There is typically a three percent to five percent increase in milk and butter sales in the United States during the fall months, compared to the summer period. That increase is largely attributed to the holiday season, with November and December witnessing a significant surge in dairy product purchases.
Butter consumption increases by about 20 percent in those months, driven by greater demand for baking and cooking purposes. Cheese sales also see a notable increase, with a 10 percent to 15 percent increase reported in the fall, correlating with the popularity of cheese in comfort foods and holiday recipes, according to the U.S. Department of Agriculture. Those figures underscore the impact of seasonal trends and holiday traditions on dairy product sales.
There are two main drivers of that question.
As markets have been adjusting to post-pandemic times producers have seen inflation increase as measured by the Consumer Price Index, interest rates increase, personal consumption increase, credit card debt increase and personal savings rate decrease. The convergence of all those factors could be leading consumers to change their spending habits. They may opt for more meals at home or purchase cheaper types of cheese when shopping.
The prices in the dairy market are sensitive to changes in U.S. consumer spending, given that about 89 percent of milk on a milkfat basis and 74 percent of milk on a skim-solids basis is consumed domestically. Dairy product inflation has been a mixed bag when looking across the product category. Fluid milk is starting to look like a buy relative to other products when grocery shoppers are perusing the shelves, while butter has remained comparably expensive. As a product category, dairy’s consumer price index has fared well compared to All Food, Food Away From Home and Food at Home. It has remained less than all three of the other consumer price index metrics and has shown slower rates of increase.
Additional information on historical holiday sales have been compiled, which is based on key figures and expectations regarding holiday sales and associated economic indicators as reported by the National Retail Federation and other referenced sources. Visit nrf.com/media-center/press-releases/2023-holiday-reach-record-spending-levels for more detailed information.
Based on the numbers alone, dairy’s consumer price index metrics paint a relatively favorable picture for domestic sales, and the apparent increase in consumer spending could translate into an increase of dairy product sales. The question remains, if consumers do spend more dollars, does that mean they are purchasing greater quantities?
There is a concern that spending might not meet the expectations of the dairy industry, which often relies on heightened demand during this time to bolster prices. If spending falls short, it could lead to price pressure in the first quarter of 2024. That is especially pertinent considering the low milk prices experienced in 2023 and the historical trend of milk prices dipping in the first few months of each calendar year. Analyzing the holiday spending data will be important in setting expectations and preparing for potential market adjustments in the dairy sector as producers and consumers transition into 2024.
Consumer spending during this holiday season may also provide valuable insights into the state of the American household, particularly in understanding how the recent convergence of market changes is impacting them. Once all the holiday spending and consumption data are in the books, they will help set the tone and shape expectations for the first quarter of 2024.
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