Dairy Donations: Finding a Home for Excess Milk
As the Commission report details, enacting a particular supply management plan designed to resolve the problem of “unabated growth” in milk production is a complicated task and a radical departure from previous national policy. It stems from a simple goal - to stop creating too much milk. Milk can be “extra” in a few ways. Milk isn’t just milk, it’s the building block of different products - there’s milk to drink, yogurt, cheese, butter, powdered milk . . . each receives a different price, and sometimes when you’ve separated the milk into, for example, butterfat and skim milk you might have a place to sell the butter but not the skim. Or sometimes there’s too much milk period, and there’s no point in even beginning to process it. If there’s much too much milk in the system (a situation we’ve recently found ourselves in) then we may see milk dumping. The name basically says it all - you discard the milk that has no economically viable place to go. It’s a sign people often point of how far out of balance our dairy system has become, with production incentivized beyond what the market can bear.
While we ask ourselves how to build a balanced market, that raises the question of what can be done with extra milk, because the truth is that milk runs out of economically viable markets long before it runs out of people interested in drinking it.
According to John Sayles, CEO of the Vermont Foodbank,“Milk is something we can always distribute very quickly and there’s a big demand.”
Carrie Calvert, Managing Director of Ag Government Relations at the national group Feeding America, noted of the Farm Bill that they were working on “. . . connecting the extra milk produced with the millions of food insecure Americans who need it.”
Redistributing extra milk to people who have difficulty accessing nutritious food is one way to make at least incremental improvements against both a milk supply imbalance and hunger. However, it’s not as straightforward as, say, Kelloggs’ redistributing an overrun of cereal. When a cereal manufacturer ends up with too much cereal that’s an end product, already processed into its edible form, it’s probably packaged, and it’s pretty shelf stable - not to mention lightweight and easy to transport. The milk to go on that cereal, on the other hand, has a long way to go between a raw product in a bulk tank and something ready for primetime - it needs pasteurizing, packaging, it needs refrigerated transport, and (depending on how it’s processed) it needs to move quickly before it spoils.
The first issue, then, is choosing a point on the milk’s trip from cow to consumer for intervention.
The simplest option in this situation is something the government already does - offering incentives to purchase milk, and other dairy products, at retail. Benefits through SNAP or the Women, Infants, and Children (WIC) program both are examples of this approach. They increase demand for milk without changing anything about how it reaches the marketplace. The private donations market sometimes mimics this approach, such as with the Great American Milk drive which solicits individual donations to go towards vouchers for milk purchases at participating retail stores.
This tool indirectly avoids the dreaded milk dumping, by raising overall demand for milk. The milk on retail shelves was not in danger of going from bulk tank to manure pit, but raising demand does reduce the gap between demand and supply. In a highly simplified version of this tool, we can imagine government subsidies for milk purchases pushing demand up enough to match oversupply by making milk so cheap we, the consumers, would be foolish not to buy it. You can quickly see where supply management might become an important part of the equation, because if milk sellers see demand for retail milk going up thanks to government help, they will begin producing more milk, and the imbalance gets worse, not better.
Taking a half step back on the supply chain, we could still drive up demand for milk but do it a little before that milk hits retail shelves. The USDA does this when it supports milk purchasing for school lunches, breakfasts, and childcare centers - and the Special Milk program ensures that milk reaches all children in schools, not just those participating in school lunch or school breakfast programs. In Vermont, the Agency of Agriculture offers grants for schools to purchase milk coolers. Schools are not the highest paying market for farmers, although this market may be high impact as it sets up food preferences for the next generation of consumers, and schools are a critical part of the safety net ensuring that children have access to nutritious food. Controversially, the USDA recently lifted their restrictions on flavored milk, while still requiring that all milk be low fat. The prohibited whole milk is the most profitable for dairy farmers, and some argue that it is questionable nutritional logic to disallow whole milk as “unhealthy” while at the same time embracing flavored milks.
Stepping even further back on the chain, another important food program that uses milk is TEFAP, or The Emergency Food Assistance Program. Through TEFAP, the USDA purchases commodities, pays for processing and packaging, and distributes to agencies in each state who can then redistribute the food to those who need it most. Milk is one of the commodities purchased. Recently, USDA used the TEFAP system to make milk purchases as part of trade mitigation to offset the effect of retaliatory tariffs. Vermont could not accept any of this milk for donation, however, because the rules required taking full tractor trailer loads and redistributing to TEFAP-eligible households only, within a short window of time. John Sayles of the Vermont Foodbank explains that we could not move that high quantity of milk through the required distribution system quickly enough. (According to this 2/17/2019 report from NPR, Vermont isn't the only place to question how to handle these shipments).
One answer to the problem of a highly perishable product is to process it into something more shelf stable. In the past, the U.S. has purchased dairy to turn into dry powdered milk, butter, and cheddar cheese as a way of creating a price floor for dairy. This strategy becomes one of the more complicated options, requiring the government to purchase dairy (and to know the right amount to purchase to stabilize price but not drive over production up even further), process it, store it, then find a way to distribute it back to people who need it. This Planet Money podcast does an excellent job of walking through how that process has gone awry in the past.
There’s another option, and this one gets more directly at what we do with excess milk when it has no market - we can make it easier for the milk handlers to create their own partnerships for donation. Milk handlers are the businesses and cooperatives that pool farmers’ milk and get it to market, and they’re part of a strictly regulated pricing system called the Federal Milk Marketing Order (FMMO). Even dumping milk requires permissions from the FMMO administrator. Through new Milk Donation Program provisions in the 2018 Farm Bill these handlers can apply to have the federal government reimburse them for the price difference between Class I milk and the lowest class price, which is the value assigned to donated milk. This means they can meet obligations to farmers while also filling gaps in the food safety net.
Carrie Calvert, of Feeding America, notes "We expect the funding support provided in the farm bill will significantly help increase our dairy donations and our ability to provide nutritious milk to millions of people facing hunger."
Kicking donations over from the government to the private sector doesn’t solve all complications. Jed Davis, Director of Sustainability at Cabot Creamery Cooperative, has looked at this issue. Cabot is no stranger to donating its product to any number of causes. Finding a way to get excess raw milk processed and donated when the market finds itself highly out of balance is a trickier subject. Cabot has tried in the past to locate bottlers to take extra milk, but couldn’t find any with capacity - other regions have more options in that regard, but the processing capacity in New England is tight. Davis doesn’t think scrambling to deal with a momentary glut is the best strategy in any event. Now, he is thinking along the lines of how to partner with other organizations to make a regular schedule for processing milk designated to go into the donation stream and not into the normal marketplace. He points to the network of farmers, food banks, and processors being built in Pennsylvania through Philabundance as an example that it’s possible to find these types of mutually beneficial systems.
None of these pathways is a long term solution for all that is harming today’s regional dairies. Nonetheless, each of them offer ways to take small steps forward and each bring us closer to at least avoiding the worst case scenario of over supply - perfectly good milk getting dumped because we don’t have a place for it.
For a lot more discussion of commodity milk, check out the Northern Tier Dairy Summit being hosted by the Vermont Agency of Agriculture April 1-2, 2019, at Jay Peak Resort.