As the COVID-19 crisis wears on, its effects on the dairy industry have become more acute.

Will producers be forced to dump milk for a lack of buyers? Should the government step in to prop them up? And even if it did, would that be enough to prevent farmers from going out of business?

Ted, T3 and Anna foresee a tough few weeks ahead.

Anna: Welcome to The Milk Check, a podcast from T.C. Jacoby & Co., where we share market insights and analysis with dairy farmers in mind.

T3: The last time we had the podcast...we did a podcast which was about two and a half weeks ago, there was a general feeling at the time that cheese and specifically cheddar might hold up okay in this because retail sales were good. What was really interesting what happened, you had the initial push into the supermarkets and everybody went into the supermarkets to buy and they bought up the whole store, you know, so that they could go home and stay at home for an extended period of time. And that drove retail sales way up and everybody expected those sales to come back down as we got into the middle of this crisis. Today is April 2. So this was about a week ago today, I would say a little over a week ago, Wednesday of last week. The best analogy that I've been able to come up with is around the interstate. You're driving at full speed, you know, little over the speed limit like we always do. And you will arrive in traffic, and you go from driving 60 miles an hour, you know, to almost a dead stop as fast as you can, because everything's backed up. And the reality is, it's traffic, you're gonna start moving again but once you're in traffic you're gonna be moving at 30 miles an hour.

And that was almost exactly what we felt with this market in the middle of last week, everything was running at full speed. The restaurant chains and that distribution pipeline was really pulling hard and eager for every piece of cheese, especially cheddar that they could get their hands on. And then they just got to the point where they were caught up. And so there are all of those extra orders, which were extra orders so that you could take the displaced foodservice demand and put it into retail, all of a sudden those extra orders really slowed down. And the whole market just backed up and it's backed up almost immediately. And so it was within a 24- to 48-hour period you went from you know, moving a lot of cheese all over the place to try and reallocate the cheese towards retail sales to, "Okay, now where do we go with this cheese because nobody's buying?" It happened very quickly and all of a sudden the market really had no choice but to come down and that's why you suddenly saw this cheese market, you know, drop over the matter of three or four trading days from you know, something almost at $1.80 down to something at $1.30.

Now, what will happen from here, I think it's harder to predict. I think the reality is hit that even cheddar which is I think the cheese that's gonna hold up best in this environment, the sales into retail are probably not gonna be enough to overcome the loss of sales on the food service side, especially when you consider that there's a lot of milk being moved away from non-cheddar plants into cheddar plants. So every cheddar plant in the country is running full. Where do we go from here? You know, one of the great reality of a market economy is uncertainty really tends to get people to stop buying not just at the consumer level, but also at the business level. And nobody was gonna buy any extra cheese at $1.70, now that we're at $1.30, my belief is we're in a place where companies are gonna say, "This crisis is temporary, eventually we'll come out of it. And I'm willing to build inventory here.