Readings

Livestock, Dairy and Poultry Outlook

This monthly report provides key dairy data, market outlook, and forecasts.  

"Falling Milk Prices Led to Record Program Payments for Dairy Producers in 2023"

The Federal Dairy Margin Coverage (DMC) program compensates dairy producers when the difference between milk prices and feed costs drops below the selected coverage level. Milk margins and participation under this program are analyzed from 2019 to 2023 (Amber Waves, September 2024).

U.S. Certified Organic Dairy Production: Three Decades of Growth

This study uses USDA’s Agricultural Resource Management Survey data from 2005, 2010, 2016, and 2021—along with other USDA data—to examine changes in farm structure, production costs, technology adoption, and challenges facing organic dairy producers over the past two decades. The report shows that growth of organic milk production has differed by U.S. State, with regional differences in farm structure and cost of production (ERR-335, September 2024).

Structure, Costs, and Technology Used on U.S. Dairy Farms

The milk production segment of the U.S. dairy industry has experienced significant change over the past two decades. This study uses USDA’s Agricultural Resource Management Survey (ARMS) dairy version data (and other USDA data) to examine changes in farm structure, production costs, and technology adoption and to compare dairy farms by size and production region over the past two decades. This report addresses how the U.S. dairy farm structure has changed over the past two decades and how the structure differs by size of the operation and by U.S. region. (ERR-334, July 2024).

Documentation for the USDA, Economic Research Service Annual U.S. Dairy Sector Econometric Model

This report provides documentation for the Annual U.S. Dairy Sector Model used by the USDA, Economic Research Service (ERS). Using econometric estimation, this dynamic model provides projections for supply, demand, and prices for U.S. milk and dairy products over a 10-year period. The model provides support for U.S. dairy projections (baseline projections) published in the USDA Agricultural Projections report each year. The model is also used to provide scenario analyses related to market conditions and various Federal Government policies (TB-1961, July 2023).

“Fluid Milk Consumption Continues Downward Trend, Proving Difficult to Reverse”

U.S. per capita fluid milk consumption has been trending downward for more than 70 years and fell at a faster rate during the 2010s than in each of the previous 6 decades. From 2003 to 2018, U.S. consumers of all ages drank less milk as a beverage, the primary way in which fluid milk is consumed. Plant-based milk alternatives explain only a small portion of the decline in U.S. fluid milk consumption (Amber Waves, June 2022).

Sources, Trends, and Drivers of U.S. Dairy Productivity and Efficiency

The U.S. dairy sector has undergone substantial structural change characterized by a shift to larger and fewer dairy operations, concentrated in relatively few States. This report measures and analyzes the dairy sector’s productivity growth and efficiency and identifies proximate drivers and sources of this growth in the face of the structural change observed from 2000 to 2020 (ERR-305, February 2022).

Examining the Decline in U.S. Per Capita Consumption of Fluid Cow’s Milk, 2003–18

U.S. per capita consumption of fluid milk is declining. USDA, ERS researchers examined how consumption among children, teenagers, and adults changed over the years 2003 through 2018, including changes in the amounts of milk that each group consumed as a beverage, added to cereal, and added to other types of beverages like coffee and tea (ERR-300, October 2021).

"Farm Milk Components and Their Use Among Dairy Products Have Shifted Over Time"

Data from the USDA, Economic Research Service show that changes in consumption patterns among dairy products from 2000 to 2019 influenced the percentages of milk fat and skim solids of the largest two product categories, fluid beverage milk and cheese (Amber Waves, August 2021)

"Growth in U.S. Dairy Product Exports to Southeast Asia Depends on Competition with Other Major Dairy Exporters"

Analysis shows that Southeast Asia’s imports of dairy products from the United States depend on U.S. and foreign export prices. Rising dairy import expenditures for the region could lead to higher or lower U.S. market shares, depending on the product and country (Amber Waves, February 2020).

Prospects for Growth in U.S. Dairy Exports to Southeast Asia

Food demand in Southeast Asia (SEA) is expected to grow in the coming decades, creating opportunities for exporters of dairy products. This study examines the prospects for growth of U.S. dairy exports to the SEA region, and how the U.S. potential to gain or lose market share varies from one Southeast Asian country to another and among products (ERR-278, December 2020).

"Plant-Based Products Replacing Cow’s Milk, But the Impact Is Small"

Using retail scanner data collected between 2013 and 2017, ERS researchers confirmed that, on average, U.S. households are buying less fluid cow’s milk and rising sales of plant-based milk alternatives are a contributing factor. However, sales of plant-based products are not a primary driver of sales trends for cow’s milk. (Amber Waves, December 2020).

"Climatic Trends Dampened Recent Productivity Growth on Wisconsin Dairy Farms"

Wisconsin is the second largest milk producer in the United States. Productivity has increased steadily across Wisconsin dairy farms over the years. However, this growth was partially offset by negative effects of climatic variability (Amber Waves, October 2020).

"Scale Economies Provide Advantages to Large Dairy Farms"

Large dairy operations have significant financial advantages over small and midsized farms, primarily because of lower average production costs per pound of milk produced (Amber Waves, August 2020).

Consolidation in U.S. Dairy Farming

The number of licensed U.S. dairy herds fell by more than half between 2002 and 2019, with an accelerating rate of decline in 2018 and 2019, even as milk production continued to grow. Production has been shifting to much larger but fewer farms, and that shift shows no sign of slowing. Larger operations realize lower costs of production, on average, and those advantages persist (ERR-274, July 2020).

“It’s in the Genes: Comparing Dairy Bulls’ Ability to Transmit Traits to Their Daughters”

USDA’s Economic Research Service and Cornell University researchers used 2017 trait data from a dataset of more than 400 Holstein bulls to estimate the technical, revenue, allocative, and profit efficiency of each bull relative to its peers (Amber Waves, March 2020).

“China Provides Opportunities for U.S. Exporters: Strong Dairy Demand and an Expanding Market for Agricultural Inputs Destined for a Growing Dairy Herd” 

In 2016, China had the world’s third largest dairy market, and it is expected to grow by 10 percent, in total, over the next 5 years. An expanding network of refrigerated facilities for production, distribution, and storage and an advancing e-commerce platform are making dairy products accessible to a greater portion of the Chinese population (Amber Waves, March 2018).

China's Dairy Supply and Demand

China’s dairy and infant formula markets have grown substantially over the past decade and are expected to continue to expand. At the same time, China’s domestic dairy industry is in the midst of rapid modernization. According to projections in the China Ministry of Agriculture’s National Dairy Industry Development Plan for 2016-20, about 75 percent of all dairy consumed in China will continue to be produced domestically. The remaining demand will be satisfied by imports (EIB-189, December 2017). 

Changes in Herd Composition a Key to Indian Dairy Production

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. One of the keys to recent and future production growth is the changing composition of India’s uniquely structured dairy herd (Amber Waves, 2017).

India's Dairy Sector: Structure, Performance, and Prospects

India is the world’s largest producer and consumer of milk. Growth in milk supply and demand has been robust, but projections indicate that production targets will be difficult to reach without stronger gains in productivity. India is now a small net exporter of dairy products, but trade policies have facilitated imports when shortages lead to high domestic price (LDPM-272-01, March 2017).

“Historical Analysis of MPP-Dairy Suggests Limited Impact on Average Margins but Considerable Potential for Risk Reduction”

The 2014 Farm Act implemented a change in U.S. dairy policy by establishing the Margin Protection Program for Dairy Producers (MPP-Dairy). Through the program, dairy producers can protect an estimated margin (milk price minus feed costs) as determined by a formula in the legislation for a chosen level of covered production (Amber Waves, 2017).

Growth of U.S. Dairy Exports

From 2004 to 2014, the value of U.S. dairy product exports more than quadrupled, and the United States became the world’s third-largest dairy product exporter, behind New Zealand and the European Union. In 2015, as global conditions changed, the value of U.S. dairy exports fell by almost 30 percent. The U.S. dairy industry will be challenged to increase market share in the years to come (LDPM-270-01, November 2016).

The Effects of the Margin Protection Program for Dairy Producers

The Margin Protection Program for Dairy Producers offers protection when the difference between the U.S. all-milk price and the estimated average feed cost falls below an elected level. The program's potential impacts on average margins and risk at different levels of coverage for both the protected margin ($4-$8 per cwt) and the share of production covered (25-90%) are estimated for 13 regions (ERR-214, September 2016).

"ERS Data Provide First Government Estimates of Commercial Domestic Disappearance of Whey Products"

In October 2015, ERS began publishing data on monthly and annual commercial disappearance (use) of dry whey, whey protein concentrates (WPCs), and lactose since 1995. The data show that while domestic use has declined for dry whey and fluctuated widely for WPCs and lactose, exports of whey products have seen strong and steady growth driven by robust demand in Asia and New Zealand (Amber Waves, April 2016).

Changing Structure, Financial Risks, and Government Policy for the U.S. Dairy Industry

Congress reorganized dairy policy in the Agricultural Act of 2014 when it eliminated three programs and created the Dairy Margin Protection Program. The new program aims to provide farmers with financial protection against risks from increasing vola­tility in milk and feed prices. These developments occurred amid ongoing structural change toward larger dairy farms, as well as ongoing change in dairy product demand, away from fluid milk, and toward manufactured products sold in domestic and export markets. This report focuses on the interrelated topics of structural change in dairy production, changes in dairy product markets, growing price volatility, and dairy policy. It details the major developments in each, traces the linkages among them, and identifies the challenges that structural change, evolving product markets, and price volatility pose for policy (ERR-205, March 2016).

"Changes in U.S. Dairy Commercial Exports and Domestic Commercial Disappearance"

ERS Economists provide an overview of trends in exports and domestic commercial disappearance based upon milk fat and skim milk solids associated with products (Amber Waves, February 2015).

Livestock Gross Margin-Dairy Insurance: An Assessment of Risk Management and Potential Supply Impacts

Public risk management policies for dairy producers have the potential to induce expansion in milk supplies, which might lower farm-level prices and offset risk-reduction benefits. An evaluation of USDA’s Livestock Gross Margin-Dairy insurance program finds economic downside risk significantly reduced, with the potential to induce modest supply expansion if widely adopted (ERR-163, March 2014).

Why Are Americans Consuming Less Fluid Milk? A Look at Generational Differences in Intake Frequency

Decreases in intake of fluid milk since the 1970s mainly reflect changes in consumption frequency, not portion sizes. Generational differences in intake frequency have contributed to the per capita decline in intake (ERR-149, May 2013).

Households' Choices Among Fluid Milk Products: What Happens When Income and Prices Change?

Many households suffered a decrease in income during the 2007-2009 recession. This study examines households' purchases of fluid milk products in response to income and price changes. It focuses on three levels of fat content, two package sizes, and organic versus conventional milk (ERR-146, April 2013).

A Quarterly Econometric Model for Short-Term Forecasting of the U.S. Dairy Industry

This research evaluates the econometric approaches employed by USDA’s Economic Research Service (ERS) to contribute to the dairy sector forecasts published in the monthly World Agricultural Supply and Demand Estimates (WASDE) report. To generate the estimates, a quarterly model of the U.S. dairy industry is specified using data for fourth-quarter 1998 (Q4/1998) to first quarter 2009 (Q1/2009), and the model is estimated and validated employing data for Q2/2009 to Q1/2010. Different forecasts are generated using a variety of single equation and system methods, which are then evaluated in terms of forecast precision or predicting turning points in the data. Different approaches, however, more effectively forecast different variables. Vector autoregression with exogenous variables outperforms structural regression models for forecasting prices, but single and system estimations of structural models are superior to time series models for forecasting some items in farm supply and commodity balance sheets (TB-1932, January 2012).

Carbon Prices and the Adoption of Methane Digesters on Dairy and Hog Farms

Biogas recovery systems collect methane from manure and burn it to generate electricity or heat. Burning methane reduces its global warming potential, thereby reducing greenhouse gas (GHG) emissions. Climate change mitigation policies that effectively put a price on GHG emissions could allow livestock producers to “sell” these reductions to other greenhouse gas emitters who face emissions caps or who voluntarily wish to offset their own emissions. Depending on the direction and scope of future climate change legislation, income from carbon offset sales could make methane digesters profitable for many livestock producers. By modeling the main determinants of producers’ decisions to adopt biogas recovery systems, we illustrate how the price of carbon influences this decision and the potential supply of carbon offsets from the livestock sector (EB-16, February 2011). For full report, see Climate Change Policy and the Adoption of Methane Digesters on Livestock Operations, link below (ERR-111, February 2011).

An Analysis of U.S. Household Dairy Demand

This report examines retail purchase data for 12 dairy products and margarine from the Nielsen 2007 Homescan retail data. Selected demographic and socioeconomic variables included in the Nielsen data are analyzed for their effects on aggregate demand and expenditure elasticities for the selected products. A censored demand system is used to derive the demand elasticities. The resulting estimates revealed that the magnitudes of 10 of the 13 own-price elasticities are greater than 1; substitute relationships are found among most dairy categories; expenditure elasticities are 1 or greater for 7 of the 13 products; and demographic and socioeconomic variables are statistically significant contributors to dairy demand (TB-1928, December 2010).

Long-Term Growth in U.S. Cheese Consumption May Slow

Cheese production and markets have emerged as important dairy industry elements over the past three decades. Supply-and-use analysis shows an upward trend in total cheese consumption over the past three decades. Nielsen 2005 retail Homescan data were used to analyze cheese consumption by location, as well as by income, age, and racial/ethnic groups. Own-price and expenditure demand elasticities were also calculated using the Nielsen data. To the extent that increases in consumer food expenditure translate into more cheese purchases, it is expected that total cheese consumption will continue to rise. However, changes in the demographic profile of the U.S. population may somewhat slow future growth (LDPM-193-01, August 2010).

"Organic Dairy Sector Evolves To Meet Changing Demand"

Declining demand for organic products in response to the economic downturn has slowed the rapid growth in organic milk production. Economic forces, primarily lower production costs, may be pushing organic dairies to be more like conventional dairies in terms of size, location, and the types of technologies used. More specific pasture requirements for organic certification proposed under USDA’s National Organic Program may affect how the organic milk production sector evolves (Amber Waves, March 2010).

Characteristics, Costs, and Issues for Organic Dairy Farming

This report uses 2005 ARMS data for U.S. dairy operations, which include a targeted sample of organic milk producers, to examine the structure, costs, and challenges of organic milk production. Findings suggest that economic forces have made organic operations more like conventional operations and that the future structure of the industry may depend on the interpretation and implementation of new organic pasture rules (ERR-82, November 2009).

"Grain Prices Impact Entire Livestock Production Cycle"

Between 2006 and 2008, feed costs nearly doubled and are expected to result in lower meat and dairy production in 2009. Feed prices have declined since mid-2008 and are expected to be lower in 2009, but the biological timeline of livestock production means meat producers are limited in what they can do in the short run to change production. Changes in the U.S. livestock industry structure and the use of alternative feeds, such as byproducts from ethanol production, will help reduce the impact of higher input costs on livestock producers (Amber Waves, March 2009).

"Whey, Once a Marginal Byproduct, Comes Into Its Own"

Whey, a natural byproduct of cheese production, was once discarded or used as animal feed. Recently, however, it has been “discovered” by traders and food processors for its high protein content and other properties as a food additive (Amber Waves, April 2008). For the full report, see "Whey Price Decline Follows a Short Run-Up" in the Livestock, Dairy, and Poultry Outlook (October 2007, page 5).

"Low Costs Drive Production to Large Dairy Farms"

This research indicates that average production costs per hundredweight (cwt) of milk produced fall sharply with herd size. Large dairy farms earn substantial profits, while most smaller operations experience economic losses. Given the cost advantages, the shift of dairy production to large farms contributes to rising industry productivity and lower real dairy prices (Amber Waves, September 2007). For the full report, see Profits, Costs, and the Changing Structure of Dairy Farming, link below (ERR-47, September 2007).

Retail and Consumer Aspects of the Organic Milk Market

This report analyzes retail scanner data from 2004 and finds that most purchasers of organic milk are White, high income, and well educated. Consumer interest in organic milk has burgeoned, resulting in rapid growth in retail sales of organic milk. Most organic milk is sold in supermarkets, and organic price premiums are large and vary by region (LDPM-155-01, May 2007).

The Impact of Big-Box Stores on Retail Food Prices and the Consumer Price Index

This report focuses on retail food- market dynamics and how they affect food price variation across store formats. The differences in prices across store formats are especially noteworthy when compared with standard measures of food price inflation over time. Over the past 20 years, annual food price changes, as measured by the CPI, have averaged just 3 percent per year, while food prices for similar products can vary by more than 10 percent across store formats at any point in time. Since the current CPI for food does not fully take into account the lower price option of nontraditional retailers, a gap exists between price changes as measured using scanner data versus the CPI estimate, even for the relatively low food-inflation period of 1998-2003. This study estimates that the CPI for dairy products overstates food price changes by 0.5 to 2.5 percentage points per year for dairy, eggs, and butter/margarine (ERR-33, December 2006).

Impacts of Trade Liberalization on the U.S. Dairy Market

This report reviews the economic effects of trade liberalization in world dairy markets by examining effects on farm milk prices and production, producer and consumer surpluses, and government revenues and program expenditures. The empirical analysis suggests that multilateral trade liberalization leads to generally modest price and production impacts on U.S. milk producers (Contractor and Cooperator Report No. 21, August 2006).

Dairy Backgrounder

This publication reports that shifts over time in consumer demands, the location and structure of milk production, industry concentration, international markets, and trade agreements have dramatically altered the U.S. dairy industry and changed the context for dairy policies and the sector as a whole. In the future, the U.S. dairy industry is likely to become more fully integrated with international markets (LDPM-145-01, July 2006).

Trade Liberalization in International Dairy Markets: Estimated Impacts

This report examines issues related to modeling complex policy regimes that affect international dairy markets. Average bound tariffs for dairy remain among the highest of all agricultural commodities, and dairy trade is characterized by a large number of megatariffs and tariff-rate quotas (TRQs). Modeling results indicate that liberalization would reduce world dairy product supplies and increase the value of dairy trade (ERR-16, February 2006).

"U.S. Dairy at a New Crossroads in a Global Setting"

This report highlights changing economic and policy forces facing the U.S. dairy industry today. As dairy markets evolve, U.S. milk producers and processors are positioned to pursue both domestic and export market opportunities. (Amber Waves, November 2005). For the full report, see U.S. Dairy at a Global Crossroads, link below (ERR-28, November 2006).

Dairy Policies in Japan

This report provides a detailed description and analysis of Japan's policies that support its milk producers and regulate dairy markets. If Japan's policies were liberalized, prices and production in Japan would fall, but sizable milk production would remain (LDP-M-134-01, August 2005).

Economic Effects of U.S. Dairy Policy and Alternative Approaches to Milk Pricing

This report shows that the effects of dairy programs on markets are modest and that current dairy programs are limited in their ability to change the long-term economic viability of dairy farms. Other forces such as technology, changing consumer demand, and changes in the marketing and processing sectors, while difficult to measure, are likely to have more impact (Report to Congress, July 2004).

Effects of U.S. Dairy Policies on Markets for Milk and Dairy Products

This report examines the economic effects of the principal current dairy sector programs. The analytical results address the economic impacts of Federal milk marketing orders, direct payments to producers, price supports, and export programs (TB-1910, May 2004).

Characteristics and Production Costs of U.S. Dairy Operations

Total costs of producing milk in 2000 ranged from an average of $11.58 per hundredweight (cwt) of milk sold in the Fruitful Rim-West region to $18.23 per cwt in the Eastern Uplands. Milk producers in the West had a significant cost advantage over producers in other regions in 2000 because their operations were much larger. Operations with 500 or more milk cows had significantly lower total operating and ownership costs, indicative of the economies of size experienced by larger operations. Also, differences in animal performance, feed efficiency, and labor efficiency were critical in determining whether producers were in the low- or high-cost group for producing milk. These findings were based on the 2000 Agricultural Resource Management Survey (ARMS), the most recent national survey of milk producers (SB-974-6, February 2004).

Manure Management for Water Quality: Costs to Animal Feeding Operations of Applying Manure Nutrients to Land

This report evaluates the costs of spreading manure on cropland at the farm, regional, and national levels. EPA regulations enacted in February 2003 require concentrated animal feeding operations (generally the largest producers of hogs, chicken, dairy, and beef cattle) to meet nutrient application standards when spreading their manure on cropland in order to preserve water resources from nitrogen and phosphorus runoff. USDA is encouraging all animal feeding operations to do the same. If all operations meet the new standards, increases in production costs could be felt throughout the food and agricultural system (AER-824, June 2003).

The Changing Landscape of U.S. Milk Production

This report illustrates how milk production has changed in the United States since 1975. Questions of how much milk is produced, where it is produced, and by whom are important both nationally and regionally. Dairy farms continue to grow, become more specialized, and, in some regions, more concentrated. But small traditional dairy farms also remain part of the industry (SB-978, June 2002).

Milk Pricing in the United States

This publication provides a primer on the U.S. milk market, cutting through the complexities to describe key pricing mechanisms and to provide a basis for more detailed study. Farm milk prices in the United States are determined by public and private pricing institutions whose interactions have become complex (AIB-761, February 2001).

Links

U.S. Department of Agriculture

Agricultural Marketing Service

Farm Service Agency

Foreign Agricultural Service

  • Dairy page. Includes programs, data and analysis, news, and features.
  • Data & Analysis. Includes Export Sales Reporting (ESR), Global Agricultural Information Network (GAIN), Global Agricultural Trade System (GATS), and Production, Supply, and Distribution (PS&D).

National Agricultural Statistics Service (NASS). Historical data, publications, and the Census of Agriculture.

  • NASS Quick Stats. Comprehensive tool for accessing agricultural data published by NASS.

Risk Management Agency Information about risk management programs available to producers.

Rural Development 

  • Cooperative Services. Information concerning agricultural cooperatives, including education, funding, data, statistics, research, and technical assistance.

World Agricultural Outlook Board. USDA’s focal point for economic intelligence and the commodity outlook for U.S. and world agriculture.

National Agricultural Library. Houses one of the world's largest collections devoted to agriculture and its related sciences.

Other U.S. Government Agencies or Offices Providing Dairy-Related Information or Regulation

Office of the United States Trade Representative. Responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries.

U.S. Department of Commerce, Bureau of Economic Analysis. Provides economic statistics on U.S. gross domestic product, foreign trade and investment statistics, and industry data.

U.S. Department of Commerce, Census Bureau. Provider of data about the U.S. people and the U.S. economy.

U.S. Department of Labor, Bureau of Labor Statistics. Measures labor market activity, working conditions, price changes, and productivity in the U.S. economy.

U.S. Department of Health and Human Services, U.S. Food and Drug Administration (FDA). Responsible for protecting the public health by ensuring the safety, efficacy, and security of foods and drugs.

United States International Trade Commission. Makes determinations in proceedings involving import injury claims, provides trade analysis and information, and maintains the U.S. tariff schedule.

Other

World Trade Organization. Global international organization dealing with the rules of trade between nations.