Demand for Dairy Products

To determine total U.S. dairy product demand, the USDA Economic Research Service (ERS) begins with U.S. supply. Total U.S. milk production, or supply, has increased over time, from 115,586 million pounds in 1974 to 170,934 million pounds in 2004. Milk used as feed is subtracted. Imports and any stocks that are on hand at the beginning of a year are included. Exports, shipments to U.S. territories, non-food uses of milk, and end of year stocks are deducted to arrive at a final annual figure for the milk available for commercial sales as food. There is a final addition for donations from USDA stocks, typically processed dairy products that were previously withdrawn from the market to support prices. This final figure is “food disappearance” for milk and is an estimate of the amount of milk that was consumed during the year as food. Total supply and “food disappearance” or “demand” are shown in Figure 18 to illustrate the general trends in U.S. supply and demand for milk. There has been little difference between U.S. supply and demand. Federal milk programs attempt to control supply through price management and a key part of those calculations is determination of milk utilization.

Imports and exports have played a fairly minor role in supply and demand interactions. Figure 19 shows two factors in the determination of U.S. demand. Imports, while trending upwards, have been less than 3.5 percent of U.S. supply. Exports have varied greatly over the past three decades, but at their greatest represented only 5.3 percent of U.S. supply. (U.S. Dairy Exports on the Rise)

U.S. population has increased steadily over the past three decades, from about 205 million in 1970 to 294 million in 2004. Increasing population increases the demand for dairy products. The more interesting question is what happens to per capita demand for dairy products. Figure 20 shows that per capita demand for dairy products has declined over the past three decades. The trend in per capita demand for all dairy products (by weight) mirrors the trend in fluid milk and cream consumption, which declined between 1970 and 2000.

Milk is consumed as a beverage in a number of forms: whole milk (3.5 percent butter fat), reduced fat milks (one and two percent), skimmed milk (fat free) and a variety of flavored products. As Figure 21 shows, total beverage consumption of milk has declined fairly steadily over the past 30 years. Current per capita consumption of milk as a beverage is about 74 percent of the 1975 level. The greatest decrease was for whole milk (3.5 percent milk). Whole milk consumption is now just 35 percent of the 1975 level. The reduced fat products picked up some of the losses by whole milk as Americans became more concerned about fat consumption. Both one percent and two percent milk increased by about 50 percent, and skim milk consumption increased by 130 percent. But, increased per capita consumption of reduced fat products did not replace the declines in whole milk. Consumption of various flavored milk beverages (not show in the graph) has been fairly flat during this period. The bottom line is that overall per capita demand for milk as a beverage has declined, replaced by other beverage products including juices, carbonated beverages, tea and coffee. Soy products have also been developed as milk substitutes. (What are Americans Drinking?)

Americans don’t drink as much milk as they did thirty years ago, but they do eat more cheese. As can be seen in Figure 22, per capita cheese demand has increased over time, by nearly 180 percent between 1970 and 2005. Demand for American style cheeses has increased by about 55 percent in the past three decades. Demand for other styles has increased more dramatically. Italian cheese demand increased by more than 400 percent in the past 30 years. The demand for other miscellaneous cheeses (i.e., Swiss, muenster, etc.) has nearly doubled. (Cheese Please!)

Consumption trends for all other remaining dairy products are rather uninteresting. They show no real dramatic losses in dairy product sales, nor do they show trends that might lead to greater dairy demand. Ice cream demand has dropped modestly over the past 30 years as has evaporated and condensed milk and cottage cheese. Butter demand has remained fairly constant during the past three decades, despite growing concerns over dietary cholesterol.