Guest Columns

Perspective:
Dairy Markets

America’s love affair with fat is just getting warmed up

Dave Kurzawski

Dave Kurzawski, a senior broker with FCStone, Chicago, contributes this column exclusively for Cheese Market News®.

The Federal Reserve building in Chicago has a great little cafeteria on the fifth floor. The employees work hard to make generally tasty food in line with the trends of today while the U.S. Fed subsidizes the whole deal. You can get a Black Forest ham and Swiss cheese sandwich and a bag of chips for the cost of a tall Starbuck’s coffee — in downtown Chicago. Finally something I can understand and support when it comes to The Fed.

While waiting in line for breakfast earlier this week, I noticed the three guys in front of me and the lady behind me all ordered some variety of egg white, veggie omelets. No yolk, no cheese and no taste. Not my style, but that’s not the point. The dairy industry has spent much time talking about the resurgence of consumer demand for fats over the past few years. But if my experience in the cafeteria breakfast line is any indication, there are still quite a few people who still reject fat.

We get it. Dairy market outlook discussions continually raise a myriad of questions around rising consumer demand for fat. Is it a fad? How do we meet this new demand? How much of an impact does this love of butter and cheese have on our markets? Who came up with putting butter in coffee and can I buy him/her a drink?

We’ve come a long way from the Time article published in June 2014 titled “Eat Butter.” The Credit Suisse Research Institute put out a report in 2015 that was bullish on demand for fat. In that report, they estimated that global demand for fats will rise 43 percent by 2030, fueled by increased shifts toward dairy, eggs and red meat. And just last week, Bloomberg published an article on cheese consumption growth in the United States stating, “The jump in total domestic cheese consumption over the past two years was the biggest since 2000, with Americans eating the most on average since the government began tracking the data in 1975.”

These are truly unchartered waters for dairy fat, resulting in paradigm shifts for dairy market prices. But we’re only beginning to scratch the surface.

Some doctors have employed a low-carb, high-fat diet to help combat a variety of neurological diseases including epilepsy, headaches, Alzheimer’s and Parkinson’s diseases, sleep disorders, autism and multiple sclerosis. And a growing number of doctors in the U.S. are beginning to adopt centuries’ old high-fat diets to promote weight-loss and combat the run-away diabetes problem.

According to the American Diabetes Association, 29 million Americans — 9.3 percent of the population — have diabetes. Another 25-30 percent or 85 million people have not yet graduated to diabetes, but instead have what is referred to as pre-diabetes — higher blood-sugar than normal but not yet diabetes. This is no small trend — this is an epidemic.

Admittedly, this group of doctors is rather small relative to the mainstream medical community, which favors pharmaceutical remedies. But their results are astounding. Several studies and clinical trials done at Duke University (to name one) show that Type 2 diabetes can essentially be reversed (blood sugars normalized and medicines reduced) by following a higher fat diet. And cheese is on the list.

I’m not advocating any sort of diet here, but could you imagine if that news became more widely discussed by the medical community? We’d see a surge in demand for cream, butter, cheese, etc. that would make the last two years of fat love pale in comparison. McDonald’s use of butter has been estimated at 25 million pounds per year, which is welcomed demand but still less than if all the people who have pre-diabetes in this country were put on high-fat diets. Do you think the dairy industry at large is thinking seriously about this shift today?

Probably not. We’re still wondering why butter prices are above $2.20 in January.

While industry talk is currently focused on 50-cent dry whey as other dairy markets take a little breather here after the surge in holiday demand, it’s sometimes worth taking a look at the broader landscape for answers to market questions. The current global trend in milk production is down and is not changing (yet). The global trend in U.S. dairy demand is up — and it seems that fat has the most potential room for growth in 2017. This is good news for America’s dairy farm families, but it presents a host of new challenges (and possible opportunities) for end-users.

The warm embrace of fat is not over — it’s just beginning — and it will continue to underpin our dairy markets this year. Plan accordingly. And go ahead — eat the yolk.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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