Nonfat dry milk--no longer a frugal alternative

by Philip Brewer on 5 November 2007 23 comments

For more than thirty years, nonfat dry milk was a frugal staple. For things like baking and making yogurt, it was as good as fresh milk. Not many people wanted to drink the stuff, but a whole generation of frugal folks knew you could use it as an extender--make up a quart of nonfat dry milk and mix it with a gallon of fresh milk. (See Myscha's Powdered Milk Solutions for Dairy Lovers for other good ways to use nonfat dry milk.)

Since late summer last year, though, nonfat dry milk has been priced more like a gourmet specialty item than as the frugal alternative it used to be.

To put it in context, food prices overall are up 4.5%, dairy and "related products" are up 13.1%, but nonfat dry milk is up 104%! At that price, it's literally as cheap to use fresh milk as it is to use dry. (Data from the Bureau of Labor Statistics and Brian Gould, UW Madison.)

What happened? The market for nonfat dry milk is a global one. Just lately we've had one of those perfect storms of supply and demand changes that commodities markets see from time to time.

The major exporters of nonfat dry milk are the United States, the European Union, and Australia. Here are some of the recent shifts that have impacted the price of nonfat dry milk:

  • For the past five years, Australia has suffered a severe drought. It has cut Australian milk production by 20%; this year's production is down by a billion liters.
  • Over the past two years, the EU has been cutting farm subsidies in a way that encourages the production of cheese over nonfat dry milk, and has also ended all dairy export subsidies.
  • A July heat wave in California killed large amounts of dairy cattle--and California produces over half of the US's nonfat dry milk. Milk production in the US has only in the past couple of months climbed back to year-ago levels.
  • The weak US dollar has made US nonfat dry milk cheaper overseas, leading to higher US exports.
  • There's been strong US demand for milk proteins and strong world-wide demand for cheese. Meeting this demand has consumed milk that might otherwise have gone to making nonfat dry milk powder.

All that has added up to the recent spike in price for nonfat dry milk.

Having given all that attention to the market, I ought to also mention an important non-market force: government dairy subsidies. The change in the EU subsidy for nonfat dry milk is just one example. All these programs have complex effects on prices for dairy products. For example, in the US there's a support price of $0.80 per pound for nonfat dry milk. At current prices, that's not going to affect supplies, but in any market that has the kind of pervasive price support structures that the dairy market has, one has to be careful when analyzing sources of price shifts.

With US production returning to normal, I think we'll see nonfat dry milk prices begin to moderate, but as long as the US dollar remains weak and the drought in Australia continues, export demand will keep the price higher than its historical average.

(Thanks to Professor Bob Cropp at the University of Wisconsin-Madison for the lowdown on recent nonfat dry milk price shifts.)

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Myscha Theriault's picture

Hi Philip. As usual, a very thorough post. All I know is, I can still whip up the powdered stuff for a tad more than two dollars a gallon. I stopped even shopping for regular milk when the price went over three dollars a gallon a while back. Now, I definitely agree with you that the price of powdered milk has risen. Quite a bit, in fact. So it's not quite as much cheaper as it used to be. However, I'm still saving money on the per gallon cost when it comes to baking. However, there are other issues that I think make it a valuable frugal alternative as well, including the use of the product to make a variety of baking ingredients as well as a concentrated soup substitute. Not to mention the fact that I don't need to run back and forth to the store on a regular basis to restock my dairy supply (gas costs), and it's much lighter to transport. Now, I realize not everyone lives out in the boondocks like I do, but the back and forth running was a huge issue for me when I lived closer to civilization too. Guess we disagree a bit on this one, huh? I hope this makes for a lively discussion, either way. Have a great week.

Philip Brewer's picture

The last time I checked, here in Champaign, the cost per gallon was almost identical for fresh milk and milk made from nonfat dry milk powder. I should check again.

Having said that, I'm with you on the advantages: Powdered milk is compact, it keeps well, and there are many cool things you can do with it. It's just not the bargain it had been for the past 30 years. Hopefully, it will be again, once the supply and demand issues get sorted out.

Myscha Theriault's picture

I hope so too. It used to make much more of a difference than it currently does as far as gallon per gallon. But the other uses and benefits make up for it, at least where we are. And of course, as you pointed out, prices may differ from place to place a bit. Hey, I've been thinking of a rising cost of bread post with strategies for coping. Want to do a similar set of companion posts on the subject? You with your kick butt data analysis and me with the ideas for coping on the home front? I'm in if you are . . .

Guest's picture
Jill

In the manufacturing sector, we've been experiencing this for some time. Powdered whey protein prices started out around $2.50/pound at the beginning of the year, peaked around $7 back in August/September, and are now slowly coming down again but still holding at more than double where we began.

Considering that whey is a secondary product from making cheese and that the commodity market for milk went up about 1 month prior to when we started seeing the spikes, I'm surprised it wasn't noticed earlier. Please also keep in mind that the prices for milk are regulated by the government.

Another thing to add to your well written article - you failed to mention the growing demand in Mexico, Japan and China for domestic and EU milk which is diluting supply as well. I recall an article that Germany was complaining about the new increased demand to China, as it had the same effect there as we see here.

Also, when the spikes began to occur, another common refrain I heard from suppliers was that ethanol production was cutting into supply for feed - can't validate this or not, but it sounds nice.

Guest's picture
Kacie

Powdered milk has gone up. But, I buy it at Aldi, where I can get a box to make milk at about a dollar less per gallon than if I were to buy regular milk. It saves just a little bit of money, but every bit helps.

Guest's picture
sunny

another reason for the increase is that US dairy cattle growers were actually paid to kill off cattle about a year (maybe 2) in order to keep milk prices high.

Heard a report about it on NPR back then.

Hrmph.

Philip Brewer's picture

Thanks for all the good comments.

Myscha, glad to do companion pieces on the rising price of bread.

Jill, you're right that rising demand in Asia and elsewhere is a big factor in rising milk prices.

Good point, Kacie--I think part of the reason that I saw milk powder as so expensive was that I probably did my comparison when there was a sale on milk. If I'd done it when there was a sale on nonfat dry milk instead, I'd have gotten a very different answer. (On the other hand, it seems like milk is always on sale around here, whereas nonfat dry milk never is. Still, it's the price you actually pay that matters, not some theoretical "normal" price.)

Sunny, there are an incredible array of government programs to support milk prices, and cutting down on the supply is one way to do that. It's nothing new.

Thanks again, everyone.

Myscha Theriault's picture

Cool. I'll start moving forward with resource links and strategies for working around the increase. I think this'll be fun!

Guest's picture

Milk powder in Calgary runs around $25 for a large bag. I buy a bag every month. I've done it for years, like my mother before me. For me it's not the price factor so much as the convenience factor. I don't have to deal with the recycling aspect. I don't have to lug home containers of milk on my bike. Milk powder is just the way I do life. If you are on your own, small containers of milk do cost more and often, I found, went sour before I used them up!

Guest's picture
Keith

Powdered milk still cheaper here. At Sams club it's $13.66 a box (makes 5.5 gallons)--still cheaper than fresh milk by a dollar a gallon, or so. And making evap milk with it is less tha na can at the store.

Guest's picture
Samuel Knerl

This can also be seen as a tremendous blessing to those who produce milk locally (oranically-grassfed-or at least small family farms.) There was a day when travel was costly (time) and not practical, so these kinds of staples were commonly purchased locally.

Also, to add my two cents to the belief that ethanol production is raising the coast of corn: In the larger market there is additional coast if directly relating to the obvious increase in the cost of corn (currently around $3.40 bushel locally). However, the ethanol industry is actually very effecient in that while producing the alcohol it is making a more perfect by-product of usable feed for livestock. Cargill locally adds vitamins and minerals and sells it as Sweetbran by the semi truck-load to producers. Again, the smaller producer is likely utilizing the grass-fed option.

Guest's picture
Amy K.

Last year in October a gallon of skim at my local store was $2.29. A 10 quart box of instant milk was $5.99, which works out to $2.40/gallon. I think my local stores carry it more as a novelty (I only buy it because my bread machine recipes call for it), so the price is higher.

Right now a gallon of skim is up close to $3 (over or under depending on the store I go to). I don't know the current price of instant, but I'd bet it's still comparable to fresh.

I'm in a suburb of Boston, I'm not sure how that impacts prices.

Guest's picture
Guest

This is a quote from the book Nourishing Traditions by Sally Fallon:

"Commercial dehydration methods oxidize cholesterol in powdered milk, rendering it harmful to the arteries. High temperature drying also creates large quantities of cross-linked proteins and nitrate compounds, which are potent carcinogens, as well as free glutamic acid [MSG] which is toxic to the nervous system" (p. 35).

Real milk* is actually the more frugal choice. Especially after we count their effects on human health and the environment, nonfat dry milk and other processed foods don't look much like bargains. By seeking out local supplies of fresh or cultured grass-fed raw milk, people can protect the health of their own families and--by supporting small farmers--the health of their environments and communities. That's a real bargain.

*http://www.realmilk.com/why.html
www.westonaprice.org

Guest's picture
Karen

I don't use much regular powdered milk. I think the last time I bought it was over a year ago; however, I do use powdered buttermilk quite frequently for making salad dressing, pancakes, & bread. The price at my local grocery is up 25% in just over a couple of months! Ouch!

Philip Brewer's picture

Yeah, anything that can be sold globally is going to see its price go up as the dollar drops. Actual buttermilk, probably not so much--too expensive to ship since it's bulky and requires refrigeration. Powdered butermilk, though, can be easily shipped and stored (even if it doesn't store as well as nonfat dry milk).

Guest's picture
Guest

Guest- I was thinking the same thing about the health benefits of dry milk while I was reading this these posts. Thanks for adding that from Nourishing Traditions. We are not being very frugal if we end up having to pay thousands and thousands in medical costs in 20 years. Having money is one thing...having your health is another.

Guest's picture
Guest

just learned this about powder milk, previously commented on above

http://en.wikipedia.org/wiki/Powdered_milk

Oxysterols

Commercial milk powders are reported to contain, in general, very low levels of oxysterols (OS)[9]. However, compared to fresh milk (trace levels), powdered milk is higher in oxysterols (oxidized cholesterol), up to 30μg/g, yet significantly lower than powdered eggs (200μg/g)[10]. The OS free radicals have been suspected of being initiators of atherosclerotic plaques[11

Guest's picture
Guest

Not quite two years later, and powdered milk is still considerably more expensive than fresh milk. I was stunned to realize this when I went shopping to donate items to a local food pantry.

Fresh milk: $1.79 per gallon.

Powdered milk: $4.99 for a box that, reconstituted, will make 2 gallons of milk, or $2.50 per gallon.

In other words, the powdered milk is about 50% more expensive than the fresh milk!

Funny ol' world, innit?

Guest's picture
Guest

I checked yesterday January 2010 and found that dry and wet milk cost per gallon was almost identical in Southern Missouri.

Guest's picture
Guest

Hi All, I'm in San Jose, CA and I bought a 3-quart box of powdered milk for $3.39 (without tax), and I also bought a gallon of fresh, whole milk--for $2.25!!  Doing the math, the powdered milk is $1.13 per quart, and the fresh is $0.57 cents per quart!!!  I couldn't believe my eyes.  I'd never used powdered milk before and wanted to try it out as an emergency thing, also under the impression thats it's cheaper.  Well, it sure isn't, definitely around here.  This area is so expensive for everything though.  But still!  I'm so disappointed that I can't powdered milk as part of my frugal living plan now--I mixed up a little and it tasted just fine.

Guest's picture
Jackie

I was wondering why dry milk prices seem to be getting higher. Thanks for the informative article. Hopefully the prices will moderate out soon. I enjoy using powdered milk for making homemade mixes like dry cream soups and hot chocolate but our prices here put a box at almost $12 dollars for a box that makes 8 quarts. It's seems crazy high.

Guest's picture
Guest Jeanette

I lost my job because of the current economy, but have had to live very frugally even before that. Live in the middle of the San Joaquin Valley, CA & have been able to buy 4lb. box of instant dry milk for $11.95 for the last 6-7 years. I'm the only one of my siblings that could tolerate reconstited dry milk growing up, & as an adult found it more convenient than liquid milk...no spoil, mix only as you need it, perfect for adding dry to coffee so it doesn't dilute the temp., & up 'til now at least no more costly than the liquid. But, last month it jumped to $18.95 a 4lb. box. I live in the middle of dairy country, a couple years ago they were dumping milk down the drain because they said the cost of production was higher than the profit. What a country! Throw away the excess instead of giving it to the poor or drying it for long term sustainability. Because I'm now unemployed, I can't buy milk at all at current prices. I think people would have driven to the dairy to buy milk @ a reasonable price, maybe even bought more if they would have offered instead of dumping it. Just a thot!

Guest's picture
Wayne Justice

I remember when it was half the cost per gallon to make compared to buying whole milk. You could save a lot. I guess the manufactures put profits ahead of the poorer folks that really do need to pinch a dollar. Of course, when I was little, milk was in short supply and we were on ration cards from the government. We had no flour or cake mix to bake a cake for my younger brother's birthday. He was two when he got his first cake. There were ways to save then, but not anymore. If there is a hole in the fence, you bet the profiteers will close it.