Dairy Economist Cites 5 Positives at Half-Year Mark

U.S. dairy exports got off to a record start this year but that was BTT (Before The Tariffs).  Peter Vitaliano reviews the half-year that was.

With half the year gone, dairy economist Peter Vitaliano of the National Milk Producers Federation has created an internal review so full of numbers it might give a non-economist a headache.

Highlighter in hand, I read Vitaliano's report, took two aspirin, and sat down with him to ask a few clarifying questions.

"If you were a meteorologist, not an economist, you might say the year was mostly sunny until June," said Vitaliano, who, in three decades of experience as a dairy economist, has seen ups and downs in global dairy markets.

"Then Mexico and China announced they would impose new, retaliatory tariffs on our dairy exports. That created big clouds of uncertainty, making the second half of 2018 difficult to forecast."

Looking back on the first part of this year, what were some global economic highlights for U.S. dairy exporters?

Vitaliano cites these five:

1.  U.S. exports hit a new volume record: U.S. dairy exports surged the first part of 2018, hitting an all-time volume high in April, breaking the previous month’s record.  On a total milk solids basis, exports were equivalent to 18.8 percent of U.S. milk production. Volume was up 32 percent from April 2017.
   
   
2. Progress made toward "The Next 5%": As a percentage of U.S. production of milk solids, U.S. dairy exports increased from 14.0 percent in 2015 to 14.3 percent in 2016 and further to 14.6 percent in 2017. In the first four months of 2018, this share expanded to 16.8 percent. That is tangible progress toward "The Next 5%," an industry goal to build U.S. dairy export volume from about 15 percent of U.S. milk solids to 20 percent.
   
   
3. Milk prices moved upward: By the early months of 2018, world prices for the major internationally traded dairy products had improved significantly from their low points of 2015-2016. … However, the new tariffs have the potential to erode some of that price improvement during the rest of 2018.
   
   
4. Bakeries loved butterfat. The particularly strong price recovery for butter and anhydrous milkfat is due to robust demand for butterfat led by usage in the bakery sector in dairy-importing countries. 
   
   
5. Economic growth accelerated: The International Monetary Fund projects world economic growth will reach 3.9 percent in both 2018 and 2019, up slightly from 3.8 percent in 2017, which was the fastest worldwide growth since 2011. That, in turn, will support dairy consumption and trade.

These developments were mostly BTT (Before the Tariffs.)

In June, the United States announced new tariffs on products from China, Mexico, Canada and the European Union. In turn, Mexico put tariffs of up to 25 percent on U.S. cheeses.

In another retaliatory move, China announced tariffs against a list of products, including a 25 percent tariff on most U.S. dairy products.

Meanwhile, Canada has imposed retaliatory tariffs of 10 percent on U.S. yogurt. 

For a recap of what happened and what the U.S. Dairy Export Council is doing to mitigate damage, read: Dairy Farmers Face Uncertain Future With New Tariffs. it includes a podcast and video featuring USDEC President and CEO Tom Vilsack.

Mark O'Keefe is vice president of editorial services at the U.S. Dairy Export Council.  

Subscribe to the U.S. Dairy Exporter Blog    

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.