SIOUX FALLS, S.D. (KELO) — The decline in the number of half-pint cartons of milk served to students in South Dakota and across the country are creating challenges in the dairy industry.
In an average school year, the Sioux Falls School District will serve 80,000 half-pints of milk in a week or 346,400 half-pint cartons a month.
The school campuses are closed and the district, like many others in the state, is serving grab and go meals during the COVID-19 pandemic. But, carton servings have dropped to about 23,700 per week.
Milk supplied to schools is one of the largest markets in the dairy industry, representatives of dairy associations in South Dakota and Iowa said.
“Three main markets, exports, schools and the foodservice industry (markets) are well below (averages),” said Tom Peterson, the executive director of the South Dakota Dairy Producers.
The demand for dairy products in the food service industry has also declined as COVID-19 has prompted state and local governments to mandate or encourage food service businesses to provide only take out, carry out or drive through services and physical social distancing has become the norm in the U.S.
Although South Dakota, Iowa and Minnesota are not among the top three producers of dairy products in the U.S., the industry is still a sizeable chunk of the overall agriculture markets.
The total economic impact of the dairy industry in South Dakota is $2.4 billion annually, according to Ag United, an organization made up of specific ag sector association members such as the South Dakota Dairy Producers and the South Dakota Soybean Association.
Peterson said COVID-19 impacting all of the agriculture industry. Yet, dairy producers were optimistic as 2020 started and milk prices had increased after at least four tough years, he said.
The American Farm Bureau has estimated a 22% decline in future class III milk prices from Jan. 2 through April 15. Other dairy advocacy groups said the price drops in March added up to about a $3 billion drop.
Peterson and Mitch Schulte of the Iowa State Dairy Association, an organization that advocates on policies for the dairy industry, said COVID-19 has already had a negative impact, processors and producers in their states have made some adaptions.
Demand for half-pint milk cartons has declined but consumers still want dairy products in their grocery stores, Schulte said.
As COVID-19 spread, “we saw consumers start to purchase all the dairy in a section,” Schulte said. “That lets us know that consumers value our product.”
Americans do like dairy. While the overall consumption of milk has declined since 1975, the public is consuming more cheese.
But providing the needed dairy products to grocery stores is a challenge.
It’s one reason why some stores placed limits on the purchase of milk and cheese. It’s also a reason why dairy producers in states such as Ohio and Pennsylvania dumped milk.
A dairy processor that packs 25-pound bags of cheese for the food service industry can’t suddenly switch to providing 16-ounce bags of cheese to grocery store customers.
“They’re trying to pivot and adjust,” Peterson said of processing plants.
Many plants have been able to stop production of one line that meets food service needs and switch it to retail needs, but some haven’t, Schulte said.
Yet, “No plants in Iowa have shut down,” Schulte said.
“We have a very strong processing segment up and down the (Interstate 29) corridor,” Peterson said. “They are functioning at capacity.”
Processors in South Dakota, according to Ag United, are:
- Valley Queen, Milbank
- Valley Side Farm Cheese, Crooks
- Davisco, Lake Norden
- Bel Brands, Brookings
- SDSU Davis Dairy Plant, Brookings
- AMPI, Hoven
- AMPI, Freeman
- Dairiconcepts, Pollock
- Dimock Cheese, Dimock
- Dean Foods, Sioux Falls
Schulte said Iowa plants and producers have been able to fix the bottleneck in the adaptation process.
And only one producer, and a potential second producer, has dumped milk in South Dakota, Peterson said.
Still, while retail demand had an uptick, that uptick may not be enough to steadily offset the losses in foodservice, schools and exports, Peterson said.
“We’re trying to be optimistic as an industry,” said
Peterson said the Coronavirus Aid, Relief, and Economic Security Act recently passed in Washington, D.C. is encouraging. The U.S. Department of Agriculture said on Friday, April 17, that $16 billion will be available in direct support to livestock, specialty and non-specialty crops will help to offset COVID-19-related losses. Another $3 billion is for commodity purchases.
A portion of the $3 million will be used for buying dairy products to be distributed to food banks, according to the USDA. About $100 million per month will be used to buy a variety of dairy products.