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State of Milk Prices: Wholesale Restaurant Food Cost Trends

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Justin GuinnAuthor

Milk prices can be hugely influential for restaurants.

Milk and other dairy products are listed on tons of recipes, so the knock-on impact of average price fluctuations can be immense.

Luckily, the cost of milk has been relatively solid compared to other restaurant ingredients.

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Toast is the point of sale system built for restaurants.

We're able to calculate the average monthly prices that coffee shops, cafes, and other restaurants pay for milk by using proprietary data from xtraCHEF by Toast, our invoice automation and recipe costing tool.

The average national price restaurants paid for a gallon of whole milk is $5.28 in July.

Interestingly, the average national price restaurants paid for a gallon of low-fat milk is $4.34 in July — making wholesale restaurant whole milk prices 22% more expensive than low-fat milk.

Here's a breakdown of historical data on wholesale restaurant milk prices over the last year:

Restaurant whole milk prices have consistently fallen since at least September, 2022. And low-fat milk prices have been dropping since peaking at $5.03 in December 2022.

Here's a breakdown of recent month-over-month fluctuation in wholesale restaurant milk prices for whole and low-fat:

Wholesale whole and low-fat milk prices are up on the month  — though both are relatively flat MoM for the past 6 months, with no fluctuations more than 4%.

Commodities experts weigh in on milk prices

We were able to speak with some experts in the food commodities space to understand their analysis on milk price trends and the impacts on restaurants. 

Question

Whole milk and low-fat milk prices have been dropping over the past year — what’s driving that and is it something restaurant operators can expect to continue?

Whole and low-fat milk had been relatively low over the course of the first half of the year. However, this is changing as record heat hindered milk production in key dairy regions. This caused stress on the cows, and milk production declined accordingly. This occurred as schools were opening back up spurring demand. Compounding the supply issue, dairy producers are currently selling cows as high feed, fuel and labor costs have reduced margins. Analysts project the national dairy herd will continue to decrease throughout 2023 and into 2024. This will result in fluid milk prices moving steadily higher over the course of the foreseeable future.

Tim Luginsland
Tim Luginsland
Wells Fargo Agri-Food Institute

American milk production and the price of milk

The state of California plays a significant role in American milk production, as it is the largest milk-producing state in the country.

California's milk industry is closely monitored by the USDA (United States Department of Agriculture), which regulates milk marketing and sets standards for milk quality. The USDA's involvement in the milk industry ensures that cafe, coffee shop, and restaurant operators can rely on a consistent supply of high-quality milk.

One important aspect of the milk market is the classification of milk into different classes based on their intended use. Class III milk, for example, refers to milk used for the production of hard cheeses, while Class IV milk is used for making butter and powdered dairy products. These classifications help determine milk prices and support milk marketing efforts.

When cafe, coffee shop, and restaurant operators purchase milk, it is most commonly in the form of fluid milk, typically sold in gallon jugs.

Understanding fluid milk pricing, which is often measured in hundredweight (cwt), is essential for operators to manage their costs effectively.

Factors such as feed prices, which can be impacted by various states like New York, Wisconsin, Idaho, Minnesota, Texas, and Michigan, play a crucial role in milk pricing since they influence the expenses associated with raising and maintaining milk cows.

Milk quality and the difference in whole fat, low fat, and others

When it comes to milk quality, the standards set by the USDA ensure that cafe, coffee shop, and restaurant operators can rely on milk that meets their customers' expectations.

The USDA works closely with dairy farms across various states, including California, New York, Wisconsin, Idaho, Minnesota, Texas, and Michigan, to maintain milk quality standards and enforce regulations regarding the health and proper care of milk cows.

Milk is often classified by its fat content, with whole milk having the highest percentage of fat.

However, low-fat and non-dairy alternatives have gained popularity in recent years.

Cafe, coffee shop, and restaurant operators should consider offering a range of milk options, including plant-based alternatives, to cater to the diverse preferences of their customers. This can include options like almond, oat, and coconut milk, all of which are commonly used in coffee beverages, including lattes and cappuccinos.

Dairy market and the impacts of non-dairy options

The dairy market has experienced shifts due to the rising demand for non-dairy alternatives.

While traditional dairy products remain dominant, cafe, coffee shop, and restaurant operators should be aware of the growing trend and consider offering non-dairy options in response to customer preferences.

The price of non-dairy alternatives can sometimes be higher than traditional dairy products, which can impact menu pricing. Additionally, the availability and cost of these alternatives may vary depending on the region.

Keeping tabs on the dairy market, including developments in milk marketing, is crucial for cafe, coffee shop, and restaurant operators.

This includes staying informed about the latest USDA regulations, monitoring the impact of non-dairy alternatives on customer preferences, and understanding the potential implications of feed prices on milk production costs. By staying informed, operators can make informed decisions about their menu offerings, pricing strategies, and sourcing of milk and milk alternatives.

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See insights from real restaurant operators which can help you benchmark your current and planned restaurant technology stack against your peers as we head into 2024 and beyond.

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Start tracking milk prices today

Milk is an essential ingredient in the kitchen and especially on the coffee bar. Incorporating milk prices — and all ingredient costs — into financial reports requires restaurant operators to have a strong back-of-house foundation built on invoice automation.

Invoices are the single source of truth for restaurant costs — pinpointing prices and fluctuations for individual ingredients as well as paper goods, non-alcoholic beverages, and more. 

With accurate and up-to-date ingredient prices from invoices, operators can start calculating plate costs. Plate costing is a detailed exercise that zooms into the recipes and/or individual ingredients that make up a dish — requiring detailed recipe costs and portion costs for ingredients.

Costing exercises can help show how each component is contributing to the overall profitability of a dish or drink. And recipe costing software can help make it easier to calculate and achieve an ideal balance between portions and profits.


Methodology

Toast analyzed monthly invoice items for milk from restaurants using xtraCHEF by Toast. Items are weighted by the frequency of orders, not quantity. A standard unit of measure is determined so that an average price can be calculated across all invoice inclusions of the ingredient.

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