Assessing economic and demographic factors that influence United States dairy demand1

Low-fat dairy products are key components of a healthy diet for all Americans. As the USDA increases its focus on nutrition and healthy eating, it is important to understand the underlying demands for dairy products, both the healthy and the less healthy ones. The consumption of fluid milk products has decreased over the last decade, whereas milk used for manufactured dairy products such as cheese, ice cream, yogurt, and butter, and for use as an ingredient in other food products, has risen. The objective of this study is to determine the effects of changes in demographic variables, retail prices, and total dairy expenditure on at-home consumption of dairy products, using purchase data from Nielsen 2007 Homescan (ACNielsen, New York, NY) data. To derive the demand elasticities for 16 products, a censored Almost Ideal Demand System model is used. Results reveal that demographic variables do have effects on the purchase of the 16 products, and own-price elasticities are 1 or greater for all 16 products for both uncompensated and compensated elasticities except 4: ice cream, refrigerated yogurt, processed cheese, and margarine. A substitution relationship exists among all fluid milk categories, natural and processed cheese, low-fat ice cream, and refrigerated yogurt, butter, and margarine.