markets down
February 21, 2020

2019 Likely to Post Second Largest Decline Ever in Fluid Sales

 |  By: Fran Howard

Fluid milk sales continued their long-term decline in November, setting up 2019 to be the second worst year ever for the category, according to recently released data from USDA. 

“Unless December sales rise more than 3%, 2019 will have the second largest annual drop in daily average fluid dairy product sales after 2004’s 3% decline,” says Bob Yonkers, an analyst with the Daily Dairy Report and former economist for the International Dairy Foods Association. “The last time any month’s daily fluid sales increased by greater than 3% was more than 10 years ago in June 2009.”

In November, total U.S. fluid dairy product sales fell 9.4% from year-earlier levels. November’s drop was largest monthly decline since USDA began reporting the data in 2000, and the drop far surpassed the prior record decrease of 6.6% posted in May 2004, Yonkers notes. “To put November’s drop into perspective, average fluid dairy product sales in November 2019 were about 1.5 million gallons less per day compared to the same month a year earlier,” he says. For the January through November 2019 period, fluid sales were 2.5% below the same period in 2018. 

While 2019 organic milk sales through November did not fall as far as conventional fluid sales, they still declined by 2%, according to the data. “Whole milk sales were the only bright spot in the 2019 data, with sales of organic whole milk up 4.7% through November and combined sales of conventional unflavored and flavored whole milk up 0.4% for the 11-month period,” Yonkers notes.

While per-capita sales of fluid milk have been trending lower for decades, last year’s decline in total sales is alarming given the growing market for plant-based milk alternatives. For instance, Starbucks recently announced it would expand its offerings of plant-based milk alternatives used in its coffee drinks. So far this year, all of Starbucks’ new in-store offerings in the United States have included plant-based dairy alternatives. 

While only 3% of Americans consider themselves vegan, many more are open to trying plant-based alternatives, according to a 2018 Gallup poll. In Great Britain, a 2019 Mintel survey showed that nearly a quarter of people surveyed were drinking non-based milk alternatives, up from 19% in 2018, and 33% of those aged 16-24 were drinking these products.

Despite last year’s sharp decline in fluid milk sales, USDA’s newest long-term projections call for the U.S. all-milk price to rise 2.4% this year to $18.85/cwt. Over the 2020 through 2029 period, the all-milk price will range from a low of $18/cwt. in 2022 to a high of $19.75 by 2029.

“With U.S. milk production expected to rise at a compound annual growth rate of 1.4% per year through 2029, demand for other dairy products will need to grow as well, especially with fluid milk sales declining,” Yonkers says. “Some of that demand will come from overseas markets.”

Going forward, USDA expects the largest increases in export demand to come from cheese, nonfat dry milk, and whey. By 2029, USDA projects that U.S. dairy exports will account for 4.5% of milk production on a milkfat milk-equivalent basis and 20.5% on a skim-solids milk-equivalent basis, compared to 4.1% and 18.3%, respectively, in 2019.