The economic crisis caused by the coronavirus pandemic has slammed broadside against the Washington dairy and potato industries, with both facing the prospect of dumping product because markets have disappeared.
Restaurants have mostly shut down, which eliminated a major market for processed potatoes. That includes everything from instant mashed potatoes to french fries. As a result, Washington growers have 1 billion pounds of potatoes in storage with no place to sell them, said Chris Voigt, executive director of the Washington Potato Commission.
“That’s a lot of potatoes,” Voigt said. “Every man, woman and child in Washington state would have to eat 200 pounds of potatoes between now and the Fourth of July.”
Producers actually have 3 billion pounds in storage, but about 70% of all spuds grown in the Evergreen State are exported. So far, those exports have remained strong. “But we are estimating that 1 billion pounds will not be used,” Voigt said.
Washington dairy producers are also being hammered by a drop in prices after restaurant and school closures took away a major portion of their demand. Prices had increased in January to about $17 per 100 pounds of milk. May futures are quoting about $11, which is about $5 below the cost of production, said Case VanderMeulen, owner of Coulee Flats Dairy near Mesa, Washington.
VanderMeulen’s 7,000 dairy cows produce about 600,000 pounds of milk per day, which means he stands to lose about $30,000 daily at the expected May price of about $11 per 100 pounds.
“It’s going to be killing us in the next few months. We are at the teetering point,” he said. “We haven’t had to dump any significant amount of milk, but we are close.”
Both products rely heavily on the restaurant industry, which has been shuttered as a response to the pandemic. The National Restaurant Association estimates that a three-month lockdown will result in $225 billion in lost sales and job cuts of between 5 million and 7 million people, the group said in a March 18 letter to the White House.
Voigt said about 90% of the potatoes grown in Washington are processed into products such as french fries. Of those processed potatoes, about 95% are sold to restaurants.
“When you shut down the restaurants, it has a devastating impact to us,” he said. “So processors are really slowing down production. They will have to come to a stop if we can’t revitalize the economy and restaurant industry.”
On Friday, Agriculture Secretary Sonny Perdue announced $19 billion in agriculture disaster relief for dairy, beef and produce farmers, which includes potatoes.
Voigt said he’s not sure that will cover all the expected losses.
All of the 3 billion pounds of potatoes currently in storage came from last year’s crop. Several farmers already had planted a new crop in the Tri-Cities area, and others were preparing to do so near Moses Lake.
Voigt said it costs about $2,500 per acre to till, fertilize and spray for disease just to prepare for planting.
“The processors came back to the growers a week and a half ago and said, ‘Stop planting. We can’t commit to buying potatoes if we don’t have a home for them.’ There really is no other crops they can grow that will recover that type of loss,” Voigt said. “We hope the USDA will step up and help them cover those losses.”
Potato sales recently got a boost in grocery stores as unemployed workers remained at home and had more time to cook from scratch using raw spuds. However, even that demand has fallen away as panic buying slows, Voigt said.
As a result, the wholesale price for a 50-pound carton of potatoes has dropped from $42 just 12 days ago to $26 Friday, Voigt said. “That’s dropping below the cost of production now.”
Industry leaders are looking for places to take the potatoes they can’t sell.
“Food banks would be a great place to start. But even there, their capacity is limited,” Voigt said. “We are reaching out to the livestock industry and looking at possibly feeding potatoes to beef.”
VanderMeulen feeds about 100 pounds of food every day to each of his 7,000 cows. Some of that already includes the leftovers from potato-processing plants.
Taking unused potatoes “might help a little bit,” VanderMeulen said. “But our girls are like athletes, they need to be fed the right way. We can’t just throw them whatever food we can find. It’s a very precise feeding regimen.”
The National Milk Producers Federation praised the announcement Friday of the $19 billion aid package.
“The plan announced today should provide important relief to some producers, and we look forward to learning more of its details in coming days to fully understand its scope and implementation,” said Jim Mulhem, president and CEO of NMPF.
VanderMeulen said he doesn’t yet know how much of that aid package will come to local producers.
“It’s not like a trucking company. We can’t park our trucks,” he said. “The cows need to be fed every day. They need to be milked. Our labor costs continue, and feed costs continue. There is no way of stopping.”
VanderMeulen will continue to dip into cash reserves and hope for the best.
“We are going to keep going,” he said. “The biggest part is we need to open the economy as quick as we can. It’s essential that we get people safely working.”
Bloomberg News contributed to this report.