Resilient cheese demand drives modest increase in August volume.

Year-over-year (YOY) U.S. dairy exports modestly improved in August, with gains in several major product categories. Milk solids equivalent (MSE) volume rose 1.7%. The August increase puts year-to-date (YTD) volume into positive territory for the first time in 2024, albeit at only +0.1%. That essentially flat YTD result epitomizes the month-by-month performance tally: Over the first eight months of 2024, YOY MSE volume increased four times and decreased four times.

YOY U.S. export value increased 10% to $708 million in August—the biggest rise of the year, as commodity prices climbed and the United States’ portfolio favored cheese and proteins.

Speaking of cheese, global cheese demand continues to surge, with total world cheese trade from all major suppliers up for 10 straight months through July. The United States continues to be one of the biggest beneficiaries of that trend, despite the steep rise in U.S. prices this past spring and a second pricing surge that started in mid-July. YOY U.S. cheese volume jumped 15% (+5,579 MT) in August, with widespread gains across geographies (for a deeper dive on cheese, see below).

U.S. whey export growth also continued in August, although not at the double-digit pace seen over the previous three months. YOY low-protein whey shipment increased 5% (+2,072 MT). By contrast, aggregate May-July low-protein exports grew 19%. The August slowdown came from the United States’ top customer: China, where volume fell 12% (-2,215 MT) for the month.

Recovery in China’s pig sector helped revive flagging U.S. low-protein whey exports earlier this year, and pig prices remain well above levels seen earlier in 2024 and throughout 2023, but they have been sliding since mid-August. U.S. exports to other destinations in August helped pick up the slack, with volume up to Southeast Asia (+20%, +1,589 MT), South America (+86%, +1,450 MT) and the Middle East/North Africa (+1,075%, +1,250 MT).

While U.S. shipments of low-protein whey to China faltered in August, the country helped drive U.S. WPC80+ exports to their second highest monthly total of all time: 7,944 MT. YOY U.S. WPC80+ shipments to China surged 281% (+2,521 MT) in August, more than offsetting declines to the Nos. 2 and 3 U.S. markets, Japan (-30%, -442 MT) and Brazil (-18%, -182 MT).

YOY nonfat dry milk/skim milk powder (NFDM/SMP) exports slipped 1% (-788 MT). Monthly exports to Southeast Asia fell (-8%, -1,956 MT) for the first time since May. A 32% increase to the Philippines (+3,102 MT) could not compensate for significant declines to Vietnam (-2,531 MT) and Indonesia (-1,540 MT). Mexico posted its second straight monthly gain in August (+9%, +3,082 MT) after 10 straight months of YOY declines (for a deeper dive on NFDM/SMP see below).

Looking ahead, on the positive side for demand, inflation in most major markets is near pre-pandemic levels, and the World Bank believes it should continue to ease back to expected averages in 2025/26. In addition, China recently implemented its biggest economic support package since the pandemic, much of it aimed at increasing internal consumption (although the package also includes incentives for the domestic dairy industry). At the same time, headwinds—including the risk of increasingly frequent extreme climate events and conflicts in the Middle East and Ukraine—continue to temper the outlook.

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Cheese exports continue to impress

U.S. cheese continued to move abroad during August, as 42,459 MT of product found homes abroad, 15% (+5,479 MT) more than during the same month last year. Cheese exports have led prior-year volumes for the entirety of this year, and often by a sizeable margin. Cumulative shipments of cheese through the first eight months of 2024 increased by 21% (+60,146 MT).

August cheese shipments were bolstered by strong performances across most varieties, except for cheddar. Exports of fresh cheese and shredded cheese bounded upward with YOY gains of 21% (+1,728 MT) and 20% (+2,289 MT), respectively. The “Other Cheese, not elsewhere specified” category saw the largest gain with exports up 31% versus last August, adding 2,771 MT to the monthly total. YOY cheddar exports dipped in August, falling by 26% (-1,639 MT) as sales to Japan dropped precipitously (-60%, -1,742 MT). Domestic cheddar production has been light in recent months as manufacturers have demonstrated a sustained preference for making other varieties, especially Italian cheeses like mozzarella.

The breadth of cheese varieties posting gains in August was heartening. Equally encouraging was the range of destinations that saw volumes rise. Mexico remains the leader in absolute terms, as cheese exports south of the border rose by 17% (+2,256 MT) in August. Shipments to Mexico grew across nearly every variety, including a modest 2% gain (+14 MT) for cheddar cheese and a 5% improvement in shredded cheese (+292 MT). However, the bulk of the increase in cheese exports to Mexico was for “Other Cheese,” (which houses most of the cheddar-adjacent varieties like gouda and manchego) as volumes soared by 34% (+1,942 MT). In total, YTD cheese exports to Mexico have increased a phenomenal 36% (+33,479) compared to the first eight months of 2023.

While the strength of Mexican cheese demand is impressive, it is not the only region that has witnessed an increased appetite for U.S. product. Cheese exports to MENA grew 136% (+1,245) in August, buoyed by a surge in shredded cheese (likely mozzarella). Improving demand from the Philippines also boosted shipments to Southeast Asia, where U.S. exports rose 93% (+870 MT). Not to be outdone, South America and Central America/Caribbean also performed well for the month, with exports to those destinations rising by 43% (+802 MT) and 13% (+755 MT), respectively.

The strength in August cheese exports was particularly impressive considering that prices have begun to tick upward. After starting the year on a weak note, cheese prices at the CME began to appreciate in April and have sat above $1.80/lb. since early May. While contracting practices and logistical delays may obfuscate some of the impact, every category of cheese exports has seen prices increase over the last three months and recorded higher prices in August than in January. While consumers have remained resilient so far, ultimately, higher prices may dampen demand for Q4 shipments.

NFDM/SMP exports stumble once more

After an encouraging 11% bump in July, U.S. exports of NFDM/SMP once again fell below prior-year levels in August though the decline was relatively minor. Exports totaled 67,990 MT for the month and while this was down 1% (-788 MT) year over year, it nevertheless represented the second-strongest volume so far in 2024. The modest decline helped to narrow the gap with prior-year volumes in cumulative terms as year-to-date shipments of NFDM/SMP were down just 8% over the first two-thirds of the year.

After trailing previous-year comparisons for 10 consecutive months, U.S. shipments of NFDM/SMP to Mexico topped prior-year levels in August for the second month in a row. At 36,807 MT (+9%, +3,082 MT), it represented the largest volume ever for the month of August and suggests that milk powder demand from Mexico has firmed considerably.

Market stakeholders indicate that wavering domestic milk production may be underpinning the need for imported dairy solids. It is likely that an increasing amount of imported milk powder is being used to fortify cheese vats and hedge against elevated cheese prices. However, it is notable that strong cheese imports have persisted even as milk powder demand has risen.

In addition to Mexico, NFDM/SMP exports to South America rose by 13% (+440 MT) mostly due to increased shipments to Colombia. Exports to Japan also perked up, rising by 371 MT against last August when no product was imported.

Albeit encouraging, these bright spots were insufficient to overcome losses in other regions as U.S. exports to Southeast Asia (-8%, -1,956 MT), Central America/Caribbean (-23%, -801 MT), and MENA (-39%, -660 MT) slipped below prior-year levels.

It is important to consider that underwhelming U.S. powder exports to these destinations do not necessarily equate to weak demand. Competition is fierce in the global NFDM/SMP market, particularly from New Zealand. As New Zealand faces the upcoming milk production season, and languishing whole milk powder demand from China, the island nation has been keen to orient its production toward SMP. Furthermore, U.S. production of milk powder has lagged in recent months as milk production has stumbled. Market participants have been forced to dip into inventories to meet commercial needs as manufacturers’ stocks of nonfat dry milk in the U.S. in August dropped to the lowest levels seen for the month since 2016.

Learn more about global dairy markets

• After a Modest First Half of 2024, U.S. Dairy Exports Surged in July

• Cheese, whey continue to buoy U.S. dairy exports in June

• U.S. dairy exports slip 5% in May

• April dairy exports rise 3%
  

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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.