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AgDairy Market Update

RSS By: Robin Schmahl, Dairy Today

Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wis. He provides dairy market insight.

Why Can’t Milk Compete?

May 23, 2014

While dairy farmers pay 15 cents per cwt. to increase demand for dairy products, milk sales decline and competition from other beverages surges.

U.S. consumption of fluid milk has been steadily declining for quite some time. In fact, consumption of total fluid milk products has been on a nearly steady decline since 1945.

At its peak, per capita consumption of fluid milk products reached 384.2 lb. It has been all downhill since then with consumption less than 195 lb. at present. This has been a concern and remains a concern not only for the dairy industry but, more importantly, the health of the nation.

Now, this is not all gloom and doom, and I do not intend it to be. The decline in fluid milk consumption has been more than offset by an increase in per-capita consumption of cheese and, recently, the surge in yogurt consumption. Per-capita total cheese consumption had tripled since 1970, reaching nearly 34 lb. Add to that steadily increasing export demand, and the decline in fluid milk consumption is not quite so depressing.

So, why the decline in fluid milk consumption? Dairy farmers are paying 15 cents per cwt. for the purpose of increasing sales and demand for dairy products. But why the lower trend of fluid milk consumption? I guess the best explanation is "competition." There are so many beverages available to consumers with more being developed. Back in 1945, soda was considered a luxury by many with milk being more of a staple. There were many small family farms with milk readily available for consumption right at the farm. Now, there are literally isles of soft drinks, sports drinks, juices, and teas available in many flavors.

There are beverages for those who like it spicy. There are beverages for those who want more energy. There are beverages for those who need quick rehydration, and there are beverages for those who want fiber, probiotics, and/or anti-oxidants. There are fluid drinks that are virtually a meal in themselves. On top of this, packaging is very appealing. Innovation in packaging for milk has improved, but consumers still look at milk as a beverage for certain applications and certain times of the day.

Today’s beverages are being produced that carry many of the nutritional qualities of milk and more with a longer shelf life. Milk is best consumed when it is cold. Once it warms to room temperature or above, it losses much of its appeal and if left too long will begin to sour. However, many other beverages are consumed at outside temperature over a longer period of time such as during bike rides, hiking trails or long rides in the car without the same effects. I am not against other beverages and consume them myself, but I love a cold glass of milk and the nutritional benefits of milk are second to none.

Demand for dairy products continues to increase both domestically and internationally providing good demand for the milk we produce. Exports continue to run substantially higher than last year with the latest export report for the month of March showing cheese exports up 36.9% over last year. Cheese exports for the first quarter of this year were 46.5% above the same period last year. Butter exports have been incredible with first quarter exports up 109.0% over the same time last year.

So, despite reduced fluid milk consumption, there are many good things happening in the dairy industry. Increasing world demand provides a positive outlook for milk prices in the future.

Upcoming reports:

  • Agricultural Price report on May 30
  • California 4a & 4b prices on June 2
  • Dairy Product Production report on June 4
  • May Federal Order class prices on June 4


Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wisconsin. He can be reached at 877-256-3253 or through their website at www.agdairy.com.

The thoughts expressed and the data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed are subject to change without notice. There is risk of loss in trading and my not be suitable for everyone. Those acting on this information are responsible for their own actions. This material has been prepared by an employee or agent of AgDairy LLC and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.

Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in commodity trading may not be suitable for recipients of this communication.

 

 

 

 

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COMMENTS (2 Comments)

harperchick - forest city, PA
Milk cannot compete because it is more expensive than those other alternatives...just like OJ is. Dairy farmers have price supports, and now they want a market too. I think they are just plain greedy.​
9:05 AM May 27th
 
Neither Fish-nor-Fowl - Hedge City, MO
For fluid milk to compete, innovation must extend beyond packaging. There are possibilities and examples of milk products that fit all the consumer preferences Mr. Schmahl lists. Also, the taste of reduced/non fat white milk must be improved. A group of farmers in Pennsylvania is proving this by marketing "White Gold" milk, which is formulated to California standards for total solids. When fat is removed, non-fat milk protein is added back in, giving the milk improved nutrition and a taste comparable to raw milk right out of the tank.
7:35 AM May 27th
 

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