Milk used to be one of those things people would buy no matter what the price. However, a new study shows that this is no longer the case. The millennial generation is consuming less milk on average than over a decade ago. This has created a surplus of milk in the market, and in 2015 the price of milk is expected to fall to combat the surplus.
There are several reasons why the demand for milk is falling. Recent studies show that milk does not have the health benefits that many have come to believe, and many consumers are turning to soy and other milk alternatives. Additionally, China is stockpiling milk powder while Russia is retaliating on the U.S. with trade sanctions of their own that affect the milk industry. For the first time in a decade, dairy farmers are producing more milk than they can sell.
By March, the price of a gallon of milk is expected to drop below $3 across the country. Dairy farmers are going to feel the price drop hard. After all, their production and shipping costs are going to remain the same. Some dairy farmers are reporting that their profits could be slashed by as much as a third. On top of that, many dairy farmers have recent loans for new equipment and cattle because the demand for milk has been on a steady climb for over a decade. This is all bad news for the milk industry.
Most of the milk supply for the U.S. comes from California and Wisconsin. Dairy farmers in these states are being asked to dump their surplus milk. They must now come up with a way to lower their production costs and keep their production levels at amounts that are sustainable in the market.