The COVID-19 pandemic has proven to be a test of the farm and dairy industry's resiliency.

The early months of 2020 saw dairy farmers dumping millions of gallons of milk as supply chain slowdowns made it more difficult to get products to market. Labor shortages and rising inflation have added to the challenges but despite these hurdles, milk production increased by 1.9 percent in 2020 and 1.6 percent in 2021, according to the USDA.

It's evident that consumers still want dairy—but their preferences are changing. Several key trends are influencing the way dairy businesses develop and market their products.

Consumer Tastes Move Beyond Milk

While milk is still a staple item for many households, consumers are increasingly purchasing dairy products they can eat, rather than drink. In the decade leading up to the COVID-19 pandemic, per capita consumption of cheese increased by 19 percent while per capita consumption for butter and yogurt increased by 24 percent and 7 percent, respectively.

Brian Nagele, a food industry consultant, says the proposed health benefits of A2 milk products like mozzarella cheese and Jersey yogurt are contributing to the shift in part. A2 milk has a different protein profile and its health impacts are frequently a subject of scientific studies.

"A2 is generally easier on the gut for consumers with lactose intolerance and that's creating an uptick in the market," Nagele says.

Changing preferences for dairy products underscores the importance of adaptability among milk producers and processors. That could present a dilemma for dairy farmers whose profits hinge largely on fluid milk.

Diversifying product lines to include in-demand options like cheese, butter, yogurt and sour cream, as well as their lactose-friendly variations, can enable farm and dairy operations to remain relevant—and profitable—in a changing market landscape. For example, farmers may change the feed supply to produce milk with higher protein values, which can then be converted to cheese, yogurt and other products.

There may be a cost trade-off associated with switching feeds. But expanding product lines may be critical if demand for more than milk continues to rise.

Plant-Based Dairy Gains Ground

The plant-based food industry has surged in recent years as more Americans seek out "next-generation" substitutes for traditional products. As of 2021, the retail plant-based foods market, which spans plant-based meats, seafood, dairy and eggs, was estimated to be worth $7 billion.

Plant-based milk products, such as oat milk, soy milk and almond milk, accounted for $2.5 billion of that figure. Across the board, the industry saw sales increase throughout 2020, with consumers spending millions on plant-based ice cream, yogurt, coffee creamer, butter and cheese.

Again, changing dietary preferences are a contributing factor. But, says Nagele, not everyone will opt for fortified milk products exclusively. In fact, the majority—90 percent—of consumers who choose plant-based and vegan dairy options also purchase regular dairy products, including cow's milk.

However, there's still an opportunity for farm and dairy businesses to meet a growing need. A number of dairy companies are already moving in that direction by establishing partnerships with vegan food producers.

For example, in 2019 Minnesota-based Live Real Farms launched a new product line of half-and-half products featuring a blend of fresh dairy with oat or almond milk. Plant-based cheese and butter company Miyoko's Creamery is going a step further with its Dairy Farm Transition program. This initiative is designed to help dairy farmers replace their cows with regenerative organic specialty crops, such as herbs, grains and seeds, that Miyoko will then purchase for production.

The ever-widening spotlight on plant-based options also touches on another trend that's driving consumer decision-making: a desire for sustainability.

Consumers Want Planet-Friendly Products

It's long been established that farming is a significant contributor to global emissions. In 2020, the agriculture economic sector accounted for 11 percent of total U.S. greenhouse gas emissions. According to the University of California Davis, cattle are the largest agricultural source of greenhouse gas emissions globally and, with other ruminants, make up 4 percent of all such gases produced in the US. Forty-three percent of methane emissions related to dairy farming come from cow manure.

With climate change concerns regularly making headlines, Americans are becoming increasingly conscious about which companies they support. According to a McKinsey report, 55 percent of U.S. consumers said they would consider buying more dairy if producers made a conscious effort to promote sustainability as part of their mission.

This presents a challenge as well as an opportunity for dairy farmers to introduce new sustainability practices. That includes adopting more environmentally-friendly approaches to curtail methane production while also preserving water and other natural resources. For example, the Environmental Protection Agency (EPA) suggests measures such as:

• Nutrient management to reduce water pollution from fertilizer runoff
• Managing livestock access to streams to prevent excess nutrients from entering the water supply
• Employing conservation draining practices

Nagele says consumer views on sustainability encourage practices that promote better animal care overall, which can result in a healthier end product. That includes ensuring animals are grass-fed and receive adequate outdoor exposure to avoid having their milk products undergo intensive nutrient fortification.

New technology is also offering potential sustainability solutions for dairy farmers. One innovation involves the use of vapor recompression and distillation  to turn cow manure into concentrated nitrogen, phosphorous and potassium fertilizer. Water runoff created from this process can also be used to water crops that are grown to feed dairy cows.

It's this kind of outside-the-box thinking that may help farm and dairy operations continue to thrive over the long term.

Preparation Is Key

Change can be daunting but it's important to view it through an optimistic lens. As Nagele points out, "there will always be consumers who support cow's milk."

Of course, as the industry continues to evolve, it's important to protect your business. Dairy farm insurance can cover you in a variety of situations and insulate your business against financial losses. Reach out to your Westfield agent to discuss what type of dairy farm insurance is best for your needs.