The number of dairies has been shrinking. A lot. For a long while. Most of us in the dairy industry know this all too well as the trend continues to highlight most industry reports. The part that continues to evoke surprise from even industry veterans is that per capita consumption of dairy products in the U.S. has increased.
It has risen from 539 pounds per capita in 1975 to 586 in 2001 and since then, another 11.7% increase to 655 pounds of dairy products consumed per capita in 2020. Similarly, milk production per cow has steadily increased 11.5% from 2011 and is expected to continue rising (from a 2021 International Dairy Foods Association report and a 2021 Farm Bureau’s Market Intel summarizing the USDA Milk Production Report).
Lancaster Farming summarized the dichotomy in a February 2022 report pointing out that the number of U.S. dairy farms has dropped by half since 2006, but over that same time frame, milk production increased 24% and milk per cow grew 20%. Current production has slightly tapered to flat to slightly down from last year.
Dairy buyers and category managers have been finding opposing forces in the market. Overall dairy consumption has continued to increase, which means a greater demand for more dairy products—and not just good old-fashioned milk—but there are now fewer places to get it. Not only might this shift some of the perceived or real power to the remaining suppliers, but this also creates new unknowns annually as more and more dairies fall by the wayside, either closing their doors or being acquired. Additionally, from the Farm Bureau report, growth in production over the past ten years has not been evenly distributed.
MRV Dairy Solutions has seen dairy category managers struggle with this more and more. While pricing data and savings continue to be some of the biggest areas MRV supports for buyers, actually getting the products they need has become an increasing concern. That uneven growth means distribution to different areas has changed. Consolidation and bankruptcies mean access to certain products is different and difficult and pricing power can shift without a solid understanding of market dynamics.
“We’ve seen this developing and have been watching the data for years,” MRV dairy expert Harry Holler said. “Consolidation with the dairies continues to be an increasing challenge. It is not easy for a category manager to add to his or her tasks finding new dairies that can provide the same products at competitive prices. This has become a growing need for our clients and solving this—getting them the products they need for their business and customers while getting them the best pricing available—has been critically important given all the other business disruptions we have had in the dairy industry.”
MRV Dairy Solutions manages dairy programs nationally and with that comes an understanding of where to find which products for which buyers in what locations at the best prices. The market may be tumultuous, but with production continuing to increase, milk still does a body good.