No idea if milk works or not, but that it is 'perfectly good food' is pretty irrelevant.
I am pretty sure the environmental impact of using some milk to control fungi is a lot less than using copper, lime or whatever jeyes fluid is made of. What about garlic based fungicides, or pepper based deterrents, are they also a 'waste of good food'. Indeed seaweed extracts are made from seaweed that could instead be eaten.
There are dozens of patent applications for fungicide compounds based on anhydrous milk fat.