Greater choices may improve consumption

By Robin Schmahl, owner, hedge and marketing specialist, AgDairy LLC

There has been controversy over organic and non-GMO, but does there need to be? Is it healthy for our industry? Consumption could increase if customers are provided with greater choices, which would provide more choices for milk products and, therefore, reduce the movement to alternative dairy products.

Lower milk prices look to be a reality for the foreseeable future due to plentiful supplies of milk and dairy products. Milk futures are showing prices back to the levels of early 2016. Current prices still leave much to be desired, with many having difficulty cash flowing with lower milk prices certainly not improving this situation.

The old saying is that low prices cure low prices and high prices cure high prices. The job of the market is to clear product when supply is larger than demand and to reduce demand when supply is tighter. However, it takes some time for markets to turn.

Dairy products are a staple in most households and overall demand has been growing not only domestically, but internationally as well. U.S. farmers produce a high-quality product that customers can feel confident about.

Embracing customer desire

Although new products are being developed that appeal to customers, there is backlash over the recent movement to provide non-genetically modified organisms (non-GMO) milk or other dairy products. Some well-known farm groups have come out against companies looking to source milk from dairy herds that are fed with non-GMO feed and produce various products with that labeling.

Whether there is validity to non-GMO food or whether it is just another misinformed movement is a subject for debate. The bottom line is that the dairy community does need to be aware of and embrace what customers desire. If some want a choice of non-GMO food and are looking for it in the grocery store, then there is a place for dairy farmers and manufacturers to fill this demand. Those who do not feel this is an issue for health and well-being will purchase food accordingly. Those who desire organic milk or food will purchase according to their desire for products they feel have greater health benefits.  

Providing choices of dairy products may actually increase consumption of those products. After all, there may be a percentage of customers that are purchasing alternative forms of non-dairy products due to the scarcity of non-GMO, organic or “clean label” products. Almond milk, rice milk and soybean milk could be used as an example.

Milk consumption as a whole declined 2.6 percent over the past year with conventional white gallon milk and organic white milk driving the overall declines, according to Information Resources Inc. However, specialty milks, including lactose-free varieties and milk substitutes, are driving sales growth. Almond milk demand has been growing with sales up 7.4 percent while coconut milk sales are up 8.5 percent over the past year.

More selection, more consumption

If there was a selection of specialty milks, non-GMO milk and organic milk along with conventional milks in the dairy case, some customers may move back to pure milk again due to greater varieties being available, thus increasing overall consumption of dairy. The same is true for other products such as cheese, butter and yogurt. Drinkable yogurt has been a success story with retail sales increasing 13.9 percent compared to a year ago.

So, whether milk and dairy products are conventional, non-GMO or organic in a variety of forms and offerings, customers who have reached for alternatives may very well move back to the exceptional quality, richer taste and better-for-you dairy products as they see choices that suit them.

Customers are flocking to varieties that they believe meet their diet preferences and they feel are healthier. The dairy community needs to work together to provide these choices to reduce the desire to switch to milk substitutes and to bring consumers back to the dairy case.  Increasing consumption is what is needed to improve demand, which will improve farmer incomes.

Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wis. Reach him at 877-256-3253 or at agdairy.com.