Growing demand for butter is boosting dairy industry

COLUMBIA, Mo. – The growing number of Americans opting for butter over margarine and other oils has given the U.S. dairy industry a much-needed boost.

“That’s one of the reasons why milk prices didn’t decline more for dairy farmers in 2015,” says University of Missouri Extension economist Scott Brown. “Very strong butter demand offset what was a slower export year for us.”

Several major baking companies and restaurant chains, including McDonald’s, have also made the shift to butter. McDonald’s will require an estimated 600 million additional pounds of milk per year. That will provide a real lift for the U.S. dairy industry, Brown says.

“That may be one of the things that really helps dairy farmers in terms of bottom lines,” he says. “It’s something that we probably wouldn’t have thought of 10 to 15 years ago.”

Brown says the U.S. market is usually considered a more mature market that doesn’t grow as fast as exports. But annual per capita butter consumption in the U.S. has risen from about 4 pounds 10 or 15 years ago to around 5 1/2 pounds today.

Brown says that pound and a half growth adds dollars all along the way.

“There are benefits for all of us, whether it’s consumers, McDonald’s or ultimately producers,” he says. “It’s a win across the board when you think about putting more butter into products that consumers want.”

Stronger domestic butter demand may be one of the few bright spots for the dairy industry, as 2016 looks to be a tough year for U.S. milk producers.

World demand for butter has not been as strong as U.S. demand recently, but Brown wonders if consumers in other countries will also start to switch to butter.

“This could be a very strong help to U.S. dairy exports,” Brown says. “If world demand picks up, world butter prices ought to come much closer to where U.S. prices have been.”