Another big month for cheese, improving whey volumes and a gain in butterfat overcome milk powder and lactose declines.

Year-over-year (YOY) U.S. dairy exports rose 3% in April in milk solids equivalent terms (MSE). The increase evened up the monthly scorecard year-to-date, with January and March declining and February and April rising. It also cut the year-to-date U.S. MSE export shortfall to 1.6%. The challenge now will be extending the winning streak beyond one month.

There were some encouraging signs in the numbers. U.S. cheese exports remained on a roll, rising 27% (+9,742 MT) to 46,270 MT in April. Volume was second only to March 2024 in most cheese ever shipped in a single month. Exports to Mexico soared 53% (+5,973 MT) to an all-time record of 17,249 MT. But growth was much more diversified, with YOY volume up across geographies: Southeast Asia +102%, South Korea +69%, the Middle East/North Africa (MENA) +40%, the Caribbean +24%, and Japan +11%.

U.S. high-protein whey sales (WPC80+) also continued their torrid growth pace, increasing 26% (+1,459 MT). YOY exports to China nearly tripled to 2,181 MT while volume to Brazil surged 66% (+338 MT). Low-protein whey failed to match the lofty gains of its higher-value cousin but posted its biggest increase of the year: +8%, +3,345 MT. Mexico (+79%, +2,120 MT) led the gain, but China, notably, posted its first increase of the year (+5%, +916 MT) as its pork sector began showing modest signs of stabilization.

U.S. butterfat (butter and anhydrous milkfat (AMF)) shipments also rose, marking their first monthly YOY increase since November 2022. Butter exports jumped 23% (+481 MT) and AMF volume more than doubled (+399 MT). Even though U.S. butter prices have been ticking upward since January, they have remained below EU and New Zealand prices for most of the year—a significant change from the back half of 2023. MENA led the total butterfat increase in April (+323 MT) with support from Canada (+199 MT).

YOY nonfat dry milk/skim milk powder (NFDM/SMP) fell 2%, as declines to China (-1,794 MT) and Vietnam (-3,009 MT) erased strong sales to South America (+2,105 MT) and the Caribbean (+1,116 MT). While U.S. shipments to Mexico fell 1% (-599 MT), it was the best U.S. performance of the year at 33,127 MT and the second highest April volume ever.

Looking to May, U.S. export tailwinds and headwinds continue to clash.

In terms of tailwinds, despite stubborn inflation, the global economic outlook continues to slowly improve. In addition, severe drought is plaguing some key milk producing states in Mexico (including Chihuahua and Durango), potentially necessitating the need to boost imports to meet demand. And New Zealand reportedly cleared most of its inventory in the first quarter, further constricting an already-tight global dairy supply.

On the other hand, rising U.S. cheese prices since late March have erased the U.S. price advantage with New Zealand and tightened the price gap with the EU. The presidential election in Mexico on June 2 dented the value of the Mexican peso compared to the U.S. dollar, making U.S. imports more expensive. While the peso has gained back some of that loss, it was still at its lowest point since late 2023 at press time. China’s appetite for dairy imports remains in flux. (For more on China and Mexico, see the deep dives into both regions below.) And the geopolitical outlook is as uncertain as ever, with no end in sight to the fighting in Ukraine or Gaza.

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

Mexican demand still flying high

Mexican dairy demand continues to provide a critical boost to U.S. dairy exports with shipments reaching 55,478 MT MSE (+13%, +6,248 MT MSE) in April. The increase was the largest YOY gain since last June and marked an important recovery compared to March when exports slipped 24% on the back of slower milk powder exports.

April’s export figures to Mexico were encouraging across a broad swath of products. As has been the case in recent months, cheese continues to stream across the border at a rapid pace. U.S. cheese exports to Mexico notched a fresh record in April as volumes hit 17,249 MT (+53%, +5,973 MT). “Other cheese” (predominantly cheddar and gouda) saw the largest gains (+73%, +3,580 MT), though shredded cheeses also rose (+43%, +2,191 MT).

But additional product categories also increased. At 169 MT, butter exports for April more than doubled (+109%, +88 MT) compared to the same month last year. Low-protein whey shipments surged (+79%, +2,120 MT), with gains seen across dry whey, permeate, and low-protein WPC. Even nonfat dry milk showed some improvement. While NFDM volumes were indeed down relative to prior year for the eighth month in a row, the 2% loss (-599 MT) was the smallest drop seen since the declines began late last year.

A thriving economy and strong currency in Mexico and competitive prices in the U.S. have underpinned Mexican dairy demand in recent months. But last week’s election caused markets to wobble. In particular, the peso lost 4% of its value in the first day of trading following the election. The peso is one of the few currencies in the world that has gained value against the dollar compared to pre-pandemic. A weakening peso is liable to make U.S. dairy products more expensive to consumers. However, the Mexican peso is still in significantly better shape than most importing markets’ currencies, and the economy remains in a strong position.

Higher U.S. prices are also likely to shape exports looking forward. Most of the cheese that moved in April was booked several months earlier when prices were significantly lower. As cheese prices have climbed, this could lower some of the  enthusiasm for U.S. product and could shift marginal Mexican demand back toward NFDM, some of which may be used to fortify Mexican cheese vats.

Chinese dairy demand remains grounded

Even as the U.S. posted gains globally, China’s demand for U.S. dairy products continued their slump in April. During the month, U.S. suppliers sent 31,357 MT MSE (-12%, -4,091 MT MSE) of dairy products to China. While this is the thirteenth month in a row that U.S. exports to China have trailed prior year, April’s exports on an average daily basis were the largest so far in 2024.

Several products had an outsized impact on the decline in exports to China. YOY lactose volume collapsed to 8,051 MT (-33%, -4,031 MT) while shipments of NFDM/SMP also tumbled by 68% (-1,814 MT). Fluid milk exports declined by 36% versus April 2023, while cheese exports showed a more modest dip (-23%, -338 MT).

China’s economic activity outperformed expectations during the first quarter of the year and the country seems to have staved off deflation concerns. Nevertheless, China remains under pressure. The real estate sector has failed to recover, even amidst policy changes designed to encourage home buying. This has kept consumer confidence at low levels, which has negative consequences for dairy demand.

Yet, despite the overall negative tone of exports to China, there were still some bright spots. In particular, whey was on the rise as high-protein WPC80+ exports shot up by 182% (+1,407 MT). In addition, low-protein whey exports to China rose by 5% (+901 MT) YOY in April. This is the first increase in the category since January 2023 and reflects stronger exports of dry whey (+42%, +1,940 MT). While some of this increase was counteracted by lower permeate shipments, stronger whey exports suggests that the Chinese pork sector is beginning to improve.

Chinese piglet prices have climbed in recent weeks as production cutbacks have limited supply. Lower input prices should help improve otherwise struggling margins for pork producers and bodes well for future whey demand. But despite improving economics, structural changes will likely continue to limit whey demand from the pork sector. In March, the Chinese government reduced the target for breeding sows from 41 million to 39 million—a move intended to maintain better balance in the domestic pork industry.

Learn more about global dairy markets:

• March exports slip 7% on mixed results

• U.S. dairy exports rebound in February

• U.S. dairy exports off to a slow start in 2024

   

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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.