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| Chart I - Year by Year Percent Changes in Per Capita Consumption of Fluid Milk |
For years, the population growth kept the total domestic consumption of fluid milk nearly even. Individuals were drinking less milk, but more people were drinking milk, keeping overall domestic consumption steady. Recently, the per capita consumption of fluid milk stated falling much faster. Additionally, the population growth has slowed to just .6% in 2018 (Chart II).
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| Chart II - Year by Year Percent Changes in U.S. Population |
The
result is a significant drop in total domestic fluid milk purchases (Chart
III). The drop is significant and
appears to be accelerating. Competition
from “alternative” milks and other beverages is increasing and the new products
are being accepted by U.S. consumers.
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| Chart III - Total U.S. Domestic Sales of Fluid Milk |
The
biggest use of milk in the U.S. is for cheese.
Total domestic cheese consumption (Chart IV) is still increasing. However, the days of 6% to 8% annual growth are far
behind. Today, the growth rate is closer
to 2%. As the cheese market continues to
mature, that growth rate will likely decrease.
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| Chart IV - Year by Year Changes in U.S. Cheese Consumption |
The annual growth in yogurt was once as high as 20% (Chart
V). For the last four years, the growth
rate has been negative. Recently, two of
the largest yogurt producers have introduced “plant based” yogurt. It is likely that this will accelerate the
decline of traditional yogurt.
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| Chart V - Year by Year Percent Change in Yogurt Consumption |
The growth of butter consumption is also slowing.
In 2017, per capita consumption became negative.
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| Chart VI - Year by Year Percent Growth in Butter Consumption |
The market for milk is changing.
With the declining market for fluid milk, there is increased pressure to
provide components, not just milk. The
products that are growing, like cheese, require components. Exports also require components because the
cost to ship water is too great.
Producers paid on the component system are paid only for
components. More butterfat and milk protein mean higher revenue. Also, processors that require a
high level of protein often pay additional bonuses for increased milk protein levels.
The key to maximizing producer revenue and cash flow is to produce
maximum components.
One of the proven techniques to increase components is to balance rations for amino
acids. Amino acid balancing has been
proven many times to increase protein, butterfat, and milk volume. Chart VI below shows a brief history of amino
acid balancing in the Upper Midwest Federal Order. From 2010 to 2014, more and more herds were
balancing for amino acids and butterfat and milk protein increased. However, as milk prices started
dropping, producers were reluctant to try anything that could increase feed
cost. This was not a good plan. The increase in revenue and cash flow from
amino acid balancing always pays for itself as it produces more butterfat, milk protein, and milk volume
While there are many things that an individual producer cannot
control, like the standardized Class III price, a producer can manage to
maximize revenue and cash flow. That may
be the key to survival in the current dairy climate.
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| Chart VII - Impact of Amino Acid Balancing |
For more details on the how a producer can increase revenue and cash
flow in the current environment, see the recent article by this author in Progressive Dairyman.
