U.S. Cheese Exports Surged in 2010

December 2010 U.S. dairy export data is released today, after this edition of Cheese Market News goes to press. So I can’t give you the exact year-end numbers on U.S. cheese exports. But whether U.S. cheese exports topped 165,000 metric tons or 168,000 metric tons (365 million lbs. or 370 million lbs.) is somewhat beside the point. The bigger takeaway from 2010 is just how far we’ve come as a cheese supplier to the world—and how far we can and must go.

After 11 months, U.S. cheese exports were on target to reach about 3.5 percent of total 2010 U.S. cheese output—a record and a significant change from the 1-2 percent annual average that characterized the previous decade.

The challenge now is sustaining and building on the inroads that have been made. There are a number of reasons to be encouraged:

• Through November, U.S. cheese export volume was up 60 percent to 153,542 metric tons. Shipments surpassed the previous full-year record of 131,203 metric tons in September. The Cooperatives Working Together program was a bigger factor than in 2009, with such shipments projected to account for about 13 percent of total shipments and the balance coming from straight commercial business.
• U.S. cheese export volume was on track to eclipse Australian cheese export volume, moving the country into the position as the No. 3 global supplier behind New Zealand and the 27-country European Union.
• U.S. shipments to South Korea jumped 75 percent to 16,478 metric tons through November, making it a solid No. 2 market behind Mexico. Those gains came without congressional action on the U.S.-South Korean free trade agreement, which should pass this year and give U.S. suppliers greater market access.
• U.S. shipments to Southeast Asia rose 117 percent to a respectable 8,377 metric tons in the first 11 months, as the United States tapped a consumer base just getting a taste for cheese and buyers sought to diversify their sourcing beyond Oceania.
• U.S. shipments to the Middle East/North Africa more than tripled to 23,996 metric tons for the January-November period.
• U.S. involvement with foodservice chains intensified, which showed in 11-months volume gains to China (+53 percent) and Japan (+115 percent).

Combined with generally declining import volumes that contributed in 2010 to the first-ever full-year cheese trade surplus, all of it has greatly benefited the cheese industry. At the same time though, signs also indicate the climate could grow more challenging in the year ahead.

• The favorable conditions that characterized 2010 are not guaranteed to continue. Economic recovery, strong demand, relatively high and stable pricing, and Oceania’s focus on powder created greater than usual opportunity. Looking ahead, many still question the strength of the economic rebound, and we all know too well that volatility is a hallmark of today’s markets.
• The  United States could gain stiffer competition from Europe in the burgeoning South Korea market as the EU-Korean FTA goes into effect this summer and questions about geographic indicators remain unresolved.
• Should political upheaval in Egypt, where the United States has the largest share of a volume cheese import market, expand to neighboring nations and drag on, U.S. suppliers could see the brakes put on growing business in the Middle East and North Africa.
• Foodservice operators around the world are now finding themselves challenged by rising input costs that could slow expansion. They’re still proliferating, particularly in emerging markets, but the faster they do so, the better it is for the United States.

Such challenges must be overcome. Trends of the past five years, culminating in this year’s record performance, indicate that overseas business has become a critical component of the health of the U.S. dairy industry, directly influencing prices and production. And cheese has become a key product in the long-term success of U.S. exports. It is our cornerstone, high-value manufactured product. Whey, lactose and milk powder alone can’t form the basis for our international growth.

Overseas cheese sales have passed the tipping point. U.S. suppliers must continue shipping the kinds of tonnages seen in 2010 to keep the U.S. dairy sector healthy, and that brings us back to a message you may be tired of hearing, but one that bears repetition nonetheless.

We have to be in it for the long haul. We have to service overseas customers like we service our domestic clients: talk to them about any quality concerns, new product interests and longer-term pricing contracts. We have to stick with markets in Asia, Latin America and the Middle East in good times and bad because our cheese market—our whole dairy industry—has become global.

(This article first appeared in Cheese Market News in February 2011.)

The U.S. Dairy Export Council represents dairy farmers, proprietary processors, cooperatives, ingredient suppliers and export traders. Its mission is to enhance U.S. competitiveness and increase global sales of U.S. dairy ingredients and products.