The U.S. Dairy Exporter Blog: Market Analysis, Research & News
  • U.S. dairy export growth streak hits seven months in October

    By USDEC Staff December 6, 2022

    NFDM/SMP exports rise for first time this year, while whey, cheese and butter continue to post solid year-over-year gains.

    October U.S. dairy exports rose 9% on a milk solids equivalent (MSE) basis, marking the seventh consecutive month of growth for U.S. suppliers. Most product categories posted gains, including nonfat dry milk/skim milk powder (NFDM/SMP), which recorded its first year-over-year increase since November 2021.

    For the first 10 months of the year, U.S. export volume was up by 4% MSE.

    U.S. export value rose 24% to $818.7 million in October. Through 10 months, value stood at $8.08 billion, already an annual record, topping the 12-month total of $7.70 billion set in 2021, as a result of increased high-value cheese and butter shipments as well as higher dairy prices in general.

    October U.S. gains were widespread across most major products, including NFDM/SMP, whey, cheese and butter.

    NFDM/SMP exports grew 11% (+6,975 MT), ending 11 straight months of year-over-year (YOY) shortfalls. Shipments to Mexico jumped 37%—the second straight month of double-digit increases—fueling the gain (see below for more).

    U.S. whey exports rose 17%, with gains across all product categories: dry whey, whey protein concentrate (WPC), modified whey and WPC80+. For WPC80+, it was the first year-over-year increase since April 2022. A sharp reduction in shipments to China has blunted U.S. WPC80+ exports all year, but data shows volumes are recovering as supply availability grows and prices ease.

    Most notably, Japan has been a driving force behind U.S. WPC80+ volume in 2022. U.S. exports there doubled (+547 MT) in October and through the first 10 months of the year were up 35% (+2,850 MT), mitigating more than half the decline to China.

    October U.S. cheese exports rose 4% (+1,589 MT) with widespread geographic gains. Shipments to Japan rose 39% (+1,260 MT), volume to the Middle East/North Africa increased 67% (+1,029 MT) and exports to Mexico grew 12% (+952 MT). While year-over-year U.S. cheese exports have now risen for 16 straight months, gains moving forward may be more challenging (see below for more).

    Chart2 (3)-Dec-06-2022-08-55-24-6170-PM

    For detailed data and charts, check out USDEC’s Data Hub

    Here are our two main takeaways from the October U.S. dairy export trade data:

    Cheese Exports Still Growing – What’s Next?

    As mentioned above, U.S. cheese exports continued to impress in October, climbing 4% year-over-year (+1,589 MT), which marks the 16th straight month of growing cheese exports.

    Bigger picture, 4% growth in cheese exports is an incredibly positive story for U.S. exports but does continue the trend of deceleration in the second half of 2022. Through the first six months of the year, U.S. cheese exports grew by 17% YOY but only by 4% since July. What explains the difference and what can we expect going forward?

    Chart1 (2)-Dec-06-2022-07-34-27-7284-PM

    In the first half of the year, the U.S. had several factors in its favor. First, the U.S. had the supply available for export. From January to June 2022, U.S. domestic consumption of American-type cheeses fell by 1.7%, while production held steady. With exports increasingly critical for maintaining cheddar market balance, U.S. American-type cheese exports grew by 59% in the first half!

    At the same time, supplies from Europe and New Zealand were relatively weak; EU27+UK shipments fell by 3% and New Zealand volumes by 13% in the first half of the year – a total decline of over 40,000 MT from those two markets. This supply dynamic opened the door for the U.S. to capture robust cheese demand, particularly from Latin America. As a result, U.S. cheese exports to Mexico grew by 18% (+9,304 MT), to Central America by 43% (+6,543 MT), and to the Caribbean by 38% (+3,134 MT) in H1.

    More recently, the factors have shifted less favorably to export growth: European milk production is recovering with higher farmgate milk prices, leading to more competition overseas; U.S. domestic sales of American-type cheese have picked up, limiting exportable supply growth; and Latin American cheese demand is being impacted by cheaper analogue cheese as palm oil prices have fallen of late and economic pressures push consumers toward low-cost alternatives.

    Looking ahead, these headwinds are likely to remain in the market into 2023. However, USDEC remains optimistic. With the committed U.S. investment into cheese exports, forecasted growth in U.S. milk supply (and therefore cheese production), as well as demand growth in Asia and other key international markets, we forecast cheese exports should keep growing into 2023 – albeit at a growth rate closer to 4% than the 17% seen in the first half of 2022.

    NFDM/SMP Gains for First Time in 11 Months

    Year-over-year U.S. shipments of NFDM/SMP jumped 10% (+6,975 MT) in October. It was the first monthly increase since November 2021. At 73,146 MT, it was the largest monthly volume since this past May when U.S. suppliers shipped 80,406 MT.

    Improved U.S. supply—along with downward-trending pricing—have been the main drivers.

    On the supply side, monthly U.S. milk production grew 1.2% from July-October (after declining 0.7% over the first half of the year), fueling an increase in U.S. NFDM production of 5% over the same period. (U.S. SMP production by contrast remains in the doldrums in 2022—down 24% over the first 10 months.)

    With improved exportable NFDM supplies, shipments to the largest single U.S. milk powder market, Mexico, have picked up significantly. U.S. NFDM/SMP shipments to our southern neighbor jumped 22% (+6,138 MT) in September and surged 37% in October (+10,268 MT).

    By contrast, U.S. NFDM/SMP shipments to Mexico were down 6% through the first eight months of the year. The strong September and October put year-to-date shipments to Mexico up by 1%. The Mexican peso has also performed better than most other international currencies in 2022, dampening some of the price impacts.

    While Mexico was the main driver of U.S. NFDM/SMP gains, other key markets also recorded encouraging growth in October. For example, U.S. suppliers grew YOY NFDM/SMP shipments to Indonesia (+47%, +2,514 MT); the Caribbean (+261%, +1,370 MT); Malaysia (+89%, +1,128 MT); and China (+32%, +814 MT).

    The biggest letdown came in the Philippines, where October U.S. exports were cut in half (-50%, -6,613 MT). Prior to October, U.S. NFDM/SMP exports to the Philippines were running 7% up on the previous year. The poor October showing dropped year-to-date volume to the country to -1%.

    Despite the October increase, year-to-date U.S. NFDM/SMP exports through October remain down 8%.

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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.  

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