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  • U.S. dairy exports slip 5% in May

    By USDEC Staff July 8, 2024

    As cheese continued to shine, lower exports of milk powder and lactose weighed on the total figure.

    U.S. dairy exports dipped in May, falling 5% compared to the same month last year in milk solids equivalent terms (MSE). The decline comes on the heels of an increase in April and offers the latest evidence that U.S. exports have struggled to gain real traction so far this year. Overall, May exemplified the up-and-down nature of 2024, with export sales mixed due to wide variation across products and regions.


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    U.S. dairy exports saw modest declines to China (-6%, -2,269 MT MSE) and Canada (-10%, -1,105 MT MSE), though these were more than offset by rising exports to Mexico (+4%, +2,319 MT MSE), Central America/Caribbean (+19%, +1,962 MT MSE), and South Korea (+25%, +1,208 MT MSE). However, dairy exports to Southeast Asia dropped decisively lower as exports of nonfat dry milk/skim milk powder (NFDM/SMP) to Southeast Asia fell by more than half (-51%, 14,265).

    Yet even as the overall U.S. export performance was effectively flat, cheese and whey excelled. U.S. cheese exports in May soared to 48,029 MT, an enormous 47% (+15,274 MT) YOY increase and nearly notching a new record high, coming in second only to March’s extraordinary figure.

    Likewise, whey exports also improved in May. High protein whey exports continued their upward campaign, increasing 19% (+1,213 MT) YOY in May as Chinese demand soared (+190%, +1,709 MT) and more than compensated for weaker exports to Southeast Asia (-47%, -273 MT) and Japan (-14%, -181 MT). Positively, gains in the whey complex were extended to include low-protein whey products, which rose by 17% (+6,522 MT).

    So far this year, U.S. dairy exports have fluctuated compared to prior year levels – rising one month, then falling the next. The challenge over the balance of 2024 will be to seek opportunities to increase shipments in a sustained and consistent way. Continued improvement in the global economy combined with rising consumer confidence should help to usher in stronger dairy demand for a variety of products, while improvement in the Chinese pork sector is likely to boost whey demand. However, serious headwinds persist.

    Cheese steals the show

    It is difficult to overstate just how impressive cheese exports have been so far this year. In every month of 2024, cheese exports have led last year by a significant margin and the three highest months of cheese exports ever were achieved in March, May, and April of this year, in that order. Cumulatively, cheese exports over the first five months of the year are up 27% (+47,921 MT).

    Impressively, cheese exports were up across all major varieties. The category “Other Cheese,” which is primarily gouda, parmesan, and non-standard cheeses, saw the biggest increase in May in absolute terms, rising 51% (+5,038 MT). But the remaining varieties were not to be left behind as fresh cheese exports surged 65% (+4,598 MT) while shredded cheese and cheddar were up 27% (+2,956 MT) and 55% (+2,682 MT), respectively.

    Even as we celebrate May’s success, we caution readers from expecting similar months moving forward as highly competitive prices for U.S. product also played a key role in supporting U.S. cheese exports through May. Assuming that U.S. product shipped in May was booked about two to three months earlier, this product was likely sold when the U.S. spot market for block Cheddar was around $1.50/lb. - and enjoying a significant discount to other international suppliers, which the unit value data seems to suggest.

    As cheese prices rallied, the clear incentive for cost-conscious buyers to source from the U.S. has cooled. Positively, other suppliers have also seen their cheese prices rise in recent weeks, so for the moment, there is a high level of convergence across cheese prices from different suppliers.

    Overall, the U.S. remains incredibly well-positioned to continue supplying the global market with cheese. Strong momentum early in 2024 has positioned the market for success, especially if global economic activity continues to grow, as most analysts expect. Furthermore, as new capacity comes online over the balance of this year and into 2025, there will likely be additional product allocated for export. While pricing dynamics could create some challenges in Q3, 2024 appears poised to be a record-high year for cheese exports.

    NFDM/SMP challenged in Southeast Asia

    Dramatically lower demand from Southeast Asia weighed heavily on U.S. exports during May. Overall, U.S. exports to the region totaled just 34,010 MT MSE, down 26% (-11,820 MT MSE) YOY. This is the weakest performance since last September and represents the lowest exports for the month of May since 2017. Furthermore, May’s poor performance comes on top of weak numbers last year. Taken together, U.S. exports to Southeast Asia in May were down 47% versus May 2022.

    Breaking out performance across products shows us that the decline was driven almost entirely by lower milk powder exports. U.S. exports of NFDM/SMP to the region collapsed to less than half of last year’s levels (-51%, -14,265 MT). Losses were seen across the region but the largest decreases in absolute terms were experienced by the Philippines (-49%, -4,893 MT), Indonesia (-61%, -4,762 MT), and Vietnam (-48%, -2,436 MT).

    The gravity of May’s losses was particularly striking because Southeast Asian demand for U.S. NFDM/SMP had been on the upswing even though it was inconsistent thanks to substantial gains in February and March. The extreme decline in May, however, pulled cumulative exports to the region down by 8% (-8,726 MT) compared to prior year.

    Economic performance in Southeast Asia has been respectable to start the year, rendering May’s decline even more curious. According to a recent report published by McKinsey & Co., GDP growth in the first quarter accelerated in almost every major economy in Southeast Asia, with Thailand posing the only exception. The improvement was driven by stronger industrial output, heightened export activity, and continued moderation of inflation. Though the situation remains precarious, analysts largely expect economic growth to continue.

    So, if the economy is performing well, why did U.S. exports fall? One plausible explanation is that the U.S. lost ground to other suppliers. Complete international data is not yet available for May, but if we use April as a proxy, we observe that while U.S. NFDM/SMP exports to Southeast Asia fell by 11% (-2,165 MT), expanded exports from New Zealand, Europe and Australia satisfied higher regional demand. In addition, weaker currencies in Southeast Asia may also have reduced purchasing power and weighed on demand. The same McKinsey report shows that every major market saw their currencies weaken in Q1.

    Stronger economic performance bodes well for future regional demand, but it will be critical for U.S. product to remain competitive against other global suppliers, especially as China’s demand falters and EU and Oceania exporters look for alternative customers.

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