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All liquids fall into one of three categories having to do with what is called pH. That is to say that liquids are either neutral, like water, acid like citrus fruits and vinegar, or alkali (sometimes called "basic") like ammonia, lye (which is in soaps), or soda.
SARAH SAYS: Milk and water, fruit juices, and potato water contribute in different ways to the quality of the recipe.
Liquid in a recipe may be milk, water, fruit juices, potato water and even eggs. The amount of liquid determines whether a "dough" or "batter" is produced. Liquids also serve to hydrate the flour, for gluten formation, and to hydrate the starch, for gelatinizing, which results in formation of the basic structure of a baked product. Liquids also dissolve the sugar and salt, making possible the leavening action of baking powder, soda and acid, or growth of yeast. Liquids contribute moistness to the texture and improve the mouthfeel of baked products. When water vaporizes in a batter or dough, the steam expands the air cells, increasing the final volume of the product.
Milk contains fats and proteins in a solution (water) and contributes valuable nutrients to baked goods. It helps browning to occur and adds flavor.
Juice may be used as the liquid in a recipe, but do not substitute milk with juice and vice versa. Because fruit juices are acidic, they are probably best used in baked products that have baking soda as an ingredient.