Butter is booming, whole milk is back and dairy is surviving
(Bloomberg Opinion) – With Americans staying home more than usual due to the pandemic and baking and cooking a lot to pass the time, this has been a banner year for butter.
Land O’Lakes, the Minnesota-based dairy cooperative, expects to sell 275-300 million pounds of produce this year – a 20% increase – as increased retail demand more than offsets lost business catering. Nationally, according to the US Department of Agriculture, butter production increased 6% in the first nine months of the year and is on track to exceed two billion pounds for the first time since. 1943.
As the graph shows, this year’s boom is part of a longer-term comeback. On a per capita basis, Americans eat far less butter than in the early decades of the 20th century. But they eat more than in the 1980s and 1990s.
After fending off margarine competition thanks to nearly a century of lobbying for margarine bans, taxes and color restrictions, butter producers lost their regulatory advantages in the 1940s and 1950s. and ceded a large market share to the cheaper spread – which was originally derived from beef fat, but was then made mostly of vegetable oil. As medical researchers began to link animal fat consumption with heart disease in the 1950s and 1960s, margarine gained even more ground as a supposedly healthier alternative.
These health claims were then mostly debunked, and the price difference between butter and margarine began to matter less as incomes rose and families declined (food purchased for consumption outside establishment accounted for over 18% of consumer spending in the early 1950s and only 6% in 2019).
Butter also benefited from the emphasis on authentic ingredients accompanying the revival of good food that began in the 1960s (Julia Child was definitely not going to use margarine). And let’s be honest, it’s better. Corn oil, olive oil, and other vegetable oils now play a much larger role in the American diet than before, so butter will likely never regain its central status there. a century ago. But it’s not going away.
“It’s a story of survivors,” says Peter Vitaliano, vice president for economic policy and market research at the National Federation of Dairy Farmers.
The same goes for the dairy industry in general. It can seem terribly under siege from time to time, and for good reason. Giant and highly productive dairies have driven many small farmers into bankruptcy. Competition from “milks” made from almonds, oats, soybeans and other plants has taken market share from real products and has led to a dairy industry lobbying campaign reminiscent of the wars of. the margarine of yesteryear. President Donald Trump’s trade policies have also caused problems. Two major milk distributors, Borden Dairy Co. and Dean Foods Inc., have filed for bankruptcy in the past 12 months.
But the bigger picture for the industry since around 1980 is that the decline in demand for its staple product (i.e. milk) is more than offset by rising sales of almost everything. which can be made from milk.
Even within milk sales, there has been an interesting shift in recent times, with whole milk surpassing 2% of milk for the first time in 15 years in 2018 and building on its lead in 2019, and sales of decreasing skim milk. If you’re going to drink milk, and not crushed almonds mixed with water, then you might as well drink the milder type of milk.
Whole milk happens to be the most profitable product for dairy farmers because it is basically what comes out of the cow and therefore does not require them to share a lot of income with processors. It also benefited from the new pandemic home consumption standard, with sales up 4.1% through August (2% milk sales are also up, with skim milk and 1% falling).
But overall, it was milk-based products that kept the industry alive. The revival of butter is one aspect. The boom in yogurt, which was virtually non-existent in the United States before the 1970s, is another, although it has faded a bit lately.
However, the main driver of the resilience of the dairy industry has been cheese. Americans consume nearly three times as much per person as in 1970.
All of this is not the result of what you would call organic consumer demand. Yes, the big gains in eating Italian cheese seem to reflect the fact that we are eating a lot more pizza than before. We can also see clues in the data of the growing popularity of Mexican cuisine (which in its incarnation north of the border contains a lot of Cheddar and Jack cheese), the emergence of bagels from regional food status (cheese a la cream!) and other fun food trends.
But since cheese can be stored longer than milk, butter, or yogurt, it’s also something the dairy industry makes when they have more milk than they know what to do with it, resulting in the famous “mountain of cheeses” which is sometimes reduced in size by large government purchases. These have been particularly significant this year, with the Agriculture Department having so far delivered more than 118 million boxes of food – each containing several pounds of dairy products, mostly cheese – to food banks and to other charities as part of the pandemic efforts.
The industry has also found new things to sell beyond milk, butter, yogurt and cheese, and new places to sell them. Forty years ago, the United States hardly exported dairy products. Today, it exports a fair amount of cheese, mainly to Mexico, South Korea and Japan, and even larger amounts of cheese-making by-products such as whey powder, isolate of whey protein and lactose, all of which are used in the manufacture of foods and dietary supplements.
The main by-product of modern buttermaking is skimmed milk powder, most of which is exported to Mexico and Southeast Asia to be reconstituted, often in combination with vegetable oils, into various beverages. milk type. Overall, Vitaliano says, the United States exports about 4% of the milk fat it produces and 19% of the skim solids.
To put it simply, the United States actually imports more than it exports, with Irish Kerrygold being the No. 2 butter brand in the United States after Land O’Lakes. But the quantities imported are still low compared to national production. Thus, this year of high demand for butter has been good for American dairy cooperatives specializing in this product, such as Land O’Lakes and the No. 1 producer California Dairies Inc., which makes Challenge butter and Danish Creamery. (Land O’Lakes and California Dairies also produce private label butter for retailers, so their role in supplying the country with butter goes well beyond their own brands.)
It was also a good year for California dairies in general, given that the state accounts for just over 30% of the United States’ butter production, and Land O’Lakes has a big presence there as well. Wisconsin, “America’s Dairyland,” focuses more on cheese, with a quarter of American production. New York is the top when it comes to yogurt, with around 15% of production.
In terms of all-purpose milk production, California is No. 1 with over 18% of the national total. He is in first place since the move from Wisconsin in 1993, but Wisconsin has narrowed the gap in recent times. Idaho recently passed New York for third place, and Texas may soon follow suit. For an old, not exactly rapidly growing industry, dairy has a lot more drama than you might think.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. He was Editorial Director of Harvard Business Review and wrote for Time, Fortune, and American Banker. He is the author of “The Myth of the Rational Market”.
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