US cheese surplus not an 'unusually enormous amount'

The ADC penned a letter to President Trump, calling for him to liquidate the cheese supply to “jump start the industry”​ and “stop the hemorrhaging of the US dairy industry.”​

The letter suggests sharing the cheese with those in the US struggling with hunger and food insecurity, which would also support the 3 million workers in the US dairy products industry.

Dairy felt a lot of financial pain in 2018, and farmers are experiencing unprecedented revenue loss thanks in part to low milk prices and tariff tensions. It’s projected that dairy farmers lost $1.5bn in the second half of 2018 alone.

An abundant natural resource

The ADC’s letter caught the attention of the public, even prompting the Travel Wisconsin tourist bureau to encourage people to visit the state and “take a bite out of cheese surplus.”​ It promised cheese to be Wisconsin’s “most abundant and delicious natural resource.”​

Travel Wisconsin advertised touring one of nearly 100 cheese factories around the state, taking a cheese cooking class or attending one of the state’s 13 cheese-dedicated festivals. It shared that Wisconsin produces one out of every four pounds of the nation’s cheese supply, and that 90% of Wisconsin milk is made into cheese.

But according to Jim Umhoefer, executive director of the Wisconsin Cheese Makers Association, there’s a necessity to always have cheese in storage. Between the making and retailing of cheese, it’s always moving in and out of storage and is not idle for long stretches of time.

He acknowledged the US surplus has been growing at a rate of 2% per year in the last five years, though the industry just sees it as a part of doing business, and the middle stage of distribution.

“But there’s reasons to note the surplus, because with it being larger than before, it does mean that there’s a slowing of prices and sales in the marketplace. And that reflects on a lower cheese price. There’s more cheese than we’re consuming right now,”​ Umhoefer told DairyReporter.

13 billion pounds in 2018

Beyond cheese, it boils down to the decreasing fluid milk prices and consumption. Excess milk was a problem last summer during President Trump’s feud with Canada, which imposes high tariffs on US dairy imports. Throughout the dismantling of NAFTA and signing of the new USMCA deal, US dairies produced more milk than they could sell.

Because it takes ten pounds of milk to make one pound of cheese, cheesemaking has long been a go-to for for storing excess milk to avoid it expiring. And as people drink less milk, the industry is turning to cheese as the more popular product.

Umhoefer believes the producer groups are right to be concerned, as this does impact milk prices, but the larger industry doesn’t see the surplus as an unusually enormous amount of cheese. There are ways to flip the surplus from slowly building to slowly decreasing, however. The US is seeing both increased cheese consumption and opportunity for exports.

According to new research from Rabobank, US milk production has increased by 13% over the past ten years. But Americans are eating more cheese, yogurt and butter, which can offset the declines in fluid milk consumption.

Between 1975 and 2017, fluid milk consumption was down by 98 pounds per capita, and cheese consumption was up by nearly 23 pounds per capita. The overall cheese production number is likely to be 13 billion pounds in 2018.

Battling retaliatory tariffs 

Cheese has become a staple in the American diet, incorporated into popular food like pizza, mac and cheese, grilled cheese and nachos. It’s enjoyed on all occasions and with all meals, spiking during special events like last weekend’s Super Bowl.

The Dairy Farmers of Wisconsin projected that Americans would buy 88 million pounds of cheese this year in the week leading up to Super Bowl Sunday. Cheese sales increase 10% on average around the football championship game.

But high domestic consumption can only get the industry so far when the country is battling a fluctuating trade war with multiple foreign markets. Overall exports have slowed because of the steel and aluminum tariffs levied by the US, resulting in retaliatory dairy tariffs in Mexico and China.

“We’ve had a reduction particularly in China on shipments of dry dairy ingredients. They buy a lot of milk powder and whey powder for infant formula. Those are down 47% this fall compared to last year. That’s a real reduction in their purchasing of American dairy products,”​ Umhoefer said.

He believes it would be appropriate for the government to look at that loss and consider compensating dairy farmers for it, as the tariffs are a major reason for the drag on the export market.

“We look forward to the steel and aluminum tariff issue being resolved and trade returning to normal. Really, it’s been growing in the last several years, so we need to get back to where we can keep moving dairy products around,”​ Umhoefer said.