The Fall of Drinking Milk

Per Capita consumption of fluid milk (drinking milk) has been decreasing for decades.  For a while, the U.S. population increases offset the decline in per capita consumption, so the total volume of drinking milk remained the same.  In the last decade, overall consumption of milk began falling.  The decline was steady at about two percent per year.  When COVID struck and "stay-at-home" policies were implemented, consumption of milk briefly increased (Chart I).  

The data in this post uses 12-month moving averages which smooth out seasonal fluctuations.  However, they also lengthen the period of the early 2020 surges.  The data includes organic and flavored milk.

The increases due to the stay-at-home policies quickly fell back to normal in 2021 and the decrease is now continuing at about 129 million pounds per month compared to the prior year (Chart II).  As the declining amount remains the same, the percent decline increases.  The decline that was once two percent is now declining at three to four percent (Chart III).  

Chart I - Total Milk Sales

Chart II - Change in Milk Sales from Prior Year

Chart III - Total Milk Percent Change from Prior Year

Where are the changes coming from?  

Whole milk has been the most volatile.  Whole milk was increasing by about two percent a year prior to COVID.  During the COVID "stay-at-home" period, sales increased.  The gains made in 2018 through 2020 have now changed to decreases (Chart V). Whole milk is currently on a decline of 3.1 percent annually, which amounts to a 44 million pounds per month decline versus the prior year.  The decline is now leveling out.

Chart IV- Whole Milk Sales

Chart V - Whole Milk Percent Change from Prior Year

Two percent fat milk was decreasing annually at three percent in early 2019.  During COVID, there were small increases in 2020.  However, just like the trends for total milk, two percent milk has fallen back to the declines seen prior to COVID policies.  In terms of total volume, two percent milk has reached the level of decline that matches the pre COVID decreases of about 57 million pounds per month compared to the prior year (Chart VI).  The current rate of decline is 3.8 percent annually compared to the early 2019 rate of decline of 3.1 percent (Chart VII).

Chart VI - Two Percent Change from the Prior Year

Chart VII - Percent Change from Prior Year

One percent fat milk is sustaining a rapid drop of about 34 million pounds per month compared to the prior year (Chart VIII).  This represents a significant decline currently at 7.2 percent annually (Chart IX).  The impact of COVID policies had only a very slight impact on one percent milk in 2020.  As the volume decline remains steady, the percent rate of decline will show an increase.

Chart VIII - One Percent Fat Milk Sales

Chart IX - Percent decline in One Percent Milk Sales

Fat free milk is declining by about 26 million pounds per year.  As displayed in Charts X and XI, the decline has recently slowed, and the fat free category is now declining by about 10 percent annually. It's typical for a decline to slow as it approaches zero.  If fat free milk did continue losing 26 million pounds per year, it would cease to exist in eight years.  That will not happen, as the decline will likely continue to slow down.  With slow retail movement, less retail space will be allocated to fat free milk and some brands may drop fat free milk.

Chart X - Fat Free Milk Sales

Chart XI - Percent Change in Fat Free Milk Sales

Table I lists the current volume changes compared to the prior year.  The overall decline is currently at 3.4 percent annually.  In terms of volume, two percent fat milk is declining fastest.  In terms of percent, fat free milk is declining fastest.

The only increase is for "other" fluid milk sales that do not fit the standard categories.  This would include new products like Fairlife milk.

Table I - Current Changes in Milk Sales

Chart X compares milk sales by fat percent for 2018 and the current 12 months ending in March 2022.  Whole milk remained steady but gained in percent of total milk as the other categories shrank.  Two percent milk lost 148 million pounds of milk per month.  One percent fat milk has lost 92 million pounds per month and fat free milk has lost 111 million pounds per month. One percent fat milk is currently at six percent of the total and fat free milk is currently at 12 percent.  Each has dropped by two percent.  Overall, fluid milk sales dropped by 349 million pounds per month over the three and a quarter years' time span.  The decline is about 10 percent.

Chart X - 2018 Breakdown of Milk Sales
Compared to the Current 12-Months 

What does it all mean?  Fluid milk (Class I milk) sales are "programmed" to be the highest paid producer milk.  With less Class I milk and more cheese (Class III milk) and more butter (Class IV milk), the average or "Uniform" price of producer milk will decrease.  In turn, the Producer Price Differential will decrease, lowering producer milk payments.

The overall drop in fluid milk combined with the rapidly shrinking low fat categories (Chart X) leaves less butterfat available to be used for butter.  The reduced fat milk categories which are declining the fastest are a major source of butterfat for butter churning.  Combined, the overall drop in fluid milk, and the rapid drop of reduced fat milk and the increasing exports of butter (see the prior post to this blog) and the growth of domestic consumption of butter, butterfat and butter will remain scarce.  This will keep the price of butterfat and butter high.