The U.S. Dairy Exporter Blog: Market Analysis, Research & News
  • U.S. dairy exports rebound in February

    By USDEC Staff April 5, 2024

    Gains in milk powder, cheese and whey lift YOY volume for the first time since January 2023.

    Note: All volume and percent change numbers in this blog post have been adjusted to 28 days to account for the extra day of Leap Year.

    U.S. dairy exports rallied impressively in February after 12 straight months of year-over-year (YOY) volume declines. YOY milk solids equivalent (MSE) volume grew 3.7%, setting a new February record.

    While we saw some positive signs of improving demand for U.S. dairy at the close of last year, February marked the first time since January 2023 that the United States’ three primary products—milk powder, cheese and whey—all posted YOY gains.

    U.S. cheese exports starred, with YOY volume rising 27% to 41,854 MT—only the seventh time in history that U.S. cheese topped 40,000 MT in a single month. On a daily basis, February was the strongest month ever for U.S. cheese exports. Latin America continued to drive sales, but U.S. suppliers saw optimistic developments in Japan and the Middle East and ongoing growth in China as well. (See below for more on cheese.)

    Nonfat dry milk/skim milk powder (NFDM/SMP) exports rose 3.4% to 65,214 MT. It was the biggest YOY gain since August 2023. A rebound in sales to Southeast Asia (39%, +6,512 MT) fueled the increase. U.S. shipments to Mexico fell short of the volume record set in February 2023 but were still a respectable 29,465 MT. (See below for more on NFDM/SMP.)

    WPC80+ extended its YOY growth streak to seven straight months, as sales rose 10% (+597 MT). Brazil (+70%, +334 MT) and China (+17%, +233 MT) posted the biggest gains.

    Perhaps most surprisingly, U.S. low-protein whey sales (0404.10) increased 6.7% (+2,678 MT), driven solely by a sizeable increase in WPC under the HS Code 0404.10.0500, which is typically WPC34 as opposed to 3502.20 which is usually WPC80 or WPI. YOY WPC shipments under Chapter 4 soared 50% (+4,396 MT), with a more-than-five-fold gain to Indonesia (+2,283 MT) and shipments to Mexico more than doubling (+1,973 MT). Before getting too excited by WPC34 shipments, the average unit values in both Mexico and Indonesia suggest it may be an issue of misclassifying dry whey as WPC34. Even if the product is sweet whey as opposed to WPC34, the story is still positive for U.S. dairy exports.

    Chart1 for February Trade Stats (2089 x 1080 px)

    Chart5 for February Trade Stats (2089 x 1080 px)-1

    For more detailed information, as well as interactive charts and data, visit USDEC's Data Hub.

    Cheese sets February record

    As mentioned in the intro, U.S. cheese exports boomed in February. YOY volume jumped 27% to 41,854 MT. It was the first time U.S. suppliers shipped more than 40,000 MT in February. In fact, if you calculate monthly U.S. cheese exports on 30-day months, February 2024 would be an all-time record.

    U.S. shipments of shredded cheese continued to lead growth, rising 37% (+3,446 MT), but all four subcategories gained. Cheddar (+34%, +1,757 MT) recorded its highest volume since March 2023 and Other Cheese, which is primarily gouda and cheddar-type cheeses, posted its best month since December 2022 (+41%, +3,682 MT). Fresh cheese lacked gaudy growth numbers but still rose 1% (+99 MT).

    U.S. cheese exports, which showed signs of recovery at the end of 2023 as inflation ebbed in key export markets, have clearly picked up speed in January and February 2024. A favorable price gap between U.S. and major competitors that formed in the fourth quarter and continues through today has helped.

    From a geographic perspective, Latin America continues to be the major driver of U.S. cheese exports. YOY U.S. cheese shipments to Mexico surged 60% (+6,012 MT) in February, while exports to Central America grew 45% (+1,412 MT), shipments to the Caribbean rose 20% (+323 MT) and exports to South America increased 8% (+142 MT).

    After more than tripling over the second half of 2023, cheese shipments to China (primarily of pizza cheese) also kept rolling in February, rising 40% (+398 MT) compared to the previous year.

    What was new for the month, from a geographic standpoint, was Japan and the Middle East, where U.S. suppliers welcomed rebounding demand. U.S. cheese shipments to Japan jumped 37% (+1,124 MT) in February, topping 4,000 MT for the first time since last August. Volume to the Middle East rose 43% (+722 MT), reaching its highest level since January 2023.

    NFDM/SMP exports unexpectedly rebound

    February saw a recovery in NFDM/SMP exports, which rose to 65,214 MT, up 3% (+2,172 MT) year over year after adjusting for the Leap Day. This is only the second time in the last six months that NFDM/SMP exports have exceeded prior-year levels, suggesting that economic conditions and demand may be improving among some milk powder customers in Southeast Asia. Still, the combination of weak milk production limiting exportable supplies and uncertainty in Mexico’s ingredient demand will likely dampen some of the product’s growth potential.

    The growth in NFDM/SMP exports was driven primarily by stronger demand from Southeast Asia where exports jumped by 39% (+6,512 MT). Indonesia, Malaysia, Thailand and Vietnam all received more NFDM/SMP in February than in the same month last year with rising demand fueled by a stronger labor market, moderating inflation and low inventory levels. Unfortunately, NFDM/SMP exports to the Philippines tumbled by 14% (-1,026 MT), but growth from the other Southeast Asian markets was more than sufficient to mitigate declines to the country.

    Conversely, sales to Mexico, the largest market for U.S. NFDM/SMP exports struggled. U.S. exporters moved 29,465 MT of NFDM/SMP into Mexico in February, 5,704 MT less (-16%) than last year’s record high figure. Expanding domestic milk production in Mexico has reduced reliance on imported milk powder while anecdotal evidence indicates that some buyers may have slowed purchases in anticipation of the spring flush, which they posit has the potential to push prices downward. Additionally, with low-priced cheese readily available from the U.S., there is less incentive to use NFDM for fortification in locally produced cheese.

    Beyond the United States’ primary customers, reduced demand from China (-73%, -1,715 MT) weighed on the total NFDM/SMP export figure, while shipments improved to South America (+76%, +1,856 MT) and to MENA (+205%, +1,802 MT).

    Overall, milk powder production in the U.S. has been limited in recent months and inventories have been whittled down to multi-year lows. Coupled with lower supply, lighter export demand meant price has mostly run sideways. If export activity begins to improve in earnest, it has the potential to push NFDM/SMP prices upward but as of yet global supply and demand for NFDM/SMP remains roughly in balance.

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