Domestic Consumption of Fluid Milk and Cheese

The two largest uses of milk are for cheese and drinking milk.  Cheese is a growth sector while drinking milk is a declining sector.  This post will review the most recent data from the first quarter of 2019 on consumption/disappearance of these products and the potential trends for the future.

Monthly consumption data is extremely volatile.  It is difficult to see where changes are occurring and where trends are going.  For that reason, data in this post will be primarily annual and the most recent data will be reviewed as 12 month rolling averages.  The 12 month rolling averages do eliminate a lot of the month-to-month volatility, however they do not fully reflect the most recent events because they are partially based on data that is up to 12 months old.  Future posts will update this data on domestic consumption quarterly.

Drinking milk, often referred to as fluid milk, will be reviewed first and in some detail because it is a declining category with significant changes in the sub-categories of organic, flavored, and reduced fat milk.

Fluid milk has been declining on a domestic per capita consumption basis for a very long time.  However, for many decades, the population increases kept overall consumption stable.  In the most recent decade, population increases have slowed down, and overall consumption has started declining as shown in Chart I below.  Chart II shows the same data expressed as an annual percentage change.  The charts both show a decline that is accelerating.

Chart I - Milk Disappearance in the Last 20 Years

Chart II - Annual Percentage Change of Fluid Milk

Charts III and IV, display sales of fluid milk consumption as 12 month rolling averages.  Chart III shows the 12 month rolling averages for 2018 and 2019 in millions of pounds.  The monthly volume decline in Chart III is very consistent month by month.  That means that the percentage change (Chart IV), is accelerating.  The trend line in Chart IV shows the accelerating decline in percentage change for milk consumption.

Chart III - Milk Sales Based on Month 12 Month Rolling Averages

Chart IV - Percentage Change by Month, Based on 12 Month Rolling Averages

The above Charts III and IV indicate that sales of fluid milk are declining, which is well known. That decline is trending to a little over 2.2% annually on a rolling 12 month average for 2019,  The data also shows that the rate of decline is accelerating.

There are also changes in the mix of fluid milk products.  A few categories are stable or growing, but most are declining.  Whole Milk has maintained its volume and the small category of flavored whole milk is growing (Chart V).  The categories of reduced fat milks have all declined.  The reduced fat milk products more closely resemble the plant-based alternative milk products which are generally very low fat.  Therefore, the reduced fat milk products are easy candidates for cannibalization by plant-based "alternative milk" products. 

Organic milk (Chart VI) is down by more than double the decline in consumption of conventional milk.   This is likely caused by the similar customer base for organic and plant-based products.  Customers who want organic products likely have a similar profile to those who want plant-based products.

Chart V - Change in Consumption of Milk products in Q1 of 2018/2019

Chart VI - Change is Conventional and Organic Milk in Q1 of 2018/2019

Cheese is growing in volume long-term and short-term (Charts VII and VIII).  The growth of cheese was especially strong in 2018.  It has previously been shown that there is price elasticity of demand for cheese, and lower cheese prices in 2018 resulted in higher than normal sales.  The percentage increase in cheese consumption shown in Chart VIII is very erratic.  However, on the average, cheese consumption is growing slightly above two percent annually, very similar in percentage decline in fluid milk.

Chart VII - Domestic Cheese Disappearance in the Last Two Decades

Chart VIII - Annual Percentage Growth of Cheese in last Two Decades

Cheese growth from 2018 and 2019 is analyzed based on 12 month moving averages.  The growth is shown in pounds in Chart IX and in annual percent changes in Chart X.  The high 2018 cheese sales discussed above are declining to more normal growth rates of 2 percent in the first quarter of 2019.

Chart IX - Cheese Disappearance in million lbs.
Based on 12 Month Moving Averages for 2018/19

Chart X - Cheese Disappearance Annual Percentage Change
Based on 12 month Rolling Averages for 2018/19

SUMMARY

The percentage growth in cheese consumption is about equal to the percentage decline in fluid milk.  However, cheese is a bigger category.  Using a weighted average of the cheese growth and the fluid milk decline indicates an average increase in the combined demand.  As covered in the prior post, Class IV milk for butter is growing by around one percent.  Class II milk for products like yogurt and ice cream are stable.  Overall, this would provide a needed increase of about one-half percent in the milk supply.  

That increase would be roughly in line with current percentage increases in milk production levels, but the overproduction of the past must still be dealt with.  In 2018, milk production was well above consumption with the excess milk ending up in excessive cheese inventories.  Those inventories have continued to grow at about four percent in 2019. Because 2018 was excessive, the current increase in the milk supply is still too big for the current needs.  Most current predictions are for better milk prices in 2019.  For this to occur, the cheese inventories must be brought in line with consumption and exports/imports.

While tremendous progress has been made in lowering the growth of milk production, additional steps to lower milk production are needed to bleed out the overproduction of prior years.