While nearly everyone in the dairy industry forecasted that U.S. milk production would keep growing, milk production began stalling in 2022 and has held relatively flat ever since. In fact, the two-year combination of 2023 and 2024 will go down as the first back-to-back years of negative growth in milk production since the late 1960s.

Yet, the U.S. continues to produce more manufactured dairy products with each passing year to meet consumer demand for products with higher butterfat and protein levels. That’s possible because milk from the nation’s dairy farms yields more dairy products annually due to higher concentrations of protein and butterfat.

Once synonymous

USDA released its first Milk Production report in 1924, and it’s been an invaluable guide for dairy farmers, processors, marketers, and retailers to track milk supplies and project potential dairy product output and price expectations. As the industry continued to grow, butterfat composition was largely an afterthought.

Butterfat levels were consistent (3.65% to 3.69%) from 1966 to 2010. If milk volumes went up, so did butterfat, and that meant growth in milk and butterfat production were synonymous for six-plus decades.

While protein reporting didn’t come on the scene until the late 1970s, those levels largely followed butterfat patterns. The nation’s collective bulk tank of milk yielded the same dairy product numbers for every hundredweight (cwt.) of milk because solids levels remained steady. The industry’s reporting metrics continued to hum along into the new century. Shifts in both milk production and milk solids mirrored one another, with annual percentage changes matching as if identical twins.

However, those “twins” started growing at different rates as the butterfat and protein portion in milk solids production began to outpace milk production in 2011. Since then, milk component production failed to surpass milk production in only two years — in 2014 and 2015, butterfat and protein percentages were essentially flat.

That’s just the beginning of the unfolding story. Butterfat and protein levels in farm-gate milk climbed significantly during the ensuing years. Butterfat moved from 3.70% in 2011 to 4.15% by 2023, according to data from USDA’s National Agricultural Statistics Service. Likewise, protein levels in Federal Milk Marketing Orders (FMMOs) using Multiple Component Pricing (MCP) climbed from 3.08% to 3.26% during the same time span according to USDA’s Agricultural Marketing Service.

Fat, protein drove growth

Taking a step back from annual comparisons and looking at a wider multi-year observation illustrates just how much has changed since 2010. From 2000 to 2010, productivity gains for milk, butterfat, and protein held in a tight window ranging from 13.8% to 15.4%. During the next 13 years, from 2011 to 2023, milk grew just 16.2%. But for components, the story took a dramatic turn: protein jumped by 22.9% and butter catapulted by 28.9% (Figure 1).

Like a long train descending a steep mountain pass, these component trends have continued picking up momentum despite stalled farm gate milk production over the past two years. From July 2023 to July 2024, milk production was down all 12 months. August and September 2024 turned milk production back around to being positive, but only at 0.1% and 0.4% growth, respectively. In contrast, milk component production has grown every month since August 2023 except for June 2024, which results in more pounds of components available for processors to manufacture dairy foods like cheese and butter.

The growth in milk components has multiple drivers. Chief among them are MCP provisions that establish values for 92% of the nation’s milk. While California imposed a milkfat and solids nonfat pricing system in the 1960s, protein pricing first appeared in the Great Basin (Utah) FMMO in 1988, and others followed. Then, the major milk pricing reforms in 2000 that introduced end-product pricing formulas accelerated MCP payments throughout most of the country.

Since 2021, butterfat payouts have ranged from 32% to 63% of the total minimum producer price required under federal orders. Meanwhile, protein accounted for the vast majority of the remaining component payments from processors to producers.

Another point that accelerated higher component density in milk was when many processors established base excess plans that either limited the amount of milk volume a farm could ship or created economic deterrents that ultimately curbed shipments. While milk pounds shipped as measured by hundredweights were curtailed in recent years to some processing plants, no thresholds were placed on milk components in most areas. So, dairy producers began shifting strategies to ship more milk components to improve milk checks.

More cheese, please

Then, there’s the most important driver: consumer demand. Cheese accounts for nearly 43% of the U.S. milk supply on a milk solids basis, up from 37.7% in 2000. Farm gate milk has yielded more cheese from every hundredweight of milk as cheese yield grew from 10.14 pounds in 2010 to 11.24 pounds in 2023. That’s a remarkable 10.8% improvement from a hundredweight of milk (Figure 2). In the future, higher protein content will further drive cheese yields.

Like cheese, yields for butter containing 80% butterfat grew from 4.39 to 4.98 pounds for every hundredweight of milk from 2010 to 2023. That’s a 13.4% improvement in butter yield from every hundredweight produced by U.S. dairy farms.

Keep in mind, these yield improvements are not due to changing breed composition, but rather genetic improvement within breed. According to sales data from the National Association of Animal Breeders (NAAB), from 2000 to 2023 Holstein semen sales dropped 92.6% to 82.3% of all semen sales; Jersey semen sales grew from 5.8% to 14.2%.

A look to the future

Higher milk solids production likely represents a permanent paradigm shift given consumer demand for manufactured dairy products. If that shift happens, the dairy industry must account for further considerations. Hundredweights drive capital retains, equity retains, and 13th milk checks for cash dividends and patronage for cooperatives. Those same hundredweights fund the dairy checkoff and some other industry organizations.

If gathered on a monthly basis, this milk component data also could be used as a tool for risk management strategies for producers, processors, and retailers alike. That’s important to the dairy industry because consumers both at home and abroad continue to eat more milk solids found in manufactured dairy products while drinking less fluid milk with each passing year.