Documenting Dumped Milk Is Critical
The market is experiencing unprecedented uncertainty that has been very difficult to predict. There is nothing in the history of the dairy futures markets to make any comparison to. None of us have every lived through a pandemic that is global in nature. Times in history where there have been events that have had a significant impact on consumers are difficult to compare. The market has become so tied together globally that is having a far greater impact than has ever been seen before. It is one thing to have a recession or an event that impacts a specific country, but it is another thing to have it happen throughout the world.
Overall exports have held well during the month of February, but indications are that exports have slowed during March, but we have no real indication as to how much. There is demand for dairy products worldwide, but the logistics of the movement of products is a problem. Consumers are adjusting to a change of lifestyle which will result in a change of consumer demand. I do think that dairy will benefit in the end result once this all gets figured out. Many consumers are realizing the flavor and benefit of nutritious dairy products in comparison to alternative products.
In the meantime, the market is struggling with a huge disruption in the supply and demand chain. There is milk being dumped with estimates upwards of 10% of the milk supply being dumped on the fields or in lagoons. That is a lot of milk.
Producers need to make sure they over-document the milk they are dumping for verification purposes. Some plants are just requiring the producer to take a measurement and write is down with the date. I do not believe is will be enough if the state or federal will need verification later for compensation. I cannot stress enough to document it as much as possible as there currently is no standard. I recommend that a picture be taken of the dipstick and when the milk valve is opened. Make sure it is a picture that has a date stamped on it. Write down the date and weight. Take a sample of the milk if at all possible and get it tested for components. Get a third party verification that will sign the verification of milk weights. Do whatever else you can think of. There will likely be some aid and there may be more requirements than just what is written down on a sheet of paper.
This documentation may be required if you have Dairy Revenue Protection insurance. Milk weights will need to be verified as well as components depending on which option was chosen on the Dairy Revenue Protection insurance endorsement. There had been no specific word as to how this will all be handled yet. Documentation will be important.
Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wisconsin. He can be reached at 877-256-3253 or through their website at www.agdairy.com.