CoBank: Shifting Consumer Demand For Dairy Foods Fuels Butterfat Boom


Source: CoBank news release

The long-term demand trends for dairy products indicate butter, cheese and other full-fat dairy foods will continue to grow in sales and volume for the foreseeable future. U.S. consumers have shifted away from margarine and reduced fat dairy foods over the last decade as nutritional science surrounding saturated fats has evolved.

As a result, butterfat levels in the national milk supply have risen sharply in response to changing demand patterns and dairy market dynamics.

According to a new report from CoBank’s Knowledge Exchange the butterfat boom will continue as the entire dairy supply chain is capturing additional value from milk with higher fat and protein levels. The economic incentives for a supermajority of the nation’s dairy farmers are firmly in place to produce milk with more butterfat.

“Despite the significant growth in domestic butterfat production over the last decade, there is still tremendous upside potential, largely because the U.S. remains a milk fat-deficit nation,” said Corey Geiger, lead dairy economist with CoBank. “Butter imports into the U.S. have skyrocketed over the last decade to meet the surging domestic demand for full-fat dairy products. Also, due to strong domestic demand, the U.S. barely exports any of its butterfat. As a result, low-fat, skim-solids product exports far outpace full-butterfat products.”

Full-fat dairy and other animal products fell out of favor beginning in the 1970s over reported health concerns. However, nutrition research in the past 15 years suggests full-fat dairy has a much more nuanced role-and potentially protective effect-on health. Consumers responded to the evolving science quickly, triggering what has proven to be a long-term shift to previously tabooed dairy foods like butter.

There was a time when U.S. milk and butterfat production were synonymous. When measured by pounds, milk and butterfat production mirrored one another from 1995-2010, each growing a collective 24%. But milk and butterfat production have since decoupled. From 2011-2022, milk pounds shipped from U.S. farms grew 15%. However, butterfat pounds shipped from those same farms grew 27%.

Dairy producers have steadily increased butterfat content levels in milk through innovations in feeding programs and the use of genomic testing programs. Genomic tests can reveal 70% of the genetic ability of a young calf years before it becomes a milk cow. The science has expedited genetic gains in the U.S. dairy cow herd and dramatically shifted butterfat composition in recent years.

Geiger said the overall market picture for butterfat is quite clear, with tremendous growth potential both domestically and ultimately via the export market.

“The reality is that consumers are eating rather than drinking their dairy these days,” said Geiger. “And they are increasingly favoring full-fat dairy foods over reduced fat options. That means continued innovation in things like premium butter, butter spreads and further development in the butter board phenomenon will bring value to producers, processors and consumers alike.”

Watch a video synopsis and read the report, The Butterfat Boom Has Just Begun.

About CoBank

CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 76,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.