Rebounds in whey and SMP joined cheese and proteins to drive U.S. dairy exports higher.

U.S. dairy exports posted their strongest month of growth in a year and a half In July, climbing 9.6% year-over-year in milk solids equivalent terms (MSE).

In contrast to prior months, where cheese and high protein whey products were the only products posting significant growth, gains were made across multiple categories in July. In particular, low-protein whey has become the star of the show after lagging throughout 2023, gaining 27% in July (+8,864 MT) and marking the fourth consecutive month of growth. Not to be outdone, despite declines in production, NFDM/SMP surprised by increasing 11% (+7,075 MT) for the month. Cheese and high protein whey also maintained momentum, growing 10% (+3,516 MT) and 23% (+1,310 MT), respectively.

July’s strong export growth is a welcome signal after an up-and-down first half of the year, but weaker comparisons certainly played a part in explaining why July’s figures were particularly robust. July 2023 was the weakest month of the year last year with whey figures for the month being the lowest since October 2019, when U.S. exports to China were still subject to retaliatory tariffs and the country was still suffering from the worst of the African Swine Fever outbreak. As such, the 10% gain in July appears slightly less impressive upon closer examination.

Yet even with that caveat, July can still be described as a positive month given the breadth of other bullish signals, namely: low-protein whey trade has grown four straight months to China and 10 out of the last 11 months Southeast Asia; cheese sales to Mexico continued to soar even with a weaker peso (+45%, +5,451 MT); and WPC80+ sales continue to expand to both established and emerging protein markets.

Overall, U.S. dairy exports remain remarkably stable despite global headwinds with gains continuing to be made in multiple products, especially in cheese and whey proteins.

For more detailed information, as well as interactive charts and data, visit USDEC's Data Hub.

Southeast Asia Outlook

U.S. dairy exports to Southeast Asia gained 25% in July (+8,631 MT MSE), the largest single month gain in over two years, which also came on the heels of a similarly impressive June (+14%, +4,819 MT MSE).

The U.S.’ gains in July were spread across multiple products, but ingredients were the clear winner. U.S. NFDM/SMP shipments to the region gained 23% (+4,891 MT) thanks almost entirely to a 6,003 MT growth in shipments to the Philippines (+83%). U.S. low-protein whey improved by 27% (+1,978 MT), continuing a nearly year-long stretch of growth. Just as in NFDM/SMP, the Philippines accounted for the majority of the growth to the region by more than tripling its purchases compared to the same month the year prior (+212%, +1,803 MT).

After three straight years of declining exports, two months of growth do not yet constitute a new trend for U.S. dairy exports to Southeast Asia, especially given limited milk powder production in the United States. However, there are positive factors that are working in the U.S.’ favor and could signal future growth ahead, even if challenges remain over the next several months.

Fundamentally, demand in the region is improving thanks to inflation cooling rapidly throughout the region, an improved economic outlook boosting spending power, and lower palm oil prices increasing demand for fat-filled milk powder and other blends utilizing whey or skim milk powder. Global trade to the region – from all exporters, not just the U.S. – improved by 9% in the first half of 2024.

Unfortunately, other suppliers have captured most of the growth in demand. New Zealand’s exports to the region climbed 6% from January to June (+13,323 MT MSE), the EU27 gained 9% (+23,472 MT MSE), and Australia’s shipments jumped an astonishing 77% (+42,122 MT MSE). Effectively, with China’s purchasing remaining well below prior years, Oceania and European exporters are focusing on regions where demand is growing and they hold critical advantages, especially on tariffs in the case of New Zealand and Australia. As such, with growing demand in Southeast Asia and a tight milk supply situation in Europe, the U.S. has the potential to grow exports to the region, but competition will remain fierce for market share so long as China’s demand remains subdued.

China Outlook

Speaking of China, U.S. low-protein whey exports to China improved for the fourth straight month in July, improving 36% (+4,905 MT). Monthly volumes over that span have been roughly similar to each other with little to indicate there’s been an acceleration in demand even as the pork market in China has firmed. Even still, the whey complex in China appears the strongest dairy category in the market.

Through the first six months of the year, global shipments to China have fallen by 9% (-97,817 MT MSE) with low-protein whey accounting for a relatively small share of the decline (-4%, -8,441 MT). Furthermore, global low-protein shipments to the country improved in the second quarter, and if the U.S. data reflects broader trends, July will be similarly positive. The rise in piglet prices and expansion of investment in pig breeding facilities should boost whey demand as China looks to rebuild its pork supply. Demand is still relatively soft for pork given the economic dynamics in the country, but with higher prices and tight pork supplies, the incentive to expand pork production (and thus whey demand) should boost U.S. whey – and therefore dairy – exports to China.

However, even as whey turns positive, China’s demand outlook for the rest of the dairy portfolio looks questionable. China’s economic struggles have continued in 2024, limiting demand growth for fluid products, foodservice and discretionary spending in general. Additionally, China’s emphasis on growing domestic production despite sluggish consumer demand, raw milk prices continuing to fall (suggesting an oversaturated market) and profitability struggles on farm are all contributing to the rapid decrease in imports, particularly of milk powders. While China’s recent announcement of import tariffs against the select dairy products from Europe could open opportunities to alternative suppliers, including the U.S., given demand dynamics in the country and ample local milk supplies, growth in U.S. exports to the country outside the whey complex appear doubtful in the near future.

Learn more about global dairy markets

• Cheese, whey continue to buoy U.S. dairy exports in June

• U.S. dairy exports slip 5% in May

• April dairy exports rise 3%

• March exports slip 7% on mixed results

   

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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.