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

Profile revised July 2009.

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 1,116 dairy product manufacturing plants. While the number of dairy plants in California continues to decline (by 107 in 2008), the total number of plants and the number in New York increased (by 113 in 2008). With 212 plants, Wisconsin continued to support the most plants in any state. The number of commercial milk bottling plants continues to decline, reaching 327 in 2007 ( ERS 2009).

Value-added Products
Butter
U.S. butter production in 2008 totaled 1.6 billion pounds, a 7.3 percent increase from the previous year. California produced 33.8 percent of this butter, followed by Wisconsin with 22 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 763.7 million pounds in 2008. When combined, production of curd, creamed and lowfat varieties of cottage cheese totaled 1.9 billion pounds.

Frozen Desserts
As of 2008, 353 plants in the United States processed ice cream, while only 158 made frozen yogurt and 177 made sherbet. That year, ice cream plants made nearly 942 million gallons of regular ice cream. Plants also made 74.1 million gallons of frozen yogurt and 60.7 million gallons of sherbet. In 2008, California led the United States in ice cream and frozen dessert production, followed by (in order) Indiana, Texas, Pennsylvania, Utah, and Missouri.

Total U.S. ice cream and frozen desserts sales in 2008 reached 377 million gallons, down from 2007. 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 21 pounds of ice cream, including lowfat ice cream, in 2007, but only 1.2 pounds of frozen yogurt and 1.3 pounds of sherbet (ERS 2007).

U.S. Frozen Dessert Production

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 2008, a slight decline from 2007. Approximately 107 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, 241 million pounds, compared to California's production of 168 million pounds.

Yogurt
Yogurt production in 2008 was nearly 3.6 billion pounds, a 3.5 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) Tennessee and New York. Per person yogurt consumption was 11.5 pounds in 2007 (ERS 2007), 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 $3.8 billion in 2008. The volume of U.S. dairy exports has also set a new record of 2.6 billion pounds. While the bulk of U.S. dairy products is still consumed domestically, the percentage exported as dairy products jumped to more than 10.8 percent in 2008. 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.

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 equaled 5 percent of total U.S. cheese production. The import volume of yogurt grew by 20 percent, and the import volume of butter equaled about 5 percent of U.S. production.

Outlook
The demand for dairy products should remain strong in 2009, 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.

Sources
Dairy Foods magazine.

Dairy Products Annual Summary, National Agricultural Statistics Service (NASS), USDA, 2009.

Innovate With Dairy

Just the facts: Ice cream sales and trends, International Dairy Foods Association.

Margarine Fun Facts & Figures, National Association of Margarine Manufacturers.

Outlook for U.S. Agricultural Trade, Economic Research Service and Foreign Agricultural Service, USDA, 2008.

Unprecedented: Markets, Demand, Delivery, U.S. Dairy Export Council, 2008 - The 2007 annual report of the council tells how U.S. dairy exports jumped 62 percent in value to $3.06 billion on overseas sales of 2.2 billion pounds of U.S. milk.

 
Profile written November 2006 and updated July 2009.