Slumping Powder Exports Drag U.S. Performance

U.S. exporters losing ingredient business in Southeast Asia.

Weak sales of nonfat dry milk/skim milk powder (NDM/SMP), particularly to Southeast Asia, depressed overall U.S. export totals in the third quarter. U.S. suppliers shipped 460,204 tons of milk powder, cheese, butterfat, whey and lactose during the July-September period, down 2% from last year. U.S. exports were valued at $1.3 billion in Q3, up 9%.

Exports of NDM/SMP in Q3 were 131,988 tons, down 18% vs. a year ago. Sales to Southeast Asia were just 34,536 tons, a 35% decline, with significant lost volume to Indonesia (-60%) and Vietnam (-76%). Shipments to Mexico also were lower, falling 19% short of last year’s pace.

(Official USDA data continues to show an increase in WMP exports to Mexico. However, Mexican import data and trade sources don’t corroborate this, and we believe this volume represents SMP sales that were misclassified at the port. Therefore, we’ve adjusted NDM/SMP and WMP trade data for June 2016 to September 2017 to account for this misclassification.)

With declining powder exports, U.S. inventories of NDM increased in Q3 for the first time since 2008. At the end of September, stocks were a record-high 146,000 tons, nearly 50% more than last year. Lagging U.S. exports reflect strong competition from European suppliers, as well as a slowdown in global buying activity. Oversupply in the world market has led SMP prices to fall to their lowest level since spring 2016.

Southeast Asian countries also took less U.S. whey in Q3. Exports were 22,072 tons, down 11%. Sales of whey protein concentrate (WPC) and modified whey were off 23%. Meanwhile, lactose shipments to the region were down 26%.

Overall U.S. exports to Southeast Asia in September alone were just $40 million (-29%), the worst month since February 2010.

Total whey exports in Q3 were up slightly from a year ago. In addition to lost Southeast Asia business, shipments to China were a little lower, while exports to Mexico and Japan improved. However, this wasn’t enough to arrest falling global prices, or prevent a build-up of U.S. dry whey stocks to record levels at the end of September.

In contrast, U.S. cheese exports were up 24%, to 84,485 tons in Q3. Rising sales to Australia (9,265 tons, +140%) and Japan (9,329 tons, +78%), drove the gains. In addition, cheese exports to the Middle East/North Africa region are beginning to recover, with September volume the highest in more than three years.

Lactose exports in Q3 were down 2%. China and Mexico took more, Southeast Asia and New Zealand took less.

In September, exports of butterfat were the lowest in more than a year. Suppliers saw a large drop-off in sales to Canada in September, and few other countries have bought U.S. butterfat over the last 18 months.

Though volumes are still very low, exports of whole milk powder (WMP) improved in September, with increased sales to China/Hong Kong.

Fluid milk/cream exports were down 8% in Q3, compared with strong sales to Canada and Mexico realized in 2016. Shipments to Taiwan continue to climb, up 38% in Q3.

On a total milk solids basis, U.S. exports were equivalent to 14.2% of U.S. milk production in September, while imports were equivalent to just 3.0% of production.

To use interactive charts with current and historical trade data, see usdec.org's page on U.S. export data.

Alan Levitt is vice president of communications and market analysis at the U.S. Dairy Export Council.

Learn more about global dairy markets:

• October's Dairy Data Dashboard
• Cheese Sales Lift August Export Volumes
• September's Dairy Data Dashboard
• Export Growth Streak Ends in July
• August's Dairy Data Dashboard
• U.S. Dairy Exports Reach Three-Year High

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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.