Annual Per Capita Consumption of Dairy Products

At the end of November each year a report on per capita dairy consumption is compiled based on data from the USDA, Agricultural Marketing Service, and others.  The report is an annual compilation through the prior year, in this case, 2022.

This post will cover the long-term growth or decline of major consumer dairy products which includes cheese, fluid milk, butter, yogurt, and ice cream.

Most of the data below is based on per capita consumption.  The population of the U.S. grew by 0.4% in 2022 slightly increasing the total volume of consumption compared to per capita consumption changes.

CHEESE

The largest use of milk is for cheese, and the consumption rate shows significant and steady gains (Chart I).  The 2022 gain in pounds per capita consumption is record setting with an increase of 1.4 pounds per person.  During the year cheese prices have been at long-term levels, increasing purchases (see Chart IV in this post for details).

The news is both good and bad.  The increase in cheese consumption is certainly a positive for dairy producers, but the stagnant cheese prices are keeping milk protein prices low.  

Chart I - Per Capita Cheese Consumption 

Chart II - Percent Change in Cheese Consumption

BUTTER

Butter per capita consumption has a long history of increases, but in 2022 consumption fell.  In 2022, wholesale butter prices increased, setting record highs and causing higher retail prices.  There has also been concern about saturated fats, but the most impactful reason for the decrease in consumption is higher consumer prices.

Chart III - Per Capita Butter Consumption

 

Chart IV - Percent Change in Butter Consumption

BUTTERFAT IMPACT

What changes the demand for butterfat?  By far, the largest use of butterfat is for cheese.  In 2022, 42% of butterfat went into cheese.  Only 17% went to butter.  Even though butter consumption went down, because of the increase in cheese consumption the demand for butterfat went up in 2022.  In turn, butterfat prices have increased.  As mentioned in many prior posts, as butterfat prices go up, milk protein prices go down.

Chart V - Butterfat Usage in Dairy Products

FLUID MILK

The decline in fluid milk is very long-term (Chart VI).  Fluid milk is declining by nearly equal volumes of 3 pounds per year per capita.  Therefore, the percentage drop is increasing (Chart VII).  Fluid milk is now rarely seen on the dining table as a beverage.  The introduction of plant based "milk" has also certainly taken its's toll on fluid milk sales. 

Whole milk as defined by the USDA as 3.5% butterfat and it is the largest usage of fluid milk representing 37% of fluid milk sales.  Whole milk has maintained its volume over 23-years losing only 5% of volume. Sales of milk with 2% fat makes up 32% of sales.  The remaining types of milk like 1% fat and fat free are declining fast.

Chart VI - Per Capita Fluid Milk Consumption

Chart VII - Percent Change in Fluid Milk Consumption

ICE CREAM

The amount of ice cream consumed per capita continues its long-term decline.  Nevertheless, it is still in fourth place in terms of butterfat usage.  Over the 23-year span, ice cream demand has fallen by just 17%.  The butterfat in ice cream is 7% of total butterfat usage.

Chart IX - Per Capita Ince Cream Consumption

YOGURT

Yogurt was growing fast in the period between 2000 to 2013.  It then abruptly leveled out.  It has remained steady for the next decade.  The amount of butterfat used in yogurt is less than 1%.

Chart VII - Per Capita Yogurt Consumption

SUMMARY OF DAIRY CONSUMPTION

The recent changes in per capita consumption are primarily the result of price changes.  The price of butter has gone up and the volume of consumption has fallen.  The price of cheese has been stable. and the volume of sales has increased.  Cheese is the clear dairy growth product with a steady increase of 70% over 23 years.  Butter has also grown over the 23 year span with a 64% growth in volume. Butter did. have a decrease in 2022 because of pricing.  Fluid milk, ice cream, and yogurt are not growth products.

Milk Production and Wall Street are Similar.

Milk production and Wall Street have similar financial profiles.  They both have an opportunity for long-term financial gains and they both have significant financial volatility.  Success in investing can show huge losses at times, but in the long-term a balanced portfolio will show significant financial gains.  The near-term emotional reaction when the market is falling is to sell, cut losses, and try to invest in more stable things like short term bonds or just hold on to cash.  The financial advice for long-term investments is to ride out the lows, take advantage of lower prices to continue to build a portfolio and wait for the market to improve.  Milk production can be the same.  The real winners, as covered in the prior post, continue to build herds with higher components and more milk per cow to maximize current revenue and be ready for the upturn in component prices.

Recently there have been articles in dairy publications that say the butter prices that have gone up must now fall back.  That is true for the short-term.  The short-term decision would be to discontinue the costs to increase components and milk pre cow and reduce the cost of improving herd productivity.  

SHORT-TERM COMMODITY PRICE TRENDS

Below are the most recent weekly charts of the Agricultural Marketing Service (AMS) prices for butter and cheese, the foundations for producer milk pricing.  

Butter prices have fallen from $3.33 per pound in September to $2.77 per pound in the most recent week.  That is a 17% drop in a short time.  However, even $2.77 per pound is at record highs.

Cheese prices have fallen from $1.95 per pound in September to $1.72 per pound in the most recent week.  That is a 12% drop also in a short time.

Is it time to change modes and start reducing costs even if it reduces revenue?  Would a Wall Street investor recommend liquidating investments with a short-term drop?

Chart I - Weekly Butter Prices

Chart II - Weekly Cheese Prices 

LONG-TERM COMMODITY PRICE TRENDS

The success of long-term investment in milk production is shown in Charts III and IV below.  Over time, commodity prices do increase as retail and wholesale prices of butter and cheese increase.  Recently, the monthly price of butter has dropped by 6% and cheese prices have dropped by 10%.

Is it time to change practices to reduce cost?

Chart III - Long-Term Butter Prices 

Chart IV - Long-Term Cheese Prices

LONG-TERM BUTTERFAT PRICES

Charts V and VI show the change in the value of butterfat and milk protein.  

In 2020, as COVID "stay at home" policies were implemented, butterfat pries fell sharply.  By 2022 butterfat prices returned to their long-term trends.  In the most recent weeks, butterfat prices have dropped by 7%.  Protein prices have dropped by 20% to a decades long record low in October before recovering somewhat in November.

When cheese prices are stable and butter prices increase, the value of milk protein drops.  The extreme drops in butter in 2020 and 2021 coincide with the COVID "stay at home" policies.  When the butter price went down, the protein price hit extreme highs. The opposite has happened in 2023.

Chart V - Long-Term Butterfat Price

Chart VI - Long-Term Protein Price

In the November 7 post, the long-term success of investing in cows and feeds which produce higher components and more milk per cow.   Charts VII and VIII show the gains in Federal Order butterfat levels of the two highest butterfat level Federal Orders, the Pacific Northwest and the Upper Midwest.  They both show the impact of long-term investing.  Both took a brief drop during the COVID mandates, but otherwise show a consistent annual growth in percent of butterfat levels.

Chart VII - Butterfat Levels in the Pacific Northwest Federal Order

Chart VIII - Butterfat Levels in the Upper Midwest Federal Order

How is milk production like Wall Street?  In both cases some are day traders, and some are long-term investors.  Success in volatile markets requires a steady hand and the ability to weather tough times.