It was still dark outside at four o’clock on a recent morning when a tanker truck poured 6,000 gallons of milk into a manure pit on Nancy Mueller’s Wisconsin dairy farm.
The milk, collected from Mueller Dairy Farm’s 1,000 cows, should have been hauled to dairy processors across the state for bottling or to be turned into cheese. But the coronavirus pandemic is disrupting all that, closing restaurants and schools that buy the nation’s dairy products—and forcing hard choices for farmers like Mrs. Mueller.
“It was heart-wrenching,” she said.
Farmers and food companies across the country are throttling back production as the virus creates chaos in the agricultural supply chain, erasing sales to restaurants, hotels and cafeterias despite grocery stores rushing to restock shelves. American producers stuck with vast quantities of food they cannot sell are dumping milk, throwing out chicken-hatching eggs and rendering pork bellies into lard instead of bacon.
In part, that is because they can’t easily shift products bound for restaurants into the appropriate sizes, packages and labels necessary for sale at supermarkets. Few in the agricultural industry expect grocery store demand to offset the restaurant market’s steep decline.
Farms are plowing under hundreds of acres of vegetables in prime U.S. growing regions like Arizona and Florida. Chicken companies are shrinking their flocks, to curb supplies that could weigh on prices for months to come.
Mississippi-based Sanderson Farms Inc., which last week said demand from its restaurant customers was down 60% to 65%, has begun breaking eggs rather than hatch them and raise the chicks for slaughter. Other poultry companies are taking similar steps, meat-industry officials said.
“When you have panic in the marketplace, weird things happen,” said Tanner Ehmke, who researches agricultural markets for farm lender CoBank.
In the dairy industry, restaurant closures and other disruptions have left producers with at least 10% more milk than can be used, according to industry estimates. Dairy groups say the milk glut could grow as supplies increase to a seasonal peak in the spring, and shelter-in-place orders stretch on across the country. In response, cooperatives that sell milk from farmers to processors are asking their members to dump milk, cull their herds or stop milking cows early in an effort to curb production.
Because milk is perishable—and cows produce more each day—dairy farmers have few alternatives, Mr. Ehmke said.
“Consumers have changed how they eat, and it’s rippling back right to the farm gate,” said Dennis Rodenbaugh, executive vice president at Dairy Farmers of America, the largest U.S. dairy cooperative, which markets Mrs. Mueller’s milk.
As much as 7% of all milk produced in the U.S. last week was dumped, Mr. Rodenbaugh said, and he anticipates that percentage will continue to increase. Asking members to dump their milk is a last resort, he said. But butter makers are hard pressed to turn the small, single-serve packets they produce for restaurants into larger blocks for grocery stores, and cheese makers can’t easily convert their 10-pound bags of bulk shredded cheese destined for pizza chains into the zippered, 8-ounce bags shoppers are accustomed to, Mr. Rodenbaugh said.
With supplies piling up, the cooperative could be forced to curb production at some of its own cheese plants, he said.
Bob Wills, founder of Clock Shadow Creamery, a specialty cheese factory in downtown Milwaukee, said that when the city’s restaurants closed, sales for the creamery’s chévre and ricotta cheeses tumbled 95% in a day. The creamery has stopped production and laid off all but one employee, though Mr. Wills said he has been able to absorb the milk from all but one supplier at a second cheese plant he operates that serves retail customers.
Howard Bohl, who milks 450 cows in east-central Wisconsin, said he sent about 20 cows to slaughter last week. Jim Ostrom, chief executive of Milk Source, which operates dairy farms in Michigan, Wisconsin and Missouri, said the firm dumped roughly 10 tankers holding about 60,000 gallons of milk in all into its manure pits, and he anticipates it will be asked to dispose of more this week.
Dairy Farmers of America says its members will still be paid for dumped milk, though checks to all members will be reduced as the cooperative markets less milk overall. The prospect of smaller checks is frightening for many farmers who in recent years have watched nearby dairies close their milking parlors at an alarming rate following a decadeslong decline in milk consumption, low prices and trade disputes.
Earlier in the week, two major dairy industry groups sent a “milk crisis plan” to the U.S. Department of Agriculture, urging the agency to take quick action to support the dairy industry through measures like paying farms that cut production and purchasing significant volumes of dairy for use in the nation’s feeding programs.
In the poultry market, supermarket shelf-clearing initially juiced prices—lifting boneless, skinless chicken breast prices by 31% over the first three weeks of March, according to data from the U.S. Department of Agriculture. But as restaurant dining rooms sit closed, breast prices dropped by one-fourth in the past two weeks.
Joe Sanderson, chief executive of Sanderson Farms, said, “Given this environment, we have too many big-bird food-service chickens.” While some of its restaurant-bound chickens are being processed for sale in supermarkets instead, the company expects to reduce overall production by about 5% in the months ahead.
Executives at Sanderson have contemplated euthanizing chickens and burying them on farms rather than feed them, process them and sell their meat at potentially unprofitable prices, Mr. Sanderson said, though right now the company isn’t taking that step.
Meat companies’ efforts to raise fewer birds aren’t likely to cause chicken shortages at grocery stores, said Ben Bienvenu, a food and agribusiness analyst at Stephens Inc., because processors are running extra shifts at separate plants that supply chicken to supermarkets.
Falling demand for bacon, made from pork bellies, is prompting some pork-processing plants to turn excess pork belly supplies into lower-value products like lard, said Steve Meyer, an economist with Kerns & Associates, an agricultural risk management firm.
Bacon, more than other pork products, relies on restaurant-industry sales. With pork demand flagging as national chains like McDonald’s Corp. and Denny’s Corp. serve fewer breakfasts, prices for pork bellies have collapsed to a record low. As a result, some major processors are attempting to find other uses for them, such as sausage, or are converting them into lard because it is less costly.
Mr. Meyer said the situation shows pork producers’ heavy reliance on bacon. “You live by the belly, you die by the belly.”