Dairy market fluidity

By Sherry Bunting, Milk Market Moos, Farmshine, February 2, 2018

Picking up from the previous dairy export ‘Jeckyll and Hyde’ discussion… Let’s look at what has happened to the fluid milk market in the U.S.

There is a difference between Class I utilization declining and actual packaged milk sales declines. For example, the 2017 year figures are not yet in, but for the last reported month of November, USDA reports that packaged conventional fluid milk sales for January through November 2017 are down 2.1% from year ago and organic fluid milk sales are off by 0.2%.

While consumers are drinking less dairy milk on a per capita basis, Class I — as a percentage of all milk sold — is declining faster because the processing of milk into other growing dairy product sectors is increasing.

Some of the increase in these product sales reflects domestic growth, but the kicker is that as exports increase as a percentage of total milk production, Class I utilization as a percentage of total raw milk sales is pushed lower — even if consumers drink more milk.

Let’s identify how the markets are changing and how to value them back to the raw milk producer rather than laying blame for over production that leaves the farmers in the position of “deserving the price they get.”

Supply management is not the answer, nor is it at this point really possible. It is a distraction. We need to be looking at the dairy trade in a way that both prepares farmers for the future and prepares the industry for dealing fairly with producers.

Case in point. How concerned has the National Dairy Council and the dairy industry  been about the fraudulent use of the word ‘milk’ on plant juice labels? NMPF’s efforts to right this wrong came only within the past two years — and 15 years after these sales of fake milk started eating into the fluid dairy milk sales.

How serious have they been about the milk that our children drink in school? It is interesting that GENYOUth was “founded in 2010 as a partnership between the National Football League and National Dairy Council, convening leaders in a movement to empower America’s youth to create a healthier future.”

One example given at the GENYOUth website recognizes U.S. Dairy Export Council CEO Tom Vilsack for his accomplishments for dairy farmers while serving as Secretary of Agriculture under President Obama. In his current role, Vilsack’s salary is paid by DAIRY FARMERS via the mandatory promotion checkoff.

Specifically a December GENYOUth gala recognized Vilsack for having “legislated to improve the health of America’s kids. Under Sec. Vilsack, USDA partnered with First Lady Michelle Obama’s Let’s Move! initiative alongside GENYOUth to improve the health of America’s children. Sec. Vilsack helped pass and implement the Healthy, Hunger-Free Kids Act to help combat child hunger and obesity by making the most significant improvements to U.S. school meals in 30 years.”

That is certainly a mouthful, considering that something else occurred in 2010-11. This was the very same year that schools were forced to offer only 1% or fat-free white milk and flavored milk could only be offered as fat-free!

Unfortunately, this did not improve school lunch meal nutrition, and it has cost dairy farmers plenty in lost milk sales.

In fact, Bob Gray for the Northeast Association of Farm Cooperatives stated recently — during a panel of dairy producers and policy folks at a Congressional viewing of the New England documentary Forgotten Farms I attended in Washington D.C. earlier this month — stated the impact of the school milk issue on milk sales, surpluses and pricing.

“For the past six years, we have not been able to sell even 1% (fat) milk in the schools,” said Gray about being forced to sell flavored milk only as fat-free. “In the first four years, alone, we lost 288 million half pints of milk sales that were not consumed by schoolchildren (2012-15) because of this move, alone.”

But maybe this is the point.

If fluid milk consumption erodes as a percentage of milk production, the cost of milk to processors becomes less for the many other products that need to be more competitive globally.

Technology is driving some of these trends. New opportunities and new knowledge are improving efficiencies throughout the supply chain. But marketing direction often leaves more questions than answers when it comes to spending money dairy farmers are forced to pay for it.

Meanwhile, as Dr. David Kohl, Virginia Tech professor emeritus, pointed out as a speaker last week in Lancaster County, Pa., the advances in technology are driving production from an efficiency standpoint. What these advances do for agriculture is to help less productive farms improve yields. “Technology improves the bottom end and that creates surplus, said Kohl. “And that is why we need export markets.”

To my thinking, exports are to be keenly pursued, but pursued with a strategy that does not ignore the market profile of dairy sales here at home, especially when the highest valued product classification under federal price regulation for dairy — fluid milk — is being treated like the Cinderella sister with odds against her, while her sisters get ready for the Prince’s ball.

There are plenty of great innovations in dairy products and distribution — including export markets — that deserve our attention. However, while Cinderella is ignored in plain clothes in the increasingly cluttered dairy case full of fake substitutes, she deserves an invitation to the ball. And a glass slipper or two sure wouldn’t hurt.

Whole milk up, fat-free way down

USDA’s January estimated fluid milk sales report indicates that whole milk sales for the first 11 months of 2017 were up by 2.5% over year ago and November, alone was up 3.5%. Meanwhile lowfat and fat-free losses drove the entire category lower as nearly 12% less fat-free milk was sold compared with year ago, 6.7% less 1% and 2.8% less 2% milk. Similar patterns were revealed among organic milk drinkers with fat-free down almost 20% Jan. through Nov. while whole milk was up 6.2%.

Author’s Note: Re-inventing this Ag Moos blog for the times….  Milk Market Moos is a column I’ve been writing in Farmshine since 2003. Find some of it here, at Ag Moos, along with other dairy and beef market related stories, agriculture news, and, in between, the stories and images of the inspirational people of agriculture… but you can get it first, and you can get it all, in Farmshine Newspaper, just $15/year. Farmshine is a weekly newspaper published in Brownstown, Pennsylvania — now in its 39th year of publishing all-dairy, all-the-time.