"The dairy sector is in uncharted territory and is expected to experience three waves of market movement over the next 12 months, from panic-buying, through muted retail demand and greater logistical challenges, to longer-term loss of consumer purchasing power," said analysts at Rabobank, a big lender to the food and agriculture industry.

For big dairy buyers such as Nestlé SA, maker of Haagen-Dazs ice cream; Danone SA, maker of Activia yogurt; and The Unilever Group, maker of Ben & Jerry's ice cream, lower milk prices are a good thing because it means lower manufacturing costs. At the same time, many supermarket shoppers have stopped buying expensive, high-end dairy products in order to save money.

"Consumers are now buying basic items, so there could be a longer-term impact" on companies' revenue and profit margins, said Alexander Anton, secretary general of the European Dairy Association, which represents dairy cooperatives and private companies.

The NMPF and the International Dairy Foods Association have jointly submitted a "Milk Crisis Plan" to the U.S. Department of Agriculture, hoping to tap funds provided under the CARES Act, the stimulus package recently passed by Congress.

For example, the two industry groups proposed a six-month program under which the government would pay producers $3 per hundredweight on 90% of their production if they cut production by 10% from the March 2020 baseline. They also want all producers and handlers of milk to be compensated for milk that must be disposed of because of supply chain disruptions resulting from the COVID-19 pandemic.

Similar challenges are unfolding in Europe, which initially benefited from a 30% increase in demand for milk products right after many countries imposed shutdowns. "But that short-term increase in demand is over and we are now suffering from other negative developments," said Anton. He estimated that up to 30% of dairy industry employees in certain locations were at home under quarantine orders or had taken sick leave.

A good deal of milk and dairy products are bought and sold in the open-air markets of Italy, Spain, Greece and France, many of which are now closed because of stay-at-home orders and social distancing rules. About 15% of Europe's milk volume is processed into products that are exported, such as mozzarella cheese from Italy, feta cheese from Greece and yogurt from France. But a decline in trade has led to a lack of shipping containers and a reduced capacity to send products to key markets such as the U.S., China and Japan.

The timing is especially bad because annual raw milk production typically peaks in April and May, and there is a lack of storage capacity for easily perishable raw milk. Many farmers "are dumping the milk," said Anton. The European Dairy Association recently asked the European Commission to subsidize farmers who want to store dairy products in privately owned warehouses but were turned down.

Farm revenue is taking a hit, too. In January, the Germany-based Institute for Food Economics and Consumption Studies forecast that the price of raw milk would be 37 European cents by the end of April. Its latest forecast: 25.8 cents.

On April 7, a group representing British dairy farmers asked the government to reimburse those suffering from lower prices or those forced to dump milk because the processing companies they supply rely heavily on the food services sector. That move, the group argues, will help save many dairy farmers from financial collapse and ensure there will not be a milk shortage problem later when the pandemic passes.

"Removing the excess distressed milk from the market place will help to stabilize the current spot price without causing long-term market distortion," said Peter Alvis, chairman of the Royal Association of British Dairy Farmers.

France has taken a similar route. The country has asked the European Union permission to pay its dairies 32 cents for every liter of milk they choose not to produce, up to a total of €10 million. That compares to the pre-coronavirus price of 30 to 35 cents per liter. "We don't need all that milk, so we need to cut down the production," said Anton.