By P.J. Huffstutter

CHICAGO (Reuters) - Dairy farmer Jason Leedle felt his stomach churn when he got the call on Tuesday evening.

"We need you to start dumping your milk," said his contact from Dairy Farmers of America (DFA), the largest U.S. dairy cooperative.

Despite strong demand for basic foods like dairy products amid the coronavirus pandemic, the milk supply chain has seen a host of disruptions that are preventing dairy farmers from getting their products to market.

Mass closures of restaurants and schools have forced a sudden shift from those wholesale food-service markets to retail grocery stores, creating logistical and packaging nightmares for plants processing milk, butter and cheese. Trucking companies that haul dairy products are scrambling to get enough drivers as some who fear the virus have stopped working. And sales to major dairy export markets have dried up as the food-service sector largely shuts down globally.

The dairy industry's woes signal broader problems in the global food supply chain, according to farmers, agricultural economists and food distributors. The dairy business got hit harder and earlier than other agricultural commodities because the products are highly perishable - milk can't be frozen, like meat, or stuck in a silo, like grain.

Other food sectors, however, are also seeing disruptions worldwide as travel restrictions are limiting the workforce needed to plant, harvest and distribute fruits and vegetables, and a shortage of refrigerated containers and truck drivers have slowed the shipment of staples such as meat and grains in some places.

Leedle could likely sell his milk if he could get it to market. Dairy products in grocery stores have been in high demand as consumers stay home during the pandemic, though panic buying may be slowing. Earlier this week, a local market told Leedle's wife she could buy only two dairy products total per shopping trip as retailers nationwide ration many high-demand products.

"It's just gut-wrenching," said Leedle, 36, as he stood inside his barn, with cows lowing softly as the animals were giving milk that would be funneled directly into a manure pit. "All I can see is that line going down the drain."

Leedle has dumped 4,700 gallons of milk from his 480 cows each day since Tuesday. The 7,500-member DFA told Reuters it has asked some other farmers in the cooperative to do the same but did not say how many.

Dairy cooperatives oversee milk marketing for all of their members and handle shipping logistics. Leedle said he will be paid for the milk he and other farmers are dumping, but the payments for all cooperative members will take a hit from the lost revenues.

Land O’Lakes Inc., another cooperative, has also warned its members they may have to dump milk. Another cooperative, Wisconsin-based Foremost Farms USA, was even more grim.

"Now is the time to consider a little extra culling of your herds," the cooperative said in a March 17 letter to members. "We believe the ability to pick up and process your milk could be compromised."

The cooperative, which also owns butter and cheese processing plants, said milk-dumping might also be on the horizon.

The dumping comes even as consumer demand for dairy has soared. Panic buying has left grocery store shelves nearly empty in recent weeks amid business shutdowns and quarantines nationwide. Retail purchases of milk rose nearly 53% for the week ended March 21, while butter sales surged more than 127% and cheese rose more than 84%, compared to the same period a year earlier, according to Nielsen data.

Grocers have been charging consumers more, too. The average retail price of cow's milk was up 11.2% for the week ended March 21, compared to a year earlier, the Nielsen data shows.





RESTAURANT CLOSURES DISRUPT SUPPLY CHAINS

Finding enough truck drivers is part of the challenge. Agriculture groups have lobbied states to increase truck weight limits on highways to enable more food to be delivered.

Dean Foods Co, which has been starting some plant shifts earlier and running later, is offering $1,000 sign-on bonuses for drivers with dairy experience as it struggles to fill 74 open positions, a company spokeswoman said.

Another major problem: The sudden shift in demand from restaurants - now closing en masse - to grocery stores creates severe logistical challenges. Suppliers struggle to make the shift from wholesale packaging for restaurants to preparing retail products for stores.

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