by Madeline Schultz, content specialist, AgMRC, Iowa State University, schultz@iastate.edu.

Profile revised November 2006.

 

Supply

The United States produced 176.9 billion pounds of milk in 2005. Just 30 percent of the milk is processed into fluid milk and cream products. Total beverage milk in 2005 totaled 6.2 billion gallons.

Demand

Fluid milk sales make up 30 percent of total U.S. milk consumption, according to the National Milk Producers Federation. About half of all milk consumed in the United States is in the form of cheese.

Total per capita milk consumption in 2004 was 21.2 gallons. Per capita fluid milk consumption has declined slowly due to competition from other beverages and because of a smaller percentage of children in the United States. 

Milk is regarded as a flow commodity because it is produced every day and must go to market at least every other day. Day-to-day milk supply does not coincide with milk demand. Demand for milk for bottling is nearly zero on Sundays and limited on Saturdays and Wednesdays since most plants close those days due to buyer demand schedules.

According to an Economic Research Service study on the milk pricing system, establishing a balance between milk’s supply and demand would require a balance among the following factors:

• For producer prices to remain high enough to maintain production yet not encourage surplus milk production;
• Willing and able consumers to pay for milk and dairy products; and
• For producers, handlers and the public to be interested in the orderly flow of milk and dairy products from producers to consumers.

In recent years, producer checkoff-funded Dairy Management Inc. has focused efforts on increasing milk consumption among youth. Milk in resealable plastic containers is available at more than 35,000 Wendy’s, McDonald’s, Burger King and Sonic Drive-In restaurants nationwide. Milk in resealable containers is also being promoted in school cafeterias and through vending machines. More than 6,000 schools now offer single-serve milk in plastic resealable bottles.

Processing

The United States has 380 commercial fluid milk bottling plants and 1,081 dairy product manufacturing plants. Due to the perishable nature of milk, it must be marketed promptly as fluid milk or processed into a storable manufactured dairy product.

More than 80 plants in the United States manufacture milk powder, accounting for 10 percent of the world’s milk powder production, or more than 700,000 metric tons. The U.S. dairy industry is positioned as a primary worldwide dairy ingredient supplier.  

Exports

The United States exported $1.81 billion worth of dairy products during 2005. Exports account for about 8.3 percent of total U.S. milk production, on a milk-equivalent basis. Dairy products that are exported include cheese, whey, lactose protein, ice cream, infant formula, fluid milk and cream and milk powders. More than 90 percent of U.S. exports in 2005 were commercial, unsubsidized products.

The United States exported 46.7 million pounds of fluid milk and cream in 2005, down 28 percent from the previous year due to strong competition from other suppliers. Mexico is the largest export market for U.S. fluid milk and cream.

Since milk can be difficult to transport, store or formulate while in its liquid form, milk processors create milk powder by removing most of the water. The most common forms of milk powder, according to the U.S. Dairy Export Council, are skim, whole and buttermilk.

The U.S. Dairy Export Incentive Program provides assistance to U.S. dairy suppliers who offer products to exporters at competitive international prices. This program helps develop U.S. dairy export markets and removes nonfat dry milk, butterfat and certain cheeses from the domestic market.

Imports

The United States imported $2.68 billion worth of dairy products during 2005. Cheese imports accounted for $1 billion of all dairy imports. Other imported dairy items were casein, a milk protein used as a food ingredient; milk protein concentrates; butterfat; dairy blends; whey and chocolate preparations.

Competition

Fluid milk competes with other beverages for sales. While skim milk consumption has increased over time and whole milk consumption has decreased, overall milk intake by Americans has dropped in the last 20 years. 

Yet, per capita consumption of soft drinks has decreased in the last few years. In 2005, per capita consumption was 52.9 gallons, down from 53.7 gallons in 2004. Bottled water consumption reached 26.1 gallons in 2005, up from 9.8 gallons per person in 1992. Bottled water is now the second most consumed commercial beverage.

Consumption of fruit and sports drinks has also increased over time. Nondairy milk products made with soy and rice are competing for space in the dairy case and are advertising as having comparable dairy attributes like calcium.

According to figures from the Beverage Marketing Corporation, milk is also being outspent on advertising by competing beverages. In 2005, $147 million was spent on milk advertising, much of which came from the national generic fluid milk program. Advertising spent on carbonated soft drinks in 2005 was $808 million. Other beverage categories outspent milk in 2005: $475 million for fruit beverages; $256 million for sports drinks; and $159 million for bottled water advertising.

Other factors related to milk competition include the fact milk is viewed as a commodity. There are few branded milk products sold. Most milk is private label. Milk competes against worldwide beverage makers with well-known brands.

Milk distribution is another factor. Milk is primarily sold in take home retail outlets, primarily supermarket. Its promotion is limited due to product perishability, compared to other competing beverages.

According to the Beverage Marketing Corporation, only 19 percent of milk volume was sold for immediate consumption in 2005. About half of the volume of milk's competition, carbonated soft drinks, sports drinks and ready-to-drink tea, was purchased for immediate consumption.

Milk’s use of single-serve plastic containers and use of new flavors, according to a report by the Beverage Marketing Corp., are likely to become keys to innovation for branding, image improvement and increased marketing channels.

Beverage Marketing Corp.

The Changing Landscape of U.S. Milk Production, Economic Research Service, 2002.

Milk Pricing in the United States, Economic Research Service, 2001.

Dairy, Economic Research Service, USDA.

Dairy Products Annual Summary, National Agricultural Statistics Service, USDA.

Milk by any other name . . . Consumer Benefits from labeled Milk, University of Wisconsin-Madison, 2003.

Recent Growth Patterns in the U.S. Organic Foods Markets, Economic Research Service, 2002.

Milk Production, National Agriculture Statistics Service.

National Milk Producers Federation

Report to Congress on the National Dairy Promotion and Research Program and the National Fluid Milk Processor Promotion Program, 2006.

Organic Production, Economic Research Service, USDA.

Baseline Projections, Economic Research Service, USDA, 2006.

U.S. Dairy Export Council’s 2004 Annual Report