April 9, 2012

 

Falling milk sales affect dairy industry in US

 

 

The declination in consumption of liquid dairy products is being offset by increased cheese sales.

 

Fluid milk sales have been struggling for some time and are expected to continue to struggle with lower consumption nearly every month and nearly every year. Fluid milk sales for the two most recent months of December and January showed declines of 3.3% and 2.7%, respectively.

 

There have been efforts to improve consumption, but so far they have failed to improve overall trend. Much of it has to do with preference and stereotype. By and large, milk is viewed as a commodity that fits in certain times of the day and with certain diets. For instance, breakfast is generally considered a meal that includes milk, while most lunch and dinners do not.

 

Schools lunches are different in that milk is offered and consumed on a regular basis. Some school systems have discontinued offering chocolate milk with lunches, which has reduced consumption. However, some have instead turned to other drinks that have higher sugar content than chocolate milk. Students have indicated less desire to consume regular milk.

 

Meals other than breakfast generally consist of other types of drinks. Most people do not view milk as a thirst quencher after a strenuous workout, sporting event or a period of hard work. Many consumers that eat at fast food restaurants purchase soft drinks.

 

Dairy Management Incorporated (DMI) has recently outlined several strategies to boost milk consumption. It is working with McDonalds to emphasis milk in children's "Happy Meals." They are investing US$7 million each year for the next three years in lactose-free milk promotions, a US$2 million investment in value-added milk and a US$5 million investment to promote retail gallon containers of milk, according to Tom Gallagher, CEO of DMI.

 

There are no easy answers to declining milk sales. The bright spot is that the decline in consumption of fluid milk is being offset by increased cheese sales. Per capita consumption of cheese continues to increase nearly every year. Per capita consumption totaled 33.3 pounds in 2010. This was up from 29.8 pounds in 2000 and up from 27.6 pounds in 1985.

 

Despite increased cheese consumption, there is plenty to go around. Inventory has grown since the Whole Herd Buyout program in the mid-1980s. The latest USDA "Cold Storage" report showed total cheese stocks in February of 987.4 million pounds. Although 5% lower than a year ago, stocks are beginning to increase seasonally, increasing 1% over January.

 

Strong milk production continues due to mild weather and increasing cow numbers. February milk production was 4.3% higher in the nation after adjusted for leap day. Cow numbers increased 9,000 head from January and 87,000 more than last year. It seems as if hot weather may be the next event that could have a negative impact on production.

 

Feed prices may tighten profitability, resulting in decreased milk output, but that will take a little while to kick in. USDA released its "Prospective Plantings" report March 30, indicating farmers will plant 95.9 million acres of corn this year, 4.0 million more than last year and the larges acreage since 1937. Soybeans plantings are expected to total 73.9 million acres, down 1.1 million from that year.

 

Trend-line corn yields would increase carryover significantly, resulting in a lower corn price but likely not for soybeans or soybean meal.