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  • Cheese rebounds in November, but overall U.S. dairy export volume declines

    By USDEC Staff January 10, 2024

    Mixed results mark another challenging month.

    U.S. cheese suppliers had their best November ever, shipping 38,610 MT—a 4% increase over the previous year. However, the cheese category’s improvement—plus ongoing growth in high-protein whey exports (WPC80+)—were insufficient to offset declines in almost all other product categories.

    Year-over-year (YOY) U.S. dairy exports fell 8.1% in milk solids equivalent (MSE) terms in November and were down 7.4% year to date (YTD). Even as U.S. exports of high-value products like cheese and whey proteins grew, lower commodity prices pushed U.S. dairy export value down 21% to $631 million in November, putting overall value down 16% YTD (to $7.481 billion) with one month to go. Effectively, even as the declines are moderating and performance is improving, U.S. dairy exports are still trailing the highs of 2022 both on a volume and value basis.

    Chart1 final-1

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    With tepid global economic growth and inflationary forces still holding sway in key markets, a broad and sustained demand rebound remains elusive.

    Global cheese demand, however, is showing some green shoots. As we wrote in our International Demand Analysis, global cheese trade (all suppliers) appeared to turn a corner in October, jumping 12% vs. the previous year. That modest improvement in demand combined with competitive prices boosted U.S. cheese exporters in November. U.S. shipments to Mexico soared 42% (+4,370 MT) for the month and have already exceeded the annual record with a full month of data to go. U.S. exports to Central America grew 16% (+565 MT) while volume to the Caribbean rose 14% (+276 MT). Shipments to China grew nearly five-fold (+1,290 MT). (For more details on cheese, see below.)

    Similarly, WPC80+ exports jumped 37% (+1,960 MT) as global demand there too seems to be improving. It was a down month for Japan, the No. 1 U.S. market, but shipments to China more than doubled (+920 MT), volume to Brazil nearly tripled (+756 MT) and India came out of nowhere, buying 761 MT (up from only 47 MT in November 2022). YTD U.S. WPC80+ exports grew 18% (+10,805 MT) and, once December numbers come out, will most certainly top 70,000 MT in a year for the first time.

    Unfortunately, that is where most of the positive story ends. Skim milk powder/nonfat dry milk (SMP/NFDM) exports slipped 5% (-3.333 MT). Shipments to Mexico declined 5% (-1,988 MT) in November, extenuating the recent downturn as sales have fallen 9% (-9,240 MT) over past three months. U.S. volume in November was a healthy 34,576 MT, but U.S. suppliers continue to find it challenging to duplicate Mexico’s elevated SMP/NFDM appetite in the later part of 2022.

    And in what has become a familiar refrain, China continues to undercut U.S. low protein whey (0404.10) export volumes. Total U.S. 0404.10 exports fell 14% (-6,892 MT) in November compared to the prior year with declining U.S. whey shipments to China (not including WPC80+) the primary culprit (-25%, -7,114 MT).

    Gratefully, we are seeing positive signs from Southeast Asia for the first time in over a year as both SMP/NFDM shipments and low-protein whey sales grew—potentially signaling the market has found a floor. The region’s growth is not particularly robust yet, but stabilization is welcome news, nonetheless.

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    Cheese exports impress in November

    Robust cheese shipments in November helped to brighten up an otherwise mostly dreary month of U.S. export data. YOY cheese exports rose 4% in November to 38,610 MT. Not only was this the largest volume since March of this year, but it also represented a record large volume of cheese exports for the month.

    Seemingly insatiable demand from Mexico underpinned the increase in November and, more broadly, has played a key role in supporting U.S. cheese exports in recent months. U.S. suppliers shipped 14,715 MT of cheese to Mexico in November, the largest volume ever moved in any month. With just one month of data outstanding in 2023, YTD cheese exports to Mexico are up 21% (+25,071 MT) compared to the same period in 2022.

    Building on the trend seen in earlier months, the bulk of the increase in cheese exports to Mexico can be traced back to shredded cheese. November exports of shredded cheese to Mexico were four times greater than in the same month last year (+4,808 MT). The vibrant Mexican economy has been a key story of 2023, and the increase in shredded cheese exports is presumably a testament to increased demand for shredded mozzarella through foodservice and hospitality channels.

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    Mexico is not the only region that saw cheese exports rise in November, however. U.S. cheese exports to China in November were almost 3.5 times greater than in the same month last year (+1,257 MT) with shredded cheese again accounting for most of the gain. Cheese exports to Canada were up by 263 MT while Central America and the Caribbean added 15% (+841 MT)

    The increase in shredded cheese exports continues to grab headlines, but another key category also saw growth. Fresh cheese exports were up 10% (+791 MT), suggesting that U.S. cream cheese and fresh mozzarella are also garnering favor with buyers abroad. Fresh cheese growth was most prominent in the Western Hemisphere, with Central America and the Caribbean seeing the largest absolute gain (+584 MT) while Canada, Mexico and South America contributed more moderately to the total.

    Though the improvement in cheese exports is welcome news, shipments are still digging themselves out of a big hole with year-to-date exports down 4% during the first 11 months of the year. But as lower domestic cheese prices render U.S. product more competitive relative to other global suppliers, there should be some sustained impulsion behind exports … assuming demand can remain at least at current levels.

    Other relevant data points from October’s trade data:

    • U.S. lactose exports fell 7% (-2,848 MT) in November. It’s been an up-and-down year for lactose after a tremendous first quarter that saw U.S. suppliers lift volume 27% (+24,585 MT). From April through November, however, YOY U.S. lactose shipments fell 1% (-2,736 MT). Heavy purchasing from New Zealand, Southeast Asia and Japan evaporated as the year went on, fortunately offset by ongoing volume growth to China (YTD +24%. +24,138), Mexico (YTD +18%, +5,431 MT), India (YTD +141%, +5,450 MT) and Brazil (YTD +67%, +3,835 MT).

    • U.S. fluid milk and cream sales have been on something of a roll for the past three months with YOY volume up 12% (+3.6 million liters). YOY November volume increased 13% (+1.3 million liters). Increased sales to Canada (+29% September-November) and Mexico (+20%) have led the rebound. YTD U.S. fluid milk and cream exports were still down 8% (-11,422 million liters), but the gap has been shrinking.

    • On a geographic basis, Mexico continued to be the standout market for U.S. suppliers in 2023 in November. Despite the aforementioned decline in SMP/NFDM exports in November, Mexico led all regions in volume gain, with November U.S. dairy exports rising 4,434 MT (all major products, not including fluid). A surprising No. 2 on the November list was India (+2,116 MT), buoyed by WPC80+ and lactose. The Philippines (+1,406 MT) and Thailand (+1,033 MT) came in at Nos. 3 and 4, respectively.

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