The U.S. Dairy Exporter Blog: Market Analysis, Research & News

  • Global Demand Sparks Cheese Trade

    By Matt McKnight May 17, 2017

    Demand trends suggest solid cheese trade numbers could be in the cards for some time to come.

    cheese2-650805-edited.jpgCheese exports by the world’s top four global dairy suppliers (Australia, the European Union (EU), New Zealand and the United States) grew 5 percent to 1.6 million tons in 2016 compared to the previous year. That 5 percent represents an additional 76,185 tons of cheese, equivalent to about 710,000 tons of milk.

    It’s too early in the year to definitively state that last year’s growth will repeat in 2017, but demand trends suggest solid cheese trade numbers could be in the cards for some time to come.

    Developing markets are at the center of the opportunity. Several emerging markets are reaching the tipping point where cheese progresses from novel food to known, accepted and preferred food. Consumers, increasingly familiar with cheese applications and tastes, are seeking it out more frequently. Chefs and restaurants are obliging them by creating dishes that incorporate cheese while often aligning with more traditional regional tastes.

    Restaurants and retailers are shifting buying philosophies to ensure consistent supply, purchasing by contract rather than on spot markets. The ongoing expansion of Western foodservice chains with their cheese-laden menus continue to spread cheese-eating opportunities to wider swathes of the population.

    The progression is clear in long-term cheese trade data: Cheese exports from the top four dairy suppliers have increased by 50 percent since 2005.

    An additional 100,000 tons annually

    Through 2021, USDEC projects demand will drive cheese trade by half a million tons—on average, an additional 100,000 tons annually. That’s one of the reasons why USDEC believes lifting total U.S. dairy exports from the equivalent of about 15 percent of the U.S. milk supply to 20 percent—or what we are calling “The Next 5%”—is an achievable goal.

    Last year, buoyant demand fueled strong cheese sales to China/Hong Kong, Southeast Asia, Mexico and the Middle East. U.S. cheese suppliers struggled to take part in export growth for much of the year, as U.S. products commanded hefty premiums vs. international through the summer. But U.S. domestic demand also remained strong, offering a convenient export alternative, and U.S. suppliers closed 2016 with a 14 percent increase in cheese shipments in the fourth quarter.

    The competition is well aware of the opportunity. New Zealand is investing to increase cheese share of its product mix with an eye on Chinese market potential. Last year, the EU directed more of its milk supply to the cheese vat in the second half even as milk production contracted. In its latest short-term outlook report, the European Commission projected EU cheese production would increase 2 percent in 2017 and exports would rise 3 percent.

    Off to a good start in 2017

    This year is off to a good start for the United States and Europe. U.S. exports increased 12 percent in the first quarter (compared to January-March 2016), and EU cheese exports rose 9 percent.

    At the same time, U.S. and international cheddar prices continue to slide, down 8-15 percent from recent peaks, a positive development for global demand. U.S. cheddar now holds a pricing advantage over the EU and Oceania, a positive development for U.S. cheese suppliers looking to take advantage of growing global cheese appetites.

    A version of this article first ran in MILK Magazine

    Matt McKnight is chief operating officer at the U.S. Dairy Export Council.

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    The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post.  .

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