Slumping Milk Sales Cut Overall Revenue
U.S. milk consumption continues to decline. Fluid milk sales dropped to 43.3 billion pounds last year, down 2.4% from 2021, the eighth straight annual decline. Last year, fluid milk accounted for about 19% of U.S. milk production, fewer than one out of every five tanker loads of milk. Twenty years ago, one in three tankers were routed to bottlers.
While Americans are drinking less milk, they are consuming more dairy. The average American consumed 661 lbs. of milkfat and 519 lbs. of milk solids in 2021, according to the latest available data from USDA. Per capita milkfat consumption stood at an all-time high in 2021, driven by Americans’ record-setting appetite for cheese and butter. Over the 10 years from 2011 to 2021, per capita cheese consumption jumped 17%, butter consumption leapt 21%, and milkfat demand climbed 10%. Over the same period, exports expanded dramatically, providing a vital outlet for additional U.S. dairy production.
Even so, the slump in fluid milk sales still creates headaches. Every gallon of milk that doesn’t go into a jug must be made into a storable product, like cheese, butter, or milk powder, so lower fluid demand boosts output of commodity products and weighs on dairy product values. The decline in fluid milk sales last year likely boosted 2022 cheese or butter production by about 50 truckloads per week. As bottlers took on less milk, U.S. milk processing capacity effectively shrunk, putting more strain on other processors. In the Upper Midwest, loads of spot milk have traded as much as $10/cwt. below Class III prices for 10 straight weeks, driven primarily by rapid growth in regional milk output, extreme weather, mechanical issues, and difficulty in maintaining experienced staff, but lower intakes at fluid milk plants were also to blame.
Slower fluid sales cut into producers’ milk checks from several angles. They reduce the share of milk revenue based on the Class I price, lift output of less valuable dairy commodities, and increase the supply of excess milk sold at a discount.
March 1, 2023