Farmers adapt to changing markets

Retail demand is up, but with food services crashing, the struggle to survive continues.
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Pork and dairy producers are feeling the effects of COVID-19 in areas ranging from a labor shortage to packaging problems. Credit iStock

Michigan’s agricultural industry is calling on the federal government for help amid the COVID-19 global pandemic.

In a letter sent to United States Department of Agriculture (USDA) Secretary Sonny Perdue, Gary McDowell, the Michigan Department of Agriculture and Rural Department director, is urging him to support Michigan when distributing the $14 billion from the Commodity Credit Corporation and the $9.5 billion appropriated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The Agricultural Leaders of Michigan (ALM), which includes the Michigan Milk Producers Association and the Michigan Pork Producers Association, among others, also reached out to Perdue urging him to provide support and aid.

Michigan’s agricultural industry, which generates $104.7 billion annually, according to McDowell, has been beset by different unsettling circumstances such as weather, a labor shortage and low commodity prices. But the COVID-19 pandemic coupled with those circumstances has crippled the industry, he said.

“Michigan’s farming and agriculture community is facing extraordinary challenges to keep food on the shelves,” McDowell said. “We’re grateful for the aid our farmers received when 82 of the state’s 83 counties were declared disasters last year. I am hopeful we can count on USDA’s continued support in these unprecedented times.”

In the letter, the director detailed the agricultural needs and possible federal solutions for the state:

  • Dairy: Michigan dairy producers have seen falling prices and demand fluctuations leading to milk dumping. MDARD is asking USDA to work to ensure farmers have markets for their products and make direct payments to producers.
  • Specialty crops: As a large specialty crop state — from greenhouses and nurseries to cherries, dry beans, apples and asparagus — Michigan grows it all. MDARD supports the idea of a Produce Stabilization Program.
  • Livestock: With consumer demand down, difficulty getting labor and multiple processing facilities closing, the beef, lamb, pork, and poultry industries are facing increased pressure to stay in business. MDARD is asking for increased market access, possible emergency federal loan assistance and direct payments to producers.
  • Farmer specific need: MDARD is asking for temporary flexibility on farm loans recently announced by USDA’s Farm Service Agency to be made permanent for the duration of the pandemic response and subsequent economic recovery.

ALM is specifically asking the USDA to intervene with a comprehensive plan that ensures farmers survive the pandemic by supporting a financial safety net, improving existing nutrition programs to address food insecurity and maximizing international food aid, he said.

Mary Kelpinski, CEO for the Michigan Pork Producers Association, said farmers still are raising pigs, although there has always been a labor shortage at processing plants. Now, she said, COVID-19 has added to that labor shortage.

“The plants are clean, and it is not anything that the employees are picking up at the work environment, but it is what they are picking up from the person next to them,” she said. “Some of the plant workers have gotten COVID-19, others have had to stay home because their kids aren’t in school anymore so someone has to watch the kids, or they might be taking care of someone who is at home and is sick. So those three things combined have really (created) a shortage of employees being able to work at processing plants.”

In addition to labor shortage, the pork and dairy industries have seen their markets dwindle.

Kelpinski said there is a large supply of hogs and the loss of food services such as restaurants, commercial kitchens, colleges and schools have negatively impacted the pork industry because food services require a different specification for the type of meat they provide.

“When you go to the grocery stores, which is retail, you can pick up a one-pound package of bacon, but for food services, they don’t want a one-pound package of bacon, they want a 10-pound package of bacon and they want it laid out so they can put a sheet of it in the oven to cook it,” she said. “So, it is a completely different packaging than what we get in the grocery stores and that is a part of the problem, too, because some of the products that go through the processing plant are cut with specifications for food services so it can’t go to the retail stores. Food services account for about a third of the pork that is produced.”

Kelpinski said retail is doing extremely well, however, and they’ve seen grocery store volumes up significantly because people are staying home. She said sales to the retail sector have increased approximately 78%.

The Michigan Milk Producers Association is a dairy farmer-owned cooperative serving approximately 1,300 dairy farmers in Michigan, Indiana, Ohio and Wisconsin. It operates two manufacturing plants in Michigan and a cheese plant in Indiana.

According to Joe Diglio, president and CEO for MMPA, as warmer temperatures approach in the spring, milk production increases with the favorable weather and the dairy industry enters what it calls “spring flush.” He said farms in Michigan produced nearly 11.4 billion pounds of milk, or around 1.3 billion gallons of milk in 2019.

However, like the pork industry, the dairy industry, which also produces cheese, butter, ice cream and milk powder, among other things, heavily depends on food services. The decline in food service sales has not been offset by the increase in retail sales. Diglio said market analysts estimate that half of all butter and cheese in the country is consumed in food service establishments.

“Milk is a perishable product and needs to be processed in a timely manner once it leaves the farm,” he said. “Many processors that supply food service markets have had to reduce or change their production schedules. Meanwhile, some processing plants that produce retail products are adapting to a surge in demand. Overall, supply exceeds demand by at least 10% around the country and this gap may continue to widen as the stay-at-home orders across the country continue.”

The downturn in the dairy commodity prices have resulted in a direct impact on the amount local dairy farmers are paid.

Because the food service market has been diminished due to COVID-19, ALM would like some of the similar assurances Perdue is pushing for, but some of their demands are different:

  • Massive, immediate pork purchases by the USDA of $1 billion to supplement food bank and other feeding programs, including accommodation for pork products packaged for the food services market.
  • Equitable direct payments to producers, addressing all market participants (i.e., those who own hogs and those who care for them).
  • A quick agreement prompting China to lift its punitive tariffs on U.S. pork and accelerating pork exports to the world’s largest pork-consuming nation and helping China meet its phase one commitments to the United States.

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