ERS Charts of Note
Monday, January 11, 2021
Dairy consumption is on the rise in Southeast Asia, a region characterized by rapid economic growth, urbanization, and changing food consumption patterns. To meet rising demand, many dairy products must be imported because the region’s climate limits its ability to produce milk. The value of imported dairy products in Southeast Asia grew from $3.8 billion in 2006 (adjusted for inflation) to $6.3 billion in 2018. Dairy products imported from the United States grew from $401 million to $738 million over that time, and dairy imports from most other trading partners rose as well. Imports from Australia, however, declined after years of drought resulted in lower milk yields and smaller dairy herds, and the United States overtook Australia in rank, rising from the fourth to the third largest dairy import supplier for the region. Southeast Asian countries also import dairy products from their regional neighbors and the rest of the world. The top dairy products imported by Southeast Asian nations are skim milk powder, whole milk powder, infant formula, butterfat products, cheese, and whey products. The United States is a major supplier of skim milk powder, whey products, cheese, and lactose to the region. This chart was drawn from the Economic Research Service report, Prospects for Growth in U.S. Dairy Exports to Southeast Asia.
Monday, November 16, 2020
In 2019, Wisconsin’s production of fluid milk was second only to California’s. According to data from USDA’s National Agricultural Statistics Service, Wisconsin generated 30.6 billion pounds of milk that year, with milk sales totaling $5 billion. In recent years, Wisconsin dairy farms have been exposed to substantial weather volatility characterized by frequent droughts, storms, and temperature extremes (both hot and cold). This has resulted in considerable fluctuations in dairy productivity. Researchers from the Economic Research Service (ERS) among others, found that total factor productivity (TFP), which measures the rate of growth in total output (aggregate milk produced) relative to the rate of growth in total inputs (such as the number of cows, farm labor, feed, and machinery), increased at an average annual rate of 2.16 percent for Wisconsin dairy farms between 1996 and 2012. This increase was primarily driven, at an annual rate of 1.91 percent, by technological progress—such as improved herd genetics, advanced feed formulations, and improvements in milking and feed handling equipment. However, trends in rainfall and temperature variation were responsible for a 0.32 percent annual decline in the productivity of Wisconsin dairy farms during the same period. For example, an average increase in temperature of 1.5 degrees Fahrenheit reduced milk output for the average Wisconsin dairy farm by 20.1 metric tons per year. This is equivalent to reducing the herd size of the average farm by 1.6 cows every year. This chart appears in ERS’s October 2020 Amber Waves finding, “Climatic Trends Dampened Recent Productivity Growth on Wisconsin Dairy Farms.”
Tuesday, September 8, 2020
Organic dairy production costs were substantially higher than those for conventional dairy in 2016—about 50 percent higher per hundredweight (cwt) of milk produced. Production costs include operating costs for feed, energy, and bedding, as well as the costs of capital and of the paid and/or family labor provided to the farm. Organic production costs were highest among farms with 10-49 cows at $48.87 per cwt, while production costs on conventional farms of that size were $33.54. Among farms with 100-199 cows in the herd, organic production costs amounted to $35.82 per cwt, while conventional farms in that category reported lower costs of $23.68. However, organic operations received much higher prices for their milk—organic gross returns per cwt of milk produced were about twice the gross returns realized by comparably sized conventional operations in 2016. With higher costs, but much higher gross returns, small organic dairy farms realized higher net returns on average than small conventional farms. (Net returns are the difference between gross returns and costs.) This chart appears in the Economic Research Service report, Consolidation in U.S. Dairy Farming, released July 2020. It also appears in the September 2020 Amber Waves finding, “Organic Dairy Farms Realized Both Higher Costs and Higher Gross and Net Returns Than Conventional Dairy Farms.”
Friday, August 14, 2020
Large dairy operations have significant financial advantages over small and midsized farms, primarily because of lower average production costs per pound of milk produced. Therefore, larger farms can earn profits during times when smaller farms bear losses. In every year between 2005 and 2018, average net returns increased with herd size and returns for herds of 1,000 head or more (the largest class for which the Economic Research Service (ERS) publishes annual estimates) exceeded those for all other herd sizes. While net returns fluctuate from year to year, farms with 1,000 head or more generated positive net returns of $1.12 per hundredweight on average between 2005 and 2018. These farms had positive net returns in 10 out of 14 years. By contrast, the smallest herd sizes (50-99 head and 100-199 head) never covered total costs, so their net returns were negative in every year. While some farms in each size class realize positive net returns, these class averages indicate that most small and midsize farms face persistent financial pressures. The persistent differences in net returns have led to structural changes in the dairy industry, with cows and production shifting away from smaller farms and toward larger ones. This chart appears in the ERS report, Consolidation in U.S. Dairy Farming, released July 2020. It also appears in the Amber Waves feature, “Scale Economies Provide Advantages to Large Dairy Farms.”
Wednesday, July 22, 2020
Large dairy operations have significant financial advantages over small and midsized farms, primarily because of lower average production costs per pound of milk produced. Therefore, larger farms can earn profits during times when smaller farms bear losses. In 2016, average total costs of milk production fell from $33.54 per hundredweight among farms with 10-49 cows to $20.85 among farms with 200-499 cows. The latter costs were 21 percent higher than the average costs realized at the largest farms—those with at least 2,500 head. Larger herds realized lower gross returns because many are in regions with lower milk prices. Gross returns include milk sales, plus revenues from the sale of culled dairy animals, milk cooperative dividends, and the fertilizer value of manure. Despite their lower gross returns, lower costs led to much larger net returns among larger operations than among smaller farms. In 2016, farms with more than 1,000 head realized positive net returns on average, whereas farms with fewer head realized negative net returns on average. This chart appears in the Economic Research Service report Consolidation in U.S. Dairy Farming, released July 2020.
Monday, May 18, 2020
Cheese is the largest product category for the dairy industry. Wholesale prices—prices paid to manufacturers—of Cheddar cheese serve as benchmarks for pricing many types of cheese and affect the pricing structure for most U.S. milk at the farm level. Between March 7 and May 2, wholesale prices for Cheddar cheese fell 35 percent because of effects of the COVID-19 pandemic. For the week ending May 2, the weighted-average price for Cheddar cheese was $1.134 per pound, and the lowest since 2009, when the Great Recession had a significant impact on global dairy demand. By the week ending May 8, that price had risen to $1.146 per pound. As research has shown that declining incomes usually have a negative effect on cheese consumption, Americans facing financial hardships caused by the pandemic are likely buying less cheese. Furthermore, cheese consumption has shifted from food service establishments, where people eat higher proportions of cheese, to at-home consumption. This shift has caused supply chain bottlenecks due to logistics and smaller unit-packaging needs of retail stores. At the same time, the dairy industry has entered its peak season of milk production. Global dairy trade is also affected by the pandemic, limiting the ability of U.S. suppliers to export cheese and other dairy products. Cheese prices are currently expected to strengthen as the year progresses. This chart is based on Economic Research Service’s Livestock, Dairy and Poultry Outlook, April 2020.
Friday, March 6, 2020
According to Economic Research Service (ERS) food availability data, the per person supply of fluid cow’s milk available for Americans to drink decreased by 40 percent over 1977-2017, from 29.0 to 17.3 gallons per person. Whole milk availability drove this decline, falling from 18.7 gallons per person in 1977 to a low of 5.1 gallons in 2014, then up to 5.7 gallons in 2017. Availability of milk with 2 percent milk fat grew from 5.5 gallons per person in 1977 to a high of 9.2 gallons in 1989 before falling to 5.8 gallons in 2017. In 2005, 2 percent milk replaced whole milk as the most popular milk type. Availability of 1 percent milk has held steady at around 2.5 gallons per person for the last two decades, and skim milk reached its peak in 1997 at 3.9 gallons per person. Several factors—including competition from alternative beverages, an aging population, and changing consumer attitudes and preferences regarding milk fats—affect trends in U.S. per person milk availability. The data for this chart come from the ERS Food Availability (Per Capita) Data System.
Friday, August 16, 2019
Whey products and lactose are the top dairy products exported, by value, from the United States to China. China’s imports of whey products (dry whey, whey protein concentrate, whey protein isolate, and modified) and lactose have declined sharply in recent months. African Swine Flu (ASF)—a virus that has affected the country’s pig and hog population—may have affected the markets for these products because they can be fed to pigs and hogs. In addition to ASF, tariffs by China, in response to U.S. tariffs on certain imports from China, may have contributed to the decline in imports of whey products and lactose from the United States. The U.S. market share declined from 57 percent in 2017 to 51 percent in 2018 and to 38 percent for the first 5 months of 2019. The United States’ largest competitor in this market is the European Union. In the first 5 months of 2019, the European Union increased its market share to 42 percent, up from 36 percent in 2018 and 34 percent in 2017. This chart is drawn from discussions in the ERS Livestock, Dairy, and Poultry Outlook newsletter, released in July 2019.
Wednesday, August 14, 2019
In 2018, the farm share of the retail price of Cheddar cheese—the ratio of what dairy farmers received for the milk used in the cheese (farm value) to what consumers paid in grocery stores (retail price)—decreased to 28 percent from 32 percent in 2017. Although the average retail price of Cheddar cheese increased from $4.90 per pound in 2017 to $5.14 in 2018, the farm value of the 10.3 pounds (1.2 gallons) of milk used to make a pound of Cheddar cheese fell from $1.54 to $1.43 after adjusting for the value of the whey coproduct. During 2015-18, cheese supplies (sum of production, beginning inventories, and imports) grew more quickly than the sum of domestic consumption and exports—a situation that put downward pressure on wholesale cheese prices. According to projections released by ERS in June 2019, prices received by farmers for their milk are forecast to increase in 2019 and the average wholesale price of Cheddar cheese is forecast to rise from $1.54 per pound in 2018 to $1.64 in 2019. More information on ERS’s farm share data can be found in the Price Spreads from Farm to Consumer data product, updated in June 2019.
Thursday, October 4, 2018
Over the past decade, the farm share for a gallon of whole milk—the ratio of what dairy farmers received (farm price) to what consumers paid in grocery stores (retail price)—has fluctuated between 40 and 61 percent. It peaked at 61 percent in 2014 as higher U.S. exports of cheese, butter, and nonfat dry milk allowed farmers to collect higher prices for farm milk. However, U.S. exports weakened in 2015 with changes in international dairy markets and slower growth in global demand for dairy products. Exports of cheese, for example, decreased by 14 percent from 2014 to 2015. The farm price of whole milk fell from $2.26 per gallon in 2014 to $1.65 in 2015 before bottoming out at $1.51 in 2016, or 47 percent of the retail price. In 2017, the farm price of whole milk returned to $1.65 per gallon, and dairy farmers received 51 percent of whole milk’s retail price. According to ERS forecasts released in September 2018, the annual average price received by dairy farmers for milk may be less in 2018 than 2017, but is expected to increase through 2019. This chart is based on the Price Spreads from Farm to Consumer data product on the ERS website.
Thursday, May 24, 2018
USDA’s newly released commodity forecasts for 2019 indicate expected growth in U.S. production of beef, pork, broilers (young chickens), turkey, eggs, and milk. Generally, production growth in meat and animal products is supported by relatively low feed costs, the long term trend of increasing animal weights for meat, and higher yields per animal for milk and eggs. However, veal production is expected to decrease, while no growth is expected for lamb. In 2019, growth of beef and turkey production is projected to exceed the respective 2014–18 averages of 1.2 percent and 0.4 percent. Growth of pork, broilers, and egg production is expected to be relatively consistent with the respective 2014–18 average growth rates of 3 percent, 2.3 percent, and 1.9 percent. The forecast growth rate for milk production is down compared to the 2014–18 average of 1.7 percent. In 2014–18, veal production contracted sizably, averaging annual decreases of 7.9 percent, but contraction has slowed in 2014–18. Similarly, in 2019, lamb, which saw average annual declines of 1.3 percent in 2014–18, is expected to maintain production levels consistent with 2018. This chart appears in the ERS Livestock, Dairy, and Poultry Outlook released in May 2018.
Tuesday, March 20, 2018
U.S. dairy product exports grew from $1.4 billion in 2000 to $7.0 billion in 2014 (valued in 2017 U.S. dollars), about a sevenfold increase. Income growth in East Asia, Southeast Asia, Latin America, and other regions has led to increased dairy consumption and demand. Additionally, China’s market-based reforms opened one of the world’s largest markets for dairy product imports, and the country is now the third largest market for U.S. dairy exports. Further, a reduction in domestic support and export subsidies for dairy products by the European Union (EU) and the United States has brought greater openness to world markets and has expanded overall global dairy trade. However, the value of U.S. dairy exports fell in 2015 and 2016 due to weaker growth in global demand for dairy products (especially from China), a Russian ban on dairy imports from several countries, a strong U.S. dollar, and the discontinuation of milk supply quotas in the EU. Global demand for dairy products rose significantly in 2017, and the value of U.S. dairy exports increased to $5.2 billion, a 14-percent increase compared with 2016. This chart is updated through 2017 and is drawn from the report, Growth of U.S. Dairy Exports, released in November 2016.
Monday, October 2, 2017
Through the 1980s whole milk sales quantities fell at a rapid pace, as reduced fat milk sales grew. Whole milk sales continued to fall through 2013, although at a lesser rate than the 1980s. Since 2013, however, whole milk sales grew, while reduced fat and low fat milk sales declined. The growth in whole milk sales in recent years has been attributed to changing consumer perceptions about the health effects of consuming milk fats. This period has coincided with increases in butter consumption, indicating that consumer concerns over dairy fat have declined. While whole milk sales increased, the overall trend for fluid milk sales remains negative, as losses to the lower fat categories exceed gains made for full fat milk. This downward trend in fluid milk consumption has been occurring for many years. Possible reasons include the declining proportion of young children in the U.S. population, the availability of alternatives, and changing consumer preferences. This chart is drawn from the ERS Livestock, Dairy, and Poultry Outlook newsletter released in September 2017.
Monday, June 19, 2017
India is the world’s largest producer and consumer of milk and has the world’s largest dairy herd. The country’s milk production has been expanding at about 4.2 percent annually since 2000, matching growth in demand as higher incomes spur more fluid milk and dairy product consumption. About half of India’s milk production is from water buffalo, and the other half is from cattle, which includes indigenous breeds and crossbred animals. Crossbred cattle are mixes of indigenous and imported exotic dairy breeds, such as Holstein-Friesen, Jersey, and Brown Swiss. The indigenous component of the cattle milking herd has relatively low milk production, or yield, per animal and is shrinking, while the higher yielding crossbred component is now the fastest growing portion of the total herd. The water buffalo herd, with per animal milk yields in between those of the indigenous and crossbred herds, continues to expand, although recent data suggest that the pace may be slowing. This chart appears in the ERS Amber Waves article, "Changes in Herd Composition a Key to Indian Dairy Production," released in June 2017.
Thursday, May 25, 2017
On average, larger dairy farms earn higher profits than smaller farms, spurring a steady shift of cows and production to larger operations. Between 2011 and 2015, farms with at least 1,000 milk cows earned the highest average rates of return on equity (ROE), a measure of profitability that captures the return to the capital that farmers have invested in the business. According to the 2012 Census of Agriculture (the latest data), these farms accounted for nearly half of all cows. By comparison, farms with less than 100 cows generally had negative average ROE between 2011 and 2015, but accounted for only 17 percent of all cows in 2012. Average ROE data can mask variation at the farm level: some farms are profitable and others are not. Low and negative ROE indicate that dairy farmers could earn more by investing their money elsewhere. Dairy farming carries financial risks for farms in all herd size classes. For example, ROE rose in 2014 as the prices that farmers receive for their milk rose to well over $20 per hundredweight of milk, but then fell sharply the following year as monthly milk prices declined by about 30 percent. This chart updates data from the ERS report Changing Structure, Financial Risks, and Government Policy for the U.S. Dairy Industry, released March 2016.
Wednesday, March 29, 2017
Errata:On April 21, 2017, the axis and text of this Chart of Note were revised so that the production units were correctly listed as million tons.
Errata: On March 29, 2017, the title of this Chart of Note was revised so that it correctly references India as the world’s largest dairy producer.
India is the largest milk-producing country in the world. The country is trailed by the United States, which is the second largest producer, in milk production by a large margin. India is unique among the major milk producers because more than half of its production comes from water buffalo, rather than cattle. Its dairy herd, also the largest in the world, has the biggest herds of both dairy cattle and water buffalo. Since 1980, production has grown consistently at an average of 4.5 percent per year. The rate of growth between water buffalo and cow’s milk has also been quite similar at 4.6 and 4.5 percent, respectively. In 2016, total production reached 154 million tons compared with 96 million produced in the United States. India surpassed the United States as the largest dairy producer in 1997, when both countries produced roughly 70 million tons, each. This chart appears in the March 2017 ERS Report “India’s Dairy Sector: Structure, Performance, and Prospects.”
Thursday, March 23, 2017
Mexico has consistently been the leading export destination for U.S. dairy products, with the combination of nonfat dry milk (NDM) and skim milk powder (SMP) as the top export product. (NDM and SMP are two very similar products grouped together in export data.) In 2016, 54 percent of NDM/SMP produced in the United States was exported, and 43 percent of these exports went to Mexico. However, there is a great deal of uncertainty concerning the future of exports to Mexico due to a strong dollar and possible changes in trade policy. The United States accounted for 94 percent of Mexico’s imports of NDM/SMP in 2016. Other sources included New Zealand, Spain, Canada, and Germany. If Mexico were to reduce imports from the United States, those countries would be in a better position to increase their share of trade. This chart appears in the ERS Livestock, Dairy, and Poultry Outlook report released in March 2017.
Friday, January 27, 2017
Over the past decade, the farm share for a basket of 16 fresh vegetables—the ratio of prices received by growers (farm value) to grocery store prices (retail value)—has averaged about 25 percent. In 2015, the basket’s annual farm value rose by 11 percent to $62.12, while its annual retail value rose by 1.6 percent to $225.80, causing farm share for the basket of fresh vegetables to increase from 25 to 28 percent. Farm-level prices rose in 2015 as drought reduced shipment volumes from California, the Nation’s leading State for fresh vegetable production. However, lower oil prices and a strong U.S. dollar mitigated retail price increases. According to ERS forecasts, while U.S. production of fresh-market vegetables was expected to recover somewhat in 2016, it was also expected to remain below 2014 values, putting continued upwards pressure on farm prices. This chart is based on the Price Spreads from Farm to Consumer data product on the ERS website, updated December 13, 2016.
Tuesday, January 10, 2017
California leads the Nation in dairy production, manufacturing roughly 20 percent of the Nation’s milk. The State is also the leading producer of butter and nonfat dry milk and is second to Wisconsin in cheese production. The ongoing drought in California has had an impact on the State’s dairy output, contributing to negative year-over-year growth since the end of 2014 until October 2016. In addition to drought conditions, prices received by California dairy farmers were down 30 percent in 2015 and dipped even further in 2016, before recovering in June 2016. The upward trend in prices received in late 2016 may help explain the movement back toward positive growth in California’s dairy production. This chart is drawn from data discussed in the ERS Livestock, Dairy, and Poultry Outlook report released in December 2016.
Tuesday, December 13, 2016
Dairy manufacturers separate and reassemble milk components to produce a variety of products. To analyze aggregate domestic and foreign demand for U.S. milk products, the products are often converted to a common milk equivalent. Two common measures are milk-fat basis and skim-solids basis. Depending on the product, the two measures may diverge significantly. Butter is very high in milk-fat and low in skim-solids, for example, while non-fat dry milk is the opposite. From 1995 to 2003, dairy product exports averaged 2.2 billion pounds per year on a milk-fat basis and 1.4 percent of total milk production. Since 2003, milk-fat basis exports have grown, reaching 12.4 billion pounds (6.0 percent of milk production) in 2014, but then falling to 8.8 billion pounds (4.2 percent) in 2015. Skim-solids basis exports have grown more, increasing from 5.2 billion pounds (3.4 percent of milk production) in 1995 to 39.0 billion pounds (18.9 percent) in 2014, before falling to 37.3 billion pounds (17.9 percent) in 2015. While both metrics have grown significantly, the larger increase in skim-solids basis exports indicates that products like non-fat dry milk, whey, and lactose have been especially popular on the export market. This chart appears in the ERS Growth of U.S. Dairy Exports report published in November 2016.