by Madeline Schultz, content specialist, AgMRC, Iowa State University, schultz@iastate.edu.
Profile revised June 2008 by Diane Huntrods, AgMRC, Iowa State University.
Overview
Only about one-third of the U.S. milk supply is actually processed into milk and cream products; the remaining two-thirds of the milk supply is used to manufacture a wide range of dairy products. Sales of these dairy products, such as butter, ice cream and yogurt, account for tens of billions of dollars annually in the United States. Producers can capture a part of that billion-dollar market by processing and selling their own line of value-added dairy products manufactured on their farms.
Processing
The United States has 1,109 dairy product manufacturing plants. While the number of dairy plants in California continues to decline (108 in 2007), the total number of plants and the number in New York increased (116 in 2007). With 206 plants, Wisconsin continued to support the most plants in any state.
Of the total 181 billion pounds of milk marketed in 2006, 14 percent was used for butter, 8 percent for frozen desserts and 40 percent for cheese. (For more information about cheese, please see the Cheese Profile.)
Value-added Products
Butter
U.S. butter production in 2007 totaled 1.5 billion pounds, a 6 percent increase from the previous year. California produced 33 percent of this butter, followed by Wisconsin with 24 percent. Both the total amount of butter processed and the number of plants making butter increased from the previous year. More than half of the butter now made comes from cream not needed when milk is used for fluid milk or cheese.
Cream and Cottage Cheeses
Cream and Neufchatel cheese production was 773 million pounds in 2007. When combined, production of curd, creamed and lowfat varieties of cottage cheese totaled 1.2 billion pounds.
Frozen Desserts
As of 2007, 352 plants in the United States processed ice cream, while only 102 made frozen yogurt and 177 made sherbet. That year, ice cream plants made nearly 951 million gallons of regular ice cream. Plants also made 60.7 gallons of frozen yogurt and 62.7 million gallons of sherbet. In 2006, California led the United States in ice cream and frozen dessert production, followed by (in order) Indiana, Texas, Pennsylvania, Missouri and New York.
Total U.S. ice cream and frozen desserts sales in 2006 reached $23 billion, up $2 billion from 2005. At-home consumption accounted for $8.9 billion of that total. Away-from-home frozen dessert purchases totaled $13.9 billion. Regular ice cream accounts for over 60 percent of the the frozen dessert market and lowfat/nonfat ice cream accounts for 24 percent, followed by frozen yogurt (4%) and sherbet (3.6%).
More than 90 percent of all U.S. households surveyed said they consume ice cream and related frozen desserts. According to the USDA, Americans consumed 15.4 pounds of ice cream in 2005 (the latest year for which data are available), but only 1.3 pounds of frozen yogurt and less than 1 pound of sherbet.
U.S. Frozen Dessert Production
|
Frozen Dessert
|
2007 U.S. Production,
in million gallons |
% change from 2006
|
|
Ice cream, regular |
951 |
- 3.2 |
|
Ice cream, lowfat |
383 |
+ 1.6 |
|
Sherbet |
63 |
+ 6.1 |
|
Frozen yogurt |
61 |
- 8.0 |
Source: USDA.
With more than 30 percent of the market, vanilla remains the most popular flavor of ice cream. Chocolate captures 10 percent of the market, followed by butter pecan (4%), strawberry (3.7%) and chocolate chip mint (3%).
Forty percent of the ice cream market is held by four manufacturers: Unilever, Ice Cream Partners USA, Dreyers Ice Cream and Blue Bell Creameries. Nearly 18 percent of ice cream sales are private label products. Regional and local companies comprise the remaining 40 percent of sales.
According to the USDA, per person ice cream consumption peaked at 23 pounds in 1946. Per person consumption from 1949 through 1987 was relatively constant. Since 1988, U.S. consumers have generally eaten less ice cream overall. They have also shifted to ice cream with higher milkfat and higher priced, in addition to frozen yogurt and other dairy products from the freezer.
Sour Cream
Total sour cream production in the United States was 1.1 billion pounds in 2007, a slight decline from 2006. Nearly 100 dairy plants throughout the country process sour cream. California is home to 17 of these plants while New York is home to 12. However, New York plants produced more sour cream, 256 million pounds, compared to California's production of 201 million pounds.
Yogurt
Yogurt production in 2007 was nearly 3.5 billion pounds, a 5 percent increase over the previous year. In contrast, yogurt production in 1980 was 570 million pounds. California leads the United States in yogurt production, followed by (in order) New York and Tennessee. Per person yogurt consumption was 8.6 pounds in 2005 (the latest year for which data are available), well below the 62.8 pounds of yogurt consumed annually in Sweden.
Yogurt is being touted as a healthy or functional food due to probiotics. According to Dairy Management Inc., probiotics “are key ingredients in any product promoting digestive health.” About 80 percent of the yogurt manufactured in the United States contains Lactobacillus acidophilus. The Bifidobacterium strain is also found in dairy products. A dairy consultant estimated the market of probiotics, including dairy products and dietary supplements, to be between $1.2 billion to $1.8 billion.
Yogurt is now being incorporated into other products. General Mills', Kellogg's and Quaker Oats sell cereals containing yogurt. McDonald's and Wendy's offer yogurt-based products on their menu. Purina has introduced dog and cat foods containing yogurt. Yogurt has also been added to toothpaste, mouthwash, facial masks and suntan products.
Exports
During the last five years, the value of U.S. dairy exports has nearly tripled, reaching $3.1 billion in 2007. The volume of U.S. dairy exports has also set a new record of 2.2 billion pounds. While the bulk of U.S. dairy products is still consumed domestically, the percentage exported as dairy products jumped to more than 9.5 percent in 2007. Dairy products that are exported include butter, cheese, ice cream, yogurt, whey, lactose, infant formula, milk powders and fluid milk and cream.
Primary markets for U.S. dairy exports are (in order) Mexico, Canada and Japan. Mexico, which imported dairy products valued at $854 million in 2007, is regarded as the most important market for U.S. dairy exports. It is the largest buyer of U.S. cheese, ice cream and yogurt. Canada imported $412 million of dairy products in 2007.
U.S. butter exports climbed to 32.9 metric tons (MT) in 2007, nearly 6 percent of the butter produced that year. More than 11.3 thousand MT, or one-third of the butter shipments, went to the European Union, which had imported less than 200 MT the previous year. Middle Eastern and North African countries imported 11.2 thousand MT of butter, valued at $28 million.
The United States is the single largest country exporting frozen dairy desserts. Exports of U.S. frozen desserts reached nearly 26.5 MT in 2006, valued at $60 million. Mexico is the largest buyer of U.S. frozen dessert exports with an estimated $24 million, followed by Canada with $5.7 million. Other key markets include the European Union. The U.S. Dairy Export Council reports ice cream exports to Europe and the Far East are declining as manufacturers shift production to regional or local locations.
According to the U.S. Dairy Export Council, 5.1 MT of yogurt valued at $12 million were exported in 2007. The volume of yogurt exports increased 23 percent from the previous year, and the value increased 32 percent.
As a direct result of the significant growth in exports, the U.S. dairy industry posted a trade surplus in 2007. Imports increased to $2.7 billion, $400 million less than exports. The USDA has not needed to provide any export subsidies for dairy products for the last two years.
Experts attribute the dairy market conditions of 2007 to the convergence of numerous factors: a weak U.S. dollar; record international prices; poor weather in Australia, which caused a decline in milk production; the suspension of European Union export subsidies; and heightened demand in developing nations such as China.
Imports
According to USDA's ERS, the United States imported $2.7 billion worth of dairy products in 2007. The largest single category of dairy imports during the preceding year was cheese, which accounted for 40 percent of the total value of U.S. dairy imports and equalled 5 percent of total U.S. cheese production. The import volume of yogurt grew by 20 percent, and the import volume of butter equalled about 5 percent of U.S. production.
Outlook
The demand for dairy products should remain strong in 2008, particularly in Asia. High global dairy prices are expected to encourage a sharp rise in milk output, but factors such as high feed prices in this country are expected to dampen any rapid expansion in global output.
Profile written November 2006 and updated June 2008.