For the last few months, dairy, agriculture, and the country as a whole have been forced to operate in incident management mode.

“We have just been focusing on dealing with the house that’s burning down . . . and haven’t really been worrying about ‘Should that house have been built there in the first place?’ We’re just focusing on trying to get the fire under control,” said Andy Novakovic on the May 27 Hoard’s Dairyman DairyLivestream.

“We’re now moving into a phase that we might call reactivation planning,” the Cornell University dairy economist continued in describing the second stage of post-COVID-19 rebuilding. “We’re able to step back a little bit and think about how we go about getting some of the pieces back in place.”

Those thoughts come after USDA announced more specific guidelines for the Coronavirus Food Assistance Program this week. This DairyLivestream episode examined some of the federal relief programs and their details for dairy farmers, with discussion from Jim Mulhern, CEO of National Milk Producers Federation; Michael Dykes, CEO of International Dairy Foods Association; and Novakovic. The recording of the entire broadcast can be viewed now. The event was sponsored by Boehringer Ingelheim.

Who creates the “new normal”?
The third phase, after incident management and reactivation planning, is the actual rejuvenation of the full supply system. The future we face is not the same as the one we left in March. One question that many dairy farmers may ask themselves is . . . How much will this crisis affect how we do business going forward to prevent a relapse?

Decisions for an industry are generally made by individuals and organizations, or the government, Novakovic outlined. Both have their role, and in the current time of crisis, we have seen expansive government action. But as we move toward the third stage, the “new normal,” those responsibilities will fall more on industry personnel such as processors and cooperatives instead.

“Are we going to be more motivated by just-in-case strategies and less motivated by just-in-time strategies?” Novakovic asked. For processors, this could be diversifying customers and products to create more options. Strategic network building would also provide more support to the current supply chain.

These changes won’t come overnight, though — they’re not simple. Novakovic pointed out, “If they would’ve been cheaper, we would’ve done them already.”

Mulhern added that on the cooperative level, base programs that previously existed or were expanded provided some stability. “The base excess plans put into place have had a very positive impact on curtailing the growth we were seeing,” he said.

Demand may be different
Not only will processors and milk buyers have to consider what risk management strategies to employ, they will also need to take into account probable changes in consumer demands and private choices.

Just because customers may be able to visit restaurants and eat out more doesn’t mean they necessarily will. Food service demand for dairy will take time to rebound. Schools and other institutions may have to change the way their food is delivered to reduce cafeteria occupancies — could this affect the offering of dairy products?

There is reason for positivity, though. Sales of frozen pizza and fluid milk (the latter likely correlated with an uptick in cereal sales) have climbed in recent weeks. If there is less food service eating, these categories may continue to see growth for home use. “We may net out okay,” Mulhern ventured.

Dykes was also optimistic that more at-home dairy consumption will encourage future dairy purchases. Cooking with high-quality, nutritious dairy products that taste good, especially to young people, will further improve dairy’s reputation moving forward.

Capitalizing on these demand changes and expanding on processing capabilities will help ensure the dairy industry’s house is in a safer place if another fire comes through.

An ongoing series of events
In June, DairyLivestream will begin airing twice each month for the remainder of this year. The next broadcast will be on Wednesday, June 10 at 11 a.m. CST. Each episode is designed for panelists to answer over 30 minutes of audience questions. If you haven’t joined a DairyLivestream broadcast yet, register here. Registering once registers you for all future broadcasts.

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(c) Hoard's Dairyman Intel 2020
May 28, 2020
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