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  • U.S. dairy exports hit all-time record in March

    By USDEC Staff May 4, 2021

    Increases in all major product categories, including records for NFDM/SMP and whey, drove U.S. export volume to an all-time high.

    There was plenty of positive news for U.S. dairy in March’s export data. First, the U.S. exported 215,557 metric tons (MT) of dairy products in milk solids equivalent – a new record. Second, that volume equated to an estimated 18.6% of production exported for the month of March – the second highest month of all-time. Third, value grew right alongside volume with $688 million worth of dairy products shipped overseas in March – the highest since 2014.

    Ultimately, there was not just one cause behind the record month in U.S. dairy exports – U.S. dairy had robust growth in all major product categories. Non-fat dry milk/skim milk powder (NFDM/SMP) and whey both had all-time highs with exports of 86,532 MT and 57,181 MT, respectively. Cheese was no laggard either – posting its second-best month of all time (36,919 MT). Butterfat and lactose also posted strong gains.

    Chart1 (2)-2

    More detailed data and charts can be found here

    March’s export data was so strong that it had us triple- and quadruple-checking our numbers to be sure we hadn’t missed a decimal point. After confirming that the numbers were correct, here are our key takeaways:

    Mexico’s demand rebounded

    One of the big questions heading into 2021 was whether Mexico could bounce back from dual setbacks of recession and pandemic that depressed dairy demand and imports throughout most of 2020. We previously flagged signs of optimism in the ongoing reopening of the nation’s tourist sector, increased vaccinations and the coattail effects of the surging U.S. economy.

    March U.S. dairy exports to Mexico (on top of some positive signals in February) have heightened that optimism.

    Year-over-year NFDM/SMP exports to Mexico grew 29% (+5,943 MT) to 26,760 MT in March (vs. the previous year). It was the second straight year-over-year increase.

    While still trailing pre-recession, pre-pandemic volumes from 2018 and 2019, U.S. NFDM/SMP shipments were up 16% in the first quarter compared to 2020. It is a very positive sign after the 13% decline to, historically, our largest milk powder market in 2020.

    Cheese shipments grew 11% (+990 MT) to 9,687 MT in March. That represents our highest monthly cheese export volume to Mexico since June 2018—as well as the first year-over-year increase in eight months. The rebound is directly attributable to the gradual reopening of the restaurant sector, entertainment venues and tourism.

    While NFDM/SMP and cheese are the two U.S. flagship products to Mexico, secondary products also saw gains to Mexico, with U.S. whey shipments up 21% (+665 MT), lactose up +3% (+101 MT) and WMP gaining 410% (+334 MT) off a small base. Pandemic uncertainty notwithstanding, Mexican demand in March struck a hopeful tone.

    Asian demand running hot

    Asian demand continues to run hot. Total U.S. milk solids exports reached over 215,000 MT in March; an increase of 24% (+24,000 MT) over March of last year. Southeast Asia (SEA) accounted for a large portion of the growth increasing 16% (+7,900 MT).

    NFDM and whey products were the key growth products in March for SEA and China. Exports of NFDM/SMP to SEA in March grew 29% (+7,700 MT) to 35,000 MT and whey product exports to SEA increased 15% (+1,500 MT) to 12,000 MT. Similarly in China, whey products continue to be a major growth source with U.S. whey exports to China in March up 110% (+14,000 MT) to 27,000 MT. Indeed, the U.S. has shipped other products to China as well – NFDM/SMP shipments were up a hundredfold to 5,626 MT and lactose to China had its best month since 2018 (9,109 MT).

    Chart2 (3)-2

    As mentioned previously, this high growth can partially be attributed to a “rubber band” effect where product was purchased potentially months ago and in March was finally able to find its way onto a boat. While this is likely part of the increase, strong demand out of the region is also driving these purchases and the U.S. has been able to capitalize.

    The U.S. has steadily grown market share in SEA over the past year, overtaking New Zealand and the EU to become the largest market share holder in milk solids exports to the region, with a share of 31% (up from 23% in late 2019). In NFDM/SMP, the U.S. also leads with a market share of roughly 45% (up from 26% in late 2019).

    Chart3 (3)

    Ongoing port issues remain a key obstacle for continuing the growth we’ve seen to the SEA and China. While largely out of U.S. exporter control, importers could grow tired of not being able to get product when they need it. This has the potential to limit further growth in the region if buyers decide that more consistent timing is worth paying a premium to get product from other suppliers. However, despite these challenges, U.S. dairy is well-positioned to continue growing exports to the region and capturing increased market share.

    Export outlook

    Looking ahead, we must offer one note of caution even as we remain optimistic about the future growth of U.S. dairy exports. Namely, March’s dairy exports likely included multiple months’ worth of production. As we said in prior months, the decline in exports we saw over the winter was likely a reflection of delays at port. We projected that as shipping became easier the delayed product would bolster our export figures in future months. We believe that is exactly what happened in March. Thus, the record March is partly a reflection of shipping issues improving.

    Still, the picture looks optimistic moving forward. The increase in shipments to Mexico is welcome news as their economy recovers. Shipping delays remain a point of concern, but we are encouraged to see greater volumes move in March reflecting at least some improvement. On top of that, firming prices of NFDM/SMP and whey reflect robust international demand for ingredients that will continue to support export volume into the latter part of the year. Finally, the U.S. remains price competitive in cheese and butterfat at the same time that international demand is growing.

    All of this should support U.S. dairy exports in the months ahead.

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