# Milk & dairy: Characteristics

Why farmers are paid for fat and protein, not litres

Source page: https://www.materialinsights.org/commodities/dairy/characteristics/

What this tab covers The supply and physical characteristics of the commodity. Supply: current production, inventories and stocks, capacity utilisation, geographic and producer concentration, how fast supply responds to price, the project pipeline and capital spending, and logistics and export flows. Material: the physical and chemical properties that set its grade, price and end uses (for example purity and conductivity for metals, API gravity, sulfur and energy content for fuels, moisture, protein and fibre quality for crops).

#### Supply volume characteristics

| Characteristic | Figure | What it means | Source |
|---|---|---|---|
| **Current production volume** | 797 Mt of cow milk (2024); 984.8 Mt of milk from all species; 697.8 Mt fluid milk in USDA-covered countries (2026f) | India produces 247.8 Mt from all species (25.2% of world), 43% of it buffalo milk. Cow milk output rose from 478.5 Mt in 1990. | FAOSTAT 2024; USDA PSD, Oct 2026 |
| **Inventory and stock levels** | SMP stocks 469,000 t (about 10% of a year's output) and butter 235,000 t (about 2%) at end-2026 (forecast) | Fluid milk cannot be stored, so stocks are held as powders, butter and cheese. India's SMP stocks are forecast at 34,000 t, held by dairies drying flush-season milk. The EU can buy butter and SMP into public intervention at set prices. | USDA PSD, Oct 2026 |
| **Capacity utilisation** | not published | Processors do not publish utilisation. Seasonal pasture systems (New Zealand, Ireland) size drying plants for the spring flush, so plants run well below capacity for part of the year. Amul handles about 31 million litres a day from 3.6 million farmers. | content_v2 dairy (Amul FY2026) |
| **Geographic and producer concentration** | India 16.9% of cow milk, top-3 (India, US, China) 34.9%, HHI 606; milk powder exports: New Zealand 29.3% of value | Milk production is unconcentrated, but exports are not: New Zealand, the EU and the US dominate powder, butter and cheese trade. Lactalis ($40.2 billion), Nestle ($23.7 billion), DFA ($23.1 billion) and Arla ($23.0 billion) lead dairy turnover. | FAOSTAT 2024; UN Comtrade 2024; RaboResearch Global Dairy Top 20, Sep 2026 |
| **Supply elasticity** | low to medium: months via feed and culling, 2-3 years via herd size | Farmers can raise yields within months with more feed and fewer culls. Herd growth needs heifers, which first calve at about two years old. Pasture systems respond to rain within a season. | content_v2 dairy; FAO 2023 |
| **Project pipeline and CapEx** | growth led by India and new US cheese plants; no aggregate CapEx figure | New US cheese plants raised output in 2024-26 and pushed cheese and butter prices down. Arla and DMK are merging into a co-operative with a 19.4 bn kg milk pool. FAO projects animal protein demand to rise 21% from 2020 to 2050. | USDA WASDE, Oct 2026; RaboResearch via Dairy Herd, Sep 2026; FAO 2023 |
| **Logistics and export flows** | a small share of milk is traded, mostly as products: powder $20.2 bn, butter $12.7 bn, cheese $43.8 bn of exports (2024) | Powders and butter move in containers from New Zealand (Tauranga), Rotterdam and US West Coast ports to China, Southeast Asia, Algeria, Mexico and the Gulf. Fluid milk is traded only across borders by road. Because so little milk is traded, small swings in New Zealand output or Chinese imports move world prices. | UN Comtrade 2024 |

#### Material characteristics Agricultural / soft commodity

Milk is priced on its solids, fat and protein, not its volume. India pays farmers on fat and solids-not-fat (SNF); Western processors pay on fat and protein. Hygiene (bacteria and somatic cell counts) decides if milk can be processed. Traded products have Codex and buyer specifications for fat, protein, moisture and solubility.

| Property | Value / specification | Why it matters | Source |
|---|---|---|---|
| **Fat content** | cow milk about 3.5-4.2%; buffalo milk about 6-8% | Fat sets payment and butter yield; buffalo milk's high fat suits ghee and paneer | FSSAI standards; dairy science (indicative) |
| **Solids-not-fat / protein** | FSSAI minimum SNF 8.5% for cow milk and 9.0% for buffalo milk; cow milk protein about 3.2-3.4% | Protein drives cheese and powder yield and payment | FSSAI Food Safety and Standards Regulations 2011 (indicative) |
| **Hygiene** | EU raw cow milk limits: plate count at most 100,000 cfu/ml, somatic cells at most 400,000 per ml | Milk above limits cannot be sold for processing in the EU | EU Regulation 853/2004 |
| **Skim milk powder specification** | milkfat at most 1.5%, moisture at most 5%, milk protein at least 34% of SNF | Defines what can be traded on GDT and delivered against futures | Codex Standard 207-1999 |
| **Butter specification** | milkfat at least 80%, water at most 16% | Sets the traded butter grade; anhydrous milk fat is at least 99.8% fat | Codex Standard 279-1971 |
| **Whole milk powder** | milkfat 26-42%; GDT trades regular 26% fat WMP | WMP is the main traded benchmark for New Zealand milk prices | Codex Standard 207-1999; Global Dairy Trade |

## Other sections

- [Summary](https://www.materialinsights.org/commodities/dairy/index.md)
- [Overview](https://www.materialinsights.org/commodities/dairy/overview/index.md)
- [Correlation](https://www.materialinsights.org/commodities/dairy/correlation/index.md)
- [Extraction](https://www.materialinsights.org/commodities/dairy/extraction/index.md)
- [Production](https://www.materialinsights.org/commodities/dairy/production/index.md)
- [Stocks](https://www.materialinsights.org/commodities/dairy/stocks/index.md)
- [Cycles](https://www.materialinsights.org/commodities/dairy/cycles/index.md)
- [Trading](https://www.materialinsights.org/commodities/dairy/trading/index.md)
- [Movement](https://www.materialinsights.org/commodities/dairy/movement/index.md)
- [Criticality](https://www.materialinsights.org/commodities/dairy/criticality/index.md)
- [Emissions](https://www.materialinsights.org/commodities/dairy/emissions/index.md)
- [Relationships](https://www.materialinsights.org/commodities/dairy/links/index.md)