Milkfat is Driving Milk Check Revenue

Milkfat driving milk check revenue
11/6/2017

Nutrition research and advice pointed to fat, particularly saturated fat, as the culprit behind the country’s growing problem with heart disease and obesity. The “anti-fat” mantra became entrenched in medical advice and government nutrition guidelines for decades.

While official guidelines are slowly changing in response, consumers have been much quicker to act and have been switching to higher fat foods — including dairy — seemingly across the board. This fundamentally altered the basic supply-demand situation for milkfat. In fact, this newfound demand for milkfat is affecting most major categories of dairy products.

Although the total fluid milk category continues to lose volume sales, the major reversal in whole milk sales has been sufficient to enhance the consumption of milkfat in the entire fluid milk category in recent months. Between January 2000 and June 2015, estimated consumption of milkfat in all fluid milk products dropped by an average of 1 percent per year, but since then it has grown by an average of 1.2 percent year-over-year.

Market development allowed per capita butter consumption to hit a 51-year high of 5.9 pounds in 2016. In fact, the consumption of milkfat, in the form of butter, has grown from about 16 percent of total U.S. milkfat in 2000 to more than 18 percent today.

The likelihood that total milkfat consumption is outpacing growth of total milkfat production, as it clearly is for butter, is where price implications come into the picture. The U.S. dairy industry has pulled over 4.5 percent of total U.S. milkfat back out of the export market over the past few years in order to meet growing domestic demand. Demand growth outpacing supply means just one thing in a commodity market: higher prices. Butter prices are where the supply-demand balance for all milkfat is reflected in the U.S. dairy industry.

Dairy futures markets predict this market shift will continue for the foreseeable future. To read the full article on how milkfat is dringing your milk check revenue, click here.

Tags: Milk Check, Revenue