It’s the question hanging over the country’s collective head as businesses look toward reopening plans . . . “When will Americans feel comfortable patronizing us?”

Perhaps that question really means, “When will business return to a semblance of normal?”

That’s important to dairy farmers, because at least 50% of all dairy products are sold in restaurants.

“Consumer confidence is key to where we’re going,” said Steven Kyle, Cornell University economist, on the June 10 DairyLivestream. That episode also featured Cornell’s Andy Novakovic and USDA Chief Economist Rob Johansson to discuss how consumers and dairy farmers will continue to navigate this pandemic economy. The waters are uncharted, and no one truly knows when more regular buying patterns may pick back up.

It’s clear, though, that those consumer dollars are what’s needed to rebuild so many industries.

“Let’s remember,” Kyle said, “consumer spending is something close to 70% of gross domestic product (GDP) overall. So whether consumers are in a good mood makes a huge difference as to whether they’ll spend money or they won’t.”

Milk prices, especially, survive on a knife’s edge and can be pushed off either direction with changes in supply or demand.

Restaurants will continue to hurt
Those food service establishments that normally buy about half of the dairy products in this country were down in sales as much as 80% at their lowest point of the past few months. Although sales in some place are slowly climbing back up, the numbers are still low.

Attendees of the June 10 DairyLivestream were asked when they will feel comfortable dining in a restaurant again. Just over half reported they’ll likely wait at least another month — 17% of viewers said it will be at least six months before they walk into a restaurant.

For better or worse, those attitudes could certainly change. “I suspect a lot of people are wavering between several of those categories, depending what the headline of the day is,” Kyle commented.

Building demand back up
The pandemic has spotlighted cracks in the supply-side of the market, Novakovic mentioned, as food manufacturing equipment lacked repurposing ability and workers fell ill. Simultaneously, though, there have also been those demand problems.

Even though retail sales of dairy shot up in early weeks by as much as 60% in some places, that was not enough to cover the sales lost in food service — everywhere from McDonald’s to the most high-end restaurant uses a healthy amount of cheese or butter, at the minimum.

“Stimulus” payments to Americans have been of little help, because they’re really functioning as disaster payments. Kyle pointed out that stimulus payments are only useful if recipients are willing to go out and spend them.

It will be a slow pickup, no matter when it begins, because consumers remain cautious. “We’re all in sort of a ‘wait-and-see’ attitude,” Kyle emphasized.

An ongoing series of events
DairyLivestream will air twice each month for the remainder of this year. The next broadcast will be on Wednesday, June 24 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 events.

To comment, email your remarks to
(c) Hoard's Dairyman Intel 2020
June 11, 2020
Subscribe to Hoard's Dairyman Intel by clicking the button below