America now has 1.2 billion pounds of excess cheese — and nowhere to put it

Sure, I like cheese, you like cheese, lots of people like cheese. But this is getting absurd.

The United States is currently in the midst of an epic cheese glut — with 1.2 billion pounds of cheese sitting in cold storage. If we wanted to patriotically eat through that surplus, every man, woman, and child would have to grab an extra 3 pounds of cheddar, Swiss, or provolone and start gnawing. (That’s over and above the 36 pounds of cheese per year the average American already eats.)

As my colleagues Brian Resnick and Javier Zarracina calculated/illustrated, if you put all that surplus cheese together, it’d be the size of a small mountain:

This cheese surplus has caused prices to collapse, which is great news for cheese lovers. But it's been disastrous for dairy producers and farmers, whose incomes have dropped 35 percent over the past two years. To help ease the pain, the US Department of Agriculture offered this week to buy up $20 million worth of cheddar cheese and distribute it to food banks. This is the second such purchase in three months.

The hitch? These government interventions are arguably making things worse, keeping the dairy market, uh, udderly out of whack.

Why America is drowning in milk and cheese

(Shutterstock)

To understand the cheese glut, we have to go back two years. In 2014, China was growing rapidly, its middle class had more cash to toss around, and people started buying more and more milk (particularly powdered milk) from the United States. Dairy profits here soared, and producers decided to expand, buying more cows and churning out more milk to meet what they hoped was skyrocketing demand.

This boom in milk production has been aided by relentless consolidation in the dairy industry. Back in 1987, the median dairy farm had 80 cows or fewer; today, it’s about 900. Economies of scale have driven costs down and bolstered output. On top of that, the average cow produces more milk than ever before, thanks in part to better breeding.

But then came the crash. China’s economy has slowed of late, driving global milk demand down. At the same time, the European Union decided to lift domestic caps on milk production, greatly increasing supply. Then Russia slapped sanctions on foreign cheese in retaliation for Western sanctions. Meanwhile, the stronger US dollar meant that American dairy farmers had a tougher time exporting their products.

It all added up to a surfeit of dairy at home. America’s dairy farms are expected to produce a record 212 billion pounds of milk this year — and there aren’t nearly enough customers to buy it all. Much of this milk is being sent to cheesemakers, who are making tons of feta, cheddar, and mozzarella and storing it for later, hoping for the best.

Even that’s not enough to get rid of all the excess milk, which is highly perishable. Some farmers can’t find any takers and are dumping their milk into nearby lagoons, reports Kelsey Gee of the Wall Street Journal (who has been covering this whole saga very closely). Others are simply going out of business: 53 dairy farms have already closed in California.

How the feds are trying to prop up dairy farmers

(Shutterstock)

Now, the politics are where things get dicey. The US government has a long history of supporting hurting dairy farmers when prices collapse. But the USDA has fewer tools available than it used to.

In the old days, the USDA ran a big program that would buy up millions of pounds of milk, butter, and cheese each year and simply ... put it in warehouses, never to be consumed. That helped put a floor on prices (and made economists irate). But that program was finally axed in 2012.

Instead, this time around, Secretary of Agriculture Tom Vilsack is invoking a different policy — Section 32 of the Agriculture Act of 1935 — that allows the federal government to buy up food to donate to food banks. This is much smaller than the dairy supports of old, but it’s something. The USDA is also sending dairy farmers $11.2 million in payments through the Dairy Margin Protection Program, a type of subsidized insurance for producers.

Critics tend to argue that even these smaller programs still distort the market in harmful ways. After all, if there’s a glut of milk out there, then that means we probably have too many dairy farmers. The most economically efficient option would be to let those dairy farmers go out of business, rather than pay them to keep milking their cows, exacerbating the glut.

Some of those critics include environmentalists. After all, cows are a significant contributor to climate change, what with all the methane they burp up. So why is the government paying to artificially inflate the number of dairy cows? “It’s outrageous that the government continues to prop up the dairy industry and the wasteful pollution caused by year after year of surplus,” says Stephanie Feldstein of the Center for Biological Diversity in a statement.

Obviously the dairy farmers who are currently hurting see things differently, and have pushed for more support.

The dairy industry would love for us to consume more milk and cheese. Americans have other ideas.

Another possible way to get rid of the dairy glut would be if Americans simply consumed more milk, butter, and cheese. True, the average person already plows through 36 pounds of cheese per year, but what’s a little extra between friends?

On this front, the US government has a long history of helping dairy producers find ways to promote their products. With the aid of the USDA, the industry created the Dairy Management Inc. (DMI), a corporation funded by federally mandated checkoff fees on dairy products that aimed to get people to eat more. It now has an annual budget of some $140 million.

Over the years, DMI has found ingenious ways to persuade people to eat more cheese. The corporation helped Domino’s launch new pizza lines and convinced McDonald’s to add an additional slice of cheese on its burgers. (More prosaically, DMI also launches various ad campaigns on the nutritional benefits of milk.)

Amid the current crisis, DMI has swung into action. The corporation has helped support McDonald’s switch from margarine to butter — which, according to the Wall Street Journal, will boost US butter consumption by about 600 million pounds over the next year.

But that all said, the dairy industry is fighting against some difficult headwinds here. As the USDA has noted, per capita milk consumption has been declining in recent years, partly because younger generations are simply less accustomed to drinking it. This may be driven in part by health concerns over dietary fat or studies showing that the benefits to your bones of drinking milk are possibly overrated. There are also demographic factors at work: White people tend to drink more milk (and are less prone to lactose intolerance), and whites increasingly make up a smaller share of America.

So we may not be able to chow our way through this excess, after all. Perhaps if we were more like the French, who eat 57 pounds of cheese per year. But America seems to be heading in a decidedly less milky direction.

Further reading:

• How big government helps big dairy sell milk
• How we got duped into believing that milk is necessary for healthy bones
• American labor productivity is surging (for dairy cows)

Correction: An earlier version of a graphic in this article stated that America’s cheese surplus would collectively amount to a 77,000 cubic-yard hunk of cheese. It would actually be 774,000 cubic yards.

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