The SNAP program is part of the Farm Bill, and to meet spending targets, the administration wants to cut $200 billion over 10 years from Farm Bill spending. In the One Big Beautiful Bill Act passed by the House that is now facing resistance in the Senate, there are cuts to SNAP funding totaling $267 billion, which would be about a 28% reduction in SNAP benefits at 2024 benefit levels.
So, what would a 28% reduction in SNAP benefits mean for dairy demand? Unfortunately, the USDA doesn’t track exactly how SNAP benefits are used, but there have been various studies from the past 15 years examining purchases by households receiving SNAP benefits versus households not receiving benefits. The analysis is completed through surveys and point-of-sale scanner data. As far as I can tell based on these surveys, SNAP recipients spend a similar share of their food dollars on dairy products as non-SNAP households. SNAP households also spend more on fluid milk, likely because they have more children than non-SNAP households, while non-SNAP households spend more on butter and premium ice cream.
If we assume: SNAP recipients spend a similar proportion of their food dollars on dairy as non-SNAP households, if SNAP benefits are cut, consumers will reduce spending equally across all the food items they purchase, 35% of dairy products are sold at retail, and SNAP benefits account for 8.6% of food-at-home spending, then a 28% cut in SNAP benefits would reduce dairy demand by (0.086*0.35*-0.28=) -0.8%. A significant amount of dairy also ends up in processed foods (baked goods and mixes, salad dressings, confectionery, etc.), which might also be affected by reduced SNAP benefits, so the impact on dairy demand could be closer to –1%.
As always, there are a lot of caveats. SNAP recipients may view dairy items as a necessity and cut spending on other items to maintain consumption of dairy. Or it could go the other direction, with consumers viewing other items as more important than dairy, and we could see a bigger drop in dairy purchases by SNAP recipients. Or SNAP recipients may cut spending on non-food goods and services and use some of their income to cover the reduced SNAP benefits and end up holding their food purchases relatively steady. However, if more of their household income is spent on food at the grocery store, it could reduce spending at food service, which would hurt dairy demand through food service. Another complication is that the proposed cuts are at the federal level, and states could choose to cover some of the cuts, which would offset some of the reduced federal benefits.
A 28% cut to SNAP benefits isn’t catastrophic for dairy demand, but it is difficult to see how cutting an average of $26.7 billion per year from low-income household budgets will be good for dairy demand overall. I’m not taking a stance on whether cuts should be made to SNAP to help balance the budget; I’m just trying to estimate what impact we could see on dairy demand. It’s also likely that there is some level of fraud or abuse that is happening, and if that could be identified and surgically cut, there could be zero to very little impact on dairy demand, but I doubt the cuts will be that surgical. As I said at the start, this bill seems to be stalled in the Senate, and the final version may be significantly different than the current one, but some cuts to SNAP are likely coming.
On the bright side, there is also legislation moving through Congress that could boost dairy demand, known as the Whole Milk for Healthy Kids Act. It passed in the House back in 2023 and died in the Senate. The Senate is now working on its own version, and there is a chance it could get passed in both chambers this year. Right now, the National School Lunch and School Breakfast programs only allow schools to offer low-fat (skim and 1%) varieties of milk to students, but this bill would exclude milk from the saturated fat limits, and schools would be free to offer 2% and whole milk. If schools do offer the higher fat content milk and students start consuming 2% and whole at the same rate in school that they do at home, then my estimate is that schools will absorb an additional 54 million pounds of fat, which would reduce butter production by about 3%.
