Federal aid to farmers in this unprecedented year has taken a number of forms: Two iterations of the Coronavirus Food Assistance Program (CFAP), the Paycheck Protection Program (PPP), and the Farmers to Families Food Box Program have all provided support, not to mention funds available through the CARES Act. Government money is estimated to account for at least 36% of total U.S. farm income for 2020.

Dairy has been a significant beneficiary of those payments. Between 3% and 5% of the milk supply this year has been purchased by the government. In addition to the direct distributions of dairy products in food boxes, retail purchasers have been affected by federal buying.

“That 3% to 5% the government has bought has been a huge lift on the cheese market; there’s no question about it,” stated Mike Brown on the October 21 Hoard’s Dairyman DairyLivestream sponsored by Diamond V. Brown makes the buying decisions on dairy products for Kroger’s network of 2,700 stores nationwide.

Federal stimulus to consumers has also bolstered dairy sales. “The sales lift this year was supported by the COVID benefits out of the early bills that were passed. People used that; they shopped with that,” Brown said.

Dried up

But that money to consumers has since disappeared. “We’re frankly surprised things have held up as well as they have in the last month since those dollars went away,” continued Brown.

With millions of Americans still out of work, the future momentum of dairy sales will likely depend heavily on what families are able to spend, in addition to the unknown future restaurant resurgence. At some point, there will be no more government aid.

“How much longer can we expect the federal government to be subsidizing food consumption for low income families?” asked Cornell University economist Andy Novakovic.

That is the question as 2021 approaches. Summarized Brown, “Government purchases are huge. I can’t image what we’re going to do next year as far as a budget, not just for dairy, but for all of agriculture — and what the implications of that might be to grow sales.”

An ongoing series of events

DairyLivestream will air twice each month for the remainder of this year. The next broadcast, “Taking a position on milk prices,” will be on Wednesday, November 4 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 intel@hoards.com.
(c) Hoard's Dairyman Intel 2020
October 26, 2020
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