Man working in dairy factory

Transforming dairy by-products into valuable young animal feed

17th December 2018

This case study highlights the potential to add value to dairy by-products from the production of butter oil, ghee and clarified butter, transforming them into products for the Young Animal Feed market.

Key Facts
Dairy derived proteins and fats are highly desirable in milk replacers
The global milk replacers market will reach USD 3.48 billion by the end of 2021
Restrictions in antimicrobial growth promoters in animal feed and the rise in scientific methods rearing are driving demand for alternative feedstock for animal feed


This case study highlights the potential to add value to dairy by-products from the production of butter oil, ghee and clarified butter, transforming them into products for the Young Animal Feed market. The case study also details the necessary specifications around format, quantity and certification.

Typically, such by-products are disposed of or, at best, used in general animal feed or as a feedstock for anaerobic digestion. However, the potential to access markets for young animal feed has been identified as a more innovative and valuable use for these materials. 

Adding value to – also known as valorising - some dairy by-products as a milk replacement for calves and piglets requires further handling of the by-products but can be more financially rewarding, due to a potentially higher market value. 


The production of butter oil, ghee and clarified butter involves the processing of a wide variety of dairy fats, including sweet or whey cream and butter. The fat from these feedstocks is separated from the aqueous phase to produce the products. Many processors treat the aqueous phase of the raw material as a by-product, surplus or waste. The implication is that this is either disposed of or, at best, used in general animal feed or as a feedstock for anaerobic digestion. 

Whilst the latter two options have the potential to deliver some financial return, there can be more lucrative opportunities to get even more value from this highly useful by-product.

The by-product

What is the by-product?

The by-product of this process is called “serum”. It is largely made up of water (up to 80%). The serum also contains lipids (mainly phospholipids, up to 5.5%), proteins (up to 5.5% - mainly whey proteins, but also casein), sugars (lactose, up to 10%) and a range of minerals. Significantly, the phospholipids content is around 10 times that present in bovine colostrum and 20 times that in raw sweet whey. This composition means that the serum could be an ideal milk replacer in young animal feed. 

Is there a market for it?

The global milk replacers market is estimated to expand at a compound annual growth rate of 7.6% with the market share of milk replacers projected to reach USD 3.48 billion by the end of 2021. Europe has the largest market in the world, with key regions including Germany, UK, France, Spain and Italy. Europe commands the largest market share because of the European Commission’s mandate on reducing input costs and improving animal health in the early growth stages.

Restrictions on the use of antimicrobial growth promoters in animal feed have intensified the search for solutions based on nutritional concepts. Another driver has been a rise in the usage of scientific methods for livestock rearing, resulting from the modernisation of the livestock industry.

Milk replacer use is established for calves in the UK and is growing for piglets with increasing litter sizes. There are several dominant players in the UK and various smaller players.

Specification of feeds

Milk replacers are highly tailored, formulated and balanced. They are regulated in terms of quality control with animal feed status accreditation required. A high level of technical knowledge is needed to produce effective formulations. Young livestock feeds are sold on reputation, with farmers relying on high quality, reliable brands, as the survival, health, and growth of their young animals is fundamental.

These products also require consistent product composition, with controlled, low-level variability.

Acidifiers are used on-farm to stabilise young animal feeds such as calf milk powder down to pH4.0 once mixed. Any lower than this and calves will avoid the milk. Microbial control is required, but if hygiene guidelines and FEMAS or UFAS standards are followed then this will ensure sufficient stability for use as feed.

Dairy derived proteins and fats are highly desirable in milk replacers, making the serum by-product an ideal type of feedstock. The serum would, however, require supplementation with minerals, vitamins and other components to ensure full suitability. 

Popular product format

Most products sold to farmers for milk replacers are in dry powder form, which has the highest share in the global milk replacers market. It is also emerging as the fastest growing product over the coming decades. Unlike liquid milk replacers, powdered milk replacers are cost-effective and attractive due to ease of use, handling and storage. 

Non-medicated replacers occupy the largest share of the global milk replacers market, but medicated is the fastest growing segment. The medicated market is highly regulated, however. 

Dairy derived, milk-based replacers are considered ideal, as the digestive system of young animals is adapted to function on milk. They are more palatable than other sources. The colour should be cream to light tan, the texture free of lumps and foreign material. The powder should have a bland to pleasant odour. (A burnt smell indicates heat damage.) 

Long-term storage of calf milk replacer powders is important. They must be packaged properly to keep out air and moisture.

They should be vacuum-sealed in a plastic bag then enclosed in a light-proof bag. Even with this protection, they are best used within six months of purchase. 

Good-quality powders include an antioxidant to reduce the deterioration of fat during storage.

Regulatory requirements

Limitations on the range of milk replacers available for formulators to develop have arisen due to the stringent regulatory controls imposed by the government on the use of antibiotics. In addition, feed cannot be manufactured without government sanction. 

Milk replacers will be subject to independent inspection and certification under the Agricultural Industries Confederation (AIC). This covers compounded feeds, blended feeds and processed food by-products.

Certification can be achieved through the accredited Universal Feed Assurance Scheme (UFAS) and /or the Feed Materials Assurance Scheme (FEMAS). The process takes between three and six months. 

The only legal requirement for labelling is that ingredients are listed in descending order of inclusion.

Next steps

Next steps for exploring opportunities

WRAP Cymru has held discussions with animal feed producers in Wales to discuss the potential for utilising the by-product serum from the production of butter oil, ghee and clarified butter. This has yielded interest in using the serum as a feedstock for young livestock if it can be supplied in the right format. In some cases, interest will be greater as a more general feed ingredient as well as for the young livestock market.

The leading UK feed manufacturers include Cargill, ForFarmers, Nestle Purina Petfood, and Volac. Initially, interested businesses should form a dialogue with such companies, which should lead to them conducting an analysis of the serum to understand its exact properties. Format specifications and logistics would also need to be discussed. 

Such markets may want to combine the serum with other value-add components. They will also require FEMAS and / or UFAS certification. Once they have this information it will then be possible to discuss commercial pricing information with these potential markets. 

Producers of this by-product should investigate the cost-benefit of installing powdering equipment onsite as well as the potential to process material from other sources to increase volume. WRAP Cymru can provide support to access details of suppliers of relevant equipment. 

Outsourcing drying to a third party facility is also an option. Recruiting an expert that has extensive technical and commercial knowledge in this market and products to guide development of this business will be essential.