Dive Brief:
- The U.S. Department of Agriculture said it would buy $50 million in pasteurized milk that would be distributed to families who do not have regular access to the liquid. The purchase would be made under a federal law that allows the government to buy food or agricultural products and send them to food banks or school nutrition programs.
- USDA stressed the donation is not related to President Trump’s call to help farmers deal with the fallout from trade disagreements. The government is expected to buy 12 million to 15 million gallons of fat-free, low-fat, reduced-fat and whole milk under the plan.
- "This purchase addresses one of our country's significant challenges — hunger — and, at the same time, will have a positive impact on the dairy industry at a time of significant market uncertainty," Michael Dykes, the International Dairy Foods Association president and CEO, told ABC News. "The nation's milk processors welcome the opportunity."
Dive Insight:
Although this newly announced $50 million government purchase of milk is not connected directly to negative impacts the trade wars with China and other countries are expected to have on U.S. agriculture, it reflects the overall struggle dairy farmers have been experiencing for the past few years. It's the latest USDA measure to help farmers. Earlier this month, the federal government said it would make $12 billion in short-term emergency funds available to help farmers, including dairy, hit by retaliatory tariffs.
Even before the Trump administration announced tariffs, the dairy industry has watched and worried as the plant-based milk craze erodes its share of the dairy case. Traditionally, the segment's response to these upstart nut, rice, pea, oat, hemp and other alternative milk brands has been aggressive, with dairy producers pressuring the Food and Drug Administration to bar plant-based companies from using the word "milk."
This stance is understandable as non-dairy milk sales in the U.S. have risen 61% during the past five years, reaching an estimated $2.11 billion in 2017, according to Mintel. Meanwhile, dairy milk's performance has declined, with overall sales slumping 15% since 2012, reaching $16.12 billion in 2017.
It has hit Dean Foods particularly hard, promoting the dairy processor to close plants and notify more than 100 milk producers in eight states this spring that their contracts are canceled, likely due to Walmart's new massive private label plant in Indiana. Adding to Dean Foods' problems is the fact that its dairy products are high quality and have commanded premium prices in an already price-sensitive and competitive market. So when grocers such as Kroger and Walmart cut retail milk prices in order to compete with each other, Dean is the biggest loser.
Federal financial crutches for the slumping dairy industry are probably not a sustainable long term solution, or one that will have a meaningful impact to the deeper challenges facing producers. As consumer tastes change and farmers also face tariff retaliations, the challenges plaguing dairy producers are unlikely to abate anytime soon.