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

Got too much milk?

Dairy farmers, faced with shuttered schools and dwindling demand for milk amid the pandemic, applied in droves for the Trump administration’s $350 billion small-businesses aid program, until Thursday when money for the program 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,...