What an aging population means for dairy
Wednesday, June 7, 2023
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By Ben Laine, senior dairy analyst for Terrain The American consumer is critical to the health of the U.S. dairy industry. The domestic market consumes more than 80% of all dairy solids produced in the U.S. Examining the demographic makeup and expected changes to the U.S. population in the decades ahead helps us plan for the long-term shifts in dairy demand. How Americans consume dairy today looks very different from what it did 30 years ago. Compared to 1990, the average U.S. consumer in 2020 drank almost 10 fewer gallons of milk but ate 13.5 pounds more cheese and 2 pounds more butter. On balance, that change has translated into a 15% increase in dairy demand per person in the U.S. over a time span during which the population grew by 83 million people. How we consume dairy 30 years in the future will look very different than today, as will the population. Population growth, as projected by the U.S. Census Bureau, is projected to slow in the coming decades. Again, over the last 30 years, the population has grown by 83 million. Between 2020 and 2050, we could add fewer than 60 million people. And the resulting population will skew much older. By as soon as 2035, there will be more older Americans (over 65 years) than children for the first time, and the population of Americans 85 years and older will have nearly doubled. Research and development of healthy-aging products within the dairy industry are warranted, but it will be more complex than ramping up the production of nutrition shakes like Ensure. Dairy processors will face the challenge of developing new products to meet evolving demands. Still, these broad shifts in demographic makeup and product mix will ultimately mean a changing mix of dairy components (i.e., fat, protein and other solids) that will be demanded from producers. To understand how that component demand may change in the coming decades, I looked at detailed demographic and dietary survey data collected since 2010. I then converted the foods consumed into equivalent amounts of dairy products (how much cheese is in a piece of pizza, how much milk is in a latte, etc.) and converted those dairy products into equivalent volumes of fat and skim-solids. Then, I compared how each age group has changed its consumption of dairy components since 2010 and projected that forward, along with the Census projections for the population growth of each age group in the coming decades. One finding stood out: Demand for milk fat shows more growth promise than skim-solids demand. We might assume an aging population would increase the demand for protein and decrease the demand for saturated fats like butter. However, the dietary data revealed that the population over 65 years old showed the strongest increase in milk fat consumption in the ten years from 2010 to 2020. Part of this is likely due to the changing, more favorable perceptions among consumers toward dairy fat starting in the mid-2010s. Skim solids like protein and other solids may not fare as well as milk fat in the domestic market. If long-term trends in component and milk-per-cow yield continue on the path they have been on for years (see chart), we will end up with a surplus of skim solid. I project that surplus even after factoring in a generous continuation of export demand growth. Bottom line: We won’t need to add cows to the U.S. milk herd to get there. In the decades to come, the growth of the milk production sector will need to be more targeted at the component level than the focus in recent years on cow numbers and total milk yield. Component values will still vary with near-term supply and demand factors, but producers will be well served to tailor genetics and feed to target the continued price premium for fat over the long term. As senior dairy analyst with Terrain, Ben Laine shares insight and forecasting in the market areas that have impact on Farm Credit customers’ businesses.
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