ago,
when the group first began researching and developing new products
with companies.
Thanks in part to cheesier pizzas and more buttery buns,
commercial use of those two dairy products was up 4% in the year
through July. On average, each American last year ate an extra
pound of cheese and butter combined, according to the latest USDA
data. That has helped the industry combat a decadeslong decline in
American's consumption of fluid milk.
McDonald's switch to butter alone is projected to use up to 600
million pounds of milk annually.
"If you create the innovative products that people want, in the
ways they want them, you can be successful," said DMI Chief
Executive Tom Gallagher.
Even organic dairy farmers, whose costs can be as much as double
those for conventional producers thanks to their smaller scale and
pricey feed, have resorted to selling milk to faraway or
conventional plants to get rid of it, sacrificing their price
advantage.
"There are California producers so desperate to move organic
milk they're coming after our market in Atlanta," said Eric Newman,
vice president of sales at Organic Valley in La Farge, Wis The
dairy cooperative this year shipped organic milk powder to a
customer in Europe at a steep discount. "It's a mess," Mr. Newman
said.
(END) Dow Jones Newswires
October 12, 2016 11:25 ET (15:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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