Market Extra: Shuttered schools, plunging milk demand led to race among dairy farmers to tap small-business rescue program before funding ran out

“The COVID-19 situation has significantly disrupted the supply side of the dairy economy,” said Paul Kohls, chief lending operations officer at Compeer Financial, one of the nation’s 72 Farm Credit lenders.

“It’s very challenging,” Kohls told MarketWatch on Thursday. “Either dairy farmers are dumping milk or the processors are dumping milk, because the demand isn’t there.”

Compeer lends to rural farm and agriculture producers across Illinois, Minnesota and Wisconsin, but spent much of April helping existing clients tap the Small Business Administration’s new Payroll Protection Program, which Kohls hopes will soon get more funding from Congress.

Read: Lawmakers fail to replenish coronavirus-aid program for small businesses on day it runs dry

Rural farmers across the food-production chain have been reeling from several seasons of severe weather, trade tensions with China and depressed commodity prices, and now must also navigate a pandemic during the critical planting season.

While coronavirus-stricken pork and beef producers are asking for some of the $9.5 billion worth of agriculture producer aid in the $2 trillion federal stimulus bill pass last month, the pandemic also has slowed restaurant demand for farm and dairy products to a trickle.

See: Restaurants and hotels, devastated by coronavirus, face long and painful recovery

But for dairy producers, there’s the added shock of nationwide school closures, affecting an estimated 25 million public students, per Education Week’s tracker, and a key source of demand for fluid milk.

May futures for Class III milk DAK20, -0.63% settled at more-a-than-decade-low of $12.11 per hundredweight on Thursday, their lowest settlement since Sept. 25, 2009, according to Dow Jones Market Data. Prices have plunged 25.34% since March 31, when California’s Bay Area tightened its early lockdown, steps other major U.S. cities followed to stem new COVID-19 cases.

“The Paycheck Protection Program is allowing many dairy operations to pay employees,” Kohls said. “Just because there is less demand, farmers still have cows that need to be milked and animals that need to be cared for, despite the economic hit being taking right now.”

Coronavirus update: 2.08 million cases worldwide, 138,487 deaths; Trump unveils guidelines reopening of economy

The Trump administration has made the Paycheck Protection Program a cornerstone of its pandemic response. And while it got off to a rocky launch on April 3, the lure of forgivable loans of up to $10 million has proved popular in a country grappling with a health crisis, partial economic shutdown and the sudden loss of millions of jobs.

“It’s very tough out there,” said Todd Van Hoose, chief executive officer at the Farm Credit Council, the trade association for the Farm Credit System, adding that thousands of farmers have applied for small-business aid, but stressed more help is need to shore up farm country.

“We’ve had an unprecedented run of severe weather. On top of that, we’re probably in the seventh year of a commodity price downturn, and you add to that the Chinese trade situation, and now the coronavirus.”

Major U.S. stock futures were soaring late Thursday, with the Dow Jones Industrial Average DJIA, +0.14% surging more than 700 points, following reports that a Gilead Sciences Inc. GILD, +2.55% drug has produced promising results in COVID-19 patients and after the White House outlined six hurdles that states should clear before they start to lift coronavirus-related restrictions.

Seven Midwestern governors also said Thursday they were working on coordinated plans to reopening state economies amid the pandemic, according to the Associated Press.

Meanwhile, Treasury Secretary Steven Mnuchin, in a joint statement with Small Business Administration Administrator Jovita Carranza, which called on Congress to provide additional funding for the novel payroll program, said that a combined 14 years’ worth of SBA loans had been processed in under 14 days.

“We want every eligible small business to participate and get the resources they need,” the statement said.

All told, Compeer helped nearly 1,300 of its clients get approved for the Paycheck Protection Program, providing about $125 million of funds across an array of businesses from dairy farms to grain elevator operators to swine farms.

“When we opened up our application portal on April 6, we received hundreds of applications on that first day alone,” Kohls said, adding that its first dollars went out to clients earlier this week.

But he also said a few hundred of Compeer’s clients submitted applications that weren’t yet processed before funds ran out on Thursday.

“We had tremendous interest and significant demand from clients of all of stripes,” he said.

Read: A Bronx bodega’s struggle to tap government loans, and survive