US dairy sales hit “record high”: Stakeholders call for tariff removals and barriers to trade

17 Sep 2020 --- New statistics highlight that dairy consumption in the US has hit a “rate never seen before”. According to new data from the USDA Economic Research Service (ERS), strong domestic demand for cheese, butter and yogurt notably is driving growth for the sector.

However, while some dairy representatives are reassured by the data and believe it shows sustained resilience amid the COVID-19 pandemic, others say the statistics are not a comprehensive representation of total milk consumption.

“USDA’s statistics are not truly total dairy consumption, they are consumption on a milkfat basis only. The calculations exclude the nonfat solids portion of dairy consumption,” Alan Levitt, vice president of market analysis and communication at the US Dairy Export Council (USDEC) tells FoodIngredientsFirst.

“Significantly, US domestic consumption of dairy products on a skim solids basis is growing at less than half of the domestic consumption of milkfat. In short, the US population consumes more dairy fat than dairy nonfat solids (protein, minerals and vitamins).”

Dairy sector representatives under the International Dairy Foods Association (IDFA) are expecting sustained overall domestic growth in milk-based products. This is despite a downward trend observed specifically in fluid milk sales, which they argue cannot be solely attributed to the boom in plant-based alternatives.

“According to the most recent data collected by the US dairy industry, the decline in fluid milk consumption is better correlated with the increasingly competitive marketplace for a wide variety of beverages rather than exclusive to growth in plant-based beverages,” Michael Dykes, president and CEO of the IDFA, tells FoodIngredientsFirst.

To sustain growth, the IDFA strongly supports the removal of tariffs and non-tariff barriers to trade. Meanwhile, US whey exports are trending upward.Among the beverages taking a chunk of milk’s market share each year, Dykes cites that bottled water leads the pack “by a wide margin” (53 percent), followed by coffee (11 percent), tea (8 percent), juice (7 percent), plant-based beverages (6.7 percent), sports drinks (5.6 percent) and other categories.

“The continued growth in the last decade is largely due to increased demand for cheese, butter and yogurt in the US, and strong demand for cheese, whey, dairy derived ingredients and other products overseas,” he highlights.

Sector calls for lifting of tariffs
To sustain growth, the IDFA strongly supports the removal of tariffs and non-tariff barriers to trade. Meanwhile, US whey exports are trending upward.

“Demand for dairy protein from growing economies remains the driver, especially in Asia. Whey is an important component to animal feed, especially for hog producers, and US whey is both competitive and high-quality,” Dykes highlights.

The Chinese government has excluded US whey from its retaliatory tariffs – one of relatively few US agricultural products that received such an exclusion. “As a result of these and other factors, demand for US whey is likely to remain strong for the remainder of 2020 and into the first half of 2021,” continues Dykes.

“Milk powders remain a foundational element of US dairy exports to all markets. Demand for protein isolates and dairy product mixes, such as ice cream, remains strong and growing as international foodservice demand drives growth,” he details.

Dairy trends forecast
Dykes observes the key trends to watch as the growth in extended shelf-life (ESL) dairy products, ultra-high temperature processing (UHT) and the continued use of filtration technology to increase the protein content and decrease the sugar content of milk.

“Whereas fresh and chilled had been the preference before March, shopping habits and preferences have changed due to the pandemic and we’re seeing sustained growth for UHT,” he notes.

In other prominent NPD themes, dairy launches are positioned to undergo a significant macronutrient makeover. This has been pegged as a Top Trend for 2020 by Innova Market Insights.

“I think you’ll see more focus on US dairy being a source of sustainable nutrition for people of all ages all around the world. In the US, that innovation has brought us value-added milks and dairy-based beverages that are high in protein and low in sugar,” he adds.

In prominent NPD themes, dairy launches are positioned to undergo a macronutrient makeover.“As we fractionate milk to deliver the dairy protein, we’re seeing growth across foods and beverages crafted for consumers focused on better health and nutrition. Dry whey and whey protein concentrate saw a 17 percent increase in per capita consumption in the US in 2019 alone.”

Previous reporting on FoodIngredientsFirst’s sister platform NutritionInsight highlighted the sustained popularity of whey proteins. Suppliers of this ingredient are spotlighting “influencer-led trends” pointing toward potential in plant-based and dairy hybrids, and more opportunities in clean label and organic formulations.

COVID-19 pandemic impact
The disruption of the dairy supply chain due to COVID-19 has presented significant challenges for the entire US food and agriculture system for processors and producers alike, notes Dykes.

“Early in the pandemic, the dairy industry faced the almost immediate loss of the foodservice market, which is about one half of the market for dairy products,” he comments.

“The sudden loss of product demand and inability of the retail supply chain to make the dramatic sudden shift left about 5 percent of the nation’s milk without a home at the height of the supply chain disruptions in April.”

In the first months of the pandemic, US dairy groups urged their government to prevent the EU from using future intervention practices to dispose of its publicly stockpiled milk products at discounted prices in international markets.

However, prices have “quickly recovered” and now hover at near pre-COVID-19 levels. This is attributed to US government interventions to address food insecurity and action by dairy cooperatives and other milk handlers to reduce milk supply and inventory excess, notes Dykes.

“The main culprit for the demand destruction is the loss of the foodservice market due to COVID-19 safeguards. The shuttering of establishments like restaurants, cafes, bars, cafeterias, schools and catering businesses has left a gap for dairy demand,” Dykes details.

Prior to COVID-19, foodservice accounted for roughly 50 percent of all sales, he estimates. “These factors dragged milk prices down to near-record lows in April into May, created serious cash flow problems, and depressed farm income.”

“Even through August, foodservice was still 15 percent below last year’s levels, although buoyed by positive sales in quick service establishments. We’re also working closely with USDA FNS to ensure milk continues to be made available in US schools, where traditionally 7 percent of total milk solids go.”

By Benjamin Ferrer