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Milkfat’s Contribution To US Milk Prices Rising As Fat Use Increases

It’s Unlikely That Price Of Butter Will Drop Below $2.00 A Pound

The contribution of milkfat to farm milk prices has risen from 38 percent for a number of years to over 50 percent since mid-2015, according to Peter Vitaliano, vice president, economic policy and market research, National Milk Producers Federation (NMPF).

Vitaliano made his comments during a webinar news conference hosted by Dairy Management, Inc. (DMI), during which he presented findings of a new report that concluded that dairy checkoff-funded research on the milkfat-health link is paying major dividends for US dairy farmers.

Much of the shifting perception of milkfat has occurred thanks to work done through the checkoff, according to Scott Wallin, DMI’s director of consumer confidence.

Tom Gallagher, DMI’s CEO, noted that the change in milkfat that’s taken place in recent years is really DMI’s business plan coming together in three important areas:

• Farmers have funded nutrition research on milkfat for more than two decades.
“We long believed that milkfat had benefits to the consumers and the general population that government policy and health professional guidance didn’t reflect.” And in the last few years, the dairy industry saw that its viewpoint and its research was upheld and is now part of government policy and health professional guidance.

• State and regional organizations, along with the national organization, have been working with the most influential health professional groups.

“It’s important that they respect the credibility of the National Dairy Council and the science that we produce,” Gallagher said. “Without that respect, this story would have been met with much more skepticism because it flies in the face of what traditionally the health community had thought.”

• Right about when you see a big uptick in milkfat, that’s when DMI’s work with McDonald’s kicked in; “that’s when we convinced them to move from margarine to butter,” Gallagher pointed out. That then triggered a catalytic effect among others in the industry to follow suit.

“That’s why we sit here with this great story for dairy farmers on milkfat,” Gallagher said.

“This story has been moving pretty fast in recent months,” Vitaliano noted. The story includes butter “but it goes much beyond butter.” And it’s happening not only across the US dairy industry, it’s also starting to spread globally.

“There’s a lot of things changing in the domestic industry, almost all of them positive for US dairy farmers,” Vitaliano said.

While sales of fluid milk overall have been declining, whole milk sales have been increasing in recent years, starting in about 2013, Vitaliano noted. Expanding this to the entire fluid milk category, the volume of milkfat used in fluid milk is also increasing.

So the fluid milk category is moving from a category that used to contribute more milkfat back into the system by throwing off cream to increasing its use of milk

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