U.S. dairy exports up 30% year-over-year to US$4.82B as suppliers capitalize on strong global markets, U.S. Dairy Export Council says; exports total 13.3% of U.S. milk solids production, up from 12.8% last year
March 2, 2012
– U.S. dairy suppliers capitalized on strong global markets to achieve record export sales in 2011, boosting shipments in a year when milk supplies from competing regions increased dramatically.
Processors and traders moved 3.24 billion lbs. of total milk solids into export channels last year, seven percent more than 2010, and 49 percent more than 2009. Overseas shipments were valued at $4.82 billion, up 30 percent from the year before, according to government trade data released last week.
With these gains, a growing and significant proportion of the U.S. milk supply is now sold overseas, notes the U.S. Dairy Export Council (USDEC). Exports were equivalent to 13.3 percent of U.S. milk solids production, up from 12.8 percent in 2010 and 9.3 percent in 2009. The ratio of milk powder, whey proteins, lactose and cheese sold offshore was the highest ever, a sign of how important exports have become to the U.S. dairy industry.
“The most important benefit of our ongoing export expansion is that it enables U.S. dairy farmers to grow,” says Les Hardesty, a dairy producer from Greeley, Colo., chairman of USDEC and a board member of Dairy Management Inc., which is USDEC’s primary funder. “Since 2003, U.S. milk production has increased 15 percent and more than half (60 percent) of the incremental milk volume has been sold overseas. USDEC’s long- term engagement with U.S. suppliers in overseas markets has helped make that possible.”
Export volumes also were remarkably consistent throughout the year, helping to forestall boom-and-bust cycling on the domestic market. The U.S. dairy industry has exported between 12 and 15 percent of its production for 21 straight months. Nonfat dry milk/skim milk powder (NDM/SMP) exports have been between 33,000 tons and 40,000 tons (74 million lbs. and 87 million lbs.) for 14 consecutive months.
The global dairy markets in 2011 were characterized by the same robust and resilient demand that has prevailed since the economic crisis of 2008-09. International markets remained strong throughout the year despite significant supply growth around the world. Milk production in the Southern Hemisphere was particularly heavy (New Zealand up 10 percent, Argentina up 14 percent), and the European Union posted a two-percent increase, the largest gain since it implemented a quota regime in 1984. All told, production in Europe, Oceania, Argentina and the United States increased by 7.6 million tons (17 billion lbs.) last year.
And yet buyers around the world absorbed this added supply, so even as prices softened in the second half of the year they didn’t collapse.
China’s imports continue to underpin global markets. Purchases of milk powder, whey proteins, cheese and butterfat increased 18 percent in 2011, after doubling from 2008 to 2010. Aggregate import volume of those selected products has grown by a whopping 525,000 tons (1.2 billion lbs.) in three years, and expectations are for continued large purchases in 2012.
Almost every other significant importer boosted orders as well. In Mexico, the United States’ first billion-dollar export market, imports of milk powder, whey, cheese and butterfat were up about 12 percent. In the sizeable Southeast Asia region, imports of those selected products were up about 5 percent, led by additional orders from Indonesia. Japan (+9 percent) and South Korea (+35 percent) also posted solid growth. In addition, sales to the Middle East/North Africa region, led by Algeria and Egypt, were strong. In fact, the only major buyer to pull back was Russia, where imports were off about 11 percent from 2010’s elevated level.
On the whole, the United States maintained its share of these rising markets – a testament to its evolving level of commitment to the global market. The most notable shifts were that U.S. suppliers increased their share of the global cheese market, where foodservice expansion is driving cheese consumption, but failed to keep pace on whey, due primarily to lower overall tonnage as production moved to higher-protein concentrations.
Global dairy markets have undergone a structural change over the last two years, in which international prices appear to have moved into a higher trading range.
For instance, in 2011, international benchmark prices for cheese, milk powder and whey were 18-30 percent higher than the average of the previous five years. Butterfat values were up more than 50 percent. That made U.S. suppliers competitive in all product categories, Suber notes.
“Prices will always cycle higher and lower; after strengthening through the first half of 2011 they’re currently in a downward trend,” says Tom Suber, president of USDEC.
“But as USDEC and outside analysts have long anticipated, global demand has outstripped the capacity of the lowest-cost suppliers,” he explains. “Therefore dairy prices have moved to a higher threshold to encourage production from other producers, and the United States has been one of the biggest beneficiaries.
“Current price softness notwithstanding, we are seeing global dairy demand sustained at higher levels than in the past, as purchasing power continues to increase in emerging markets,” he says. “And because the costs of alternative proteins and fats also have risen with global food inflation, substitution pressure is less pronounced.”
2012 will be more challenging
Markets conditions in early 2012 are more challenging for U.S. suppliers. Prices have eased about 10-20 percent from the spring 2011 peak. Sellers’ offering prices are more aggressive. Buyers are comfortable with current holdings and in no rush to buy ahead. And global economic issues remain a demand concern, particularly in Europe.
“The resolve of U.S. suppliers will be tested in 2012. But the importance of the export market to the health of the U.S. dairy industry is undeniable,” says dairyman Hardesty. “More than one of every eight tankers of milk that rolls out of producers’ driveways is turned into a dairy product that’s consumed overseas.”
2011 Dairy Export Highlights
• U.S. dairy exports in 2011 were valued at $4.82 billion, up 30 percent vs. 2010 totals of $3.71 billion. Exports have increased 21 percent annually over the last eight years.
• U.S. dairy imports increased 13 percent in 2011 to $2.93 billion. On a volume (total solids) basis, imports increased four percent. Export volume was more than four times the level of imports.
• 2011 export volume (total solids) was 3.242 billion lbs., equivalent to 13.3 percent of U.S. milk solids production. This percentage was up from 12.8 percent in 2010 and 9.3 percent in 2009. Exports equaled 49 percent of the NDM/SMP produced in the United States last year, 55 percent of the dry whey, 69 percent of the lactose, 7.6 percent of the butter and 4.7 percent of the cheese. The NDM/SMP and cheese figures were all- time highs.
• Exports of NDM/SMP, cheese, WPC, WPI, lactose and fluid milk reached record levels in 2011.
• Mexico remained the largest customer for U.S. dairy exports, with sales of $1.16 billion in 2011. Other top markets were Southeast Asia ($963 million), Canada ($496 million), China/Hong Kong ($383 million), Middle East/North Africa ($375 million), Japan ($277 million) and South Korea ($222 million).
• USDA reported exports of 961 million lbs. of nonfat dry milk/skim milk powder (NDM/SMP) last year (+13 percent from 2010) and 48 million lbs. of whole milk powder (WMP) (-59 percent).
• U.S. suppliers shipped 398 million lbs. of NDM/SMP/WMP to Mexico, up 44 percent from the year before. They moved nearly the same volume to Southeast Asia, where the Philippines, Indonesia and Vietnam remained top customers. Mexico and Southeast Asia made up more than 80 percent of U.S. milk powder exports. Shipments to most other markets declined from prior-year levels.
• U.S. cheese exports jumped to 495 million lbs. in 2011, up 29 percent from the prior year. 2011 shipments were driven by strong business in South Korea (up 82 percent vs. 2010), Japan (up 54 percent) and Middle East/North Africa (up 17 percent). Mexico remained the largest market for U.S. cheese exporters, taking 106 million lbs.
• U.S. exports of whey proteins in 2011 were 993 million lbs., down fractionally from the year before. Exports of sweet whey decreased 1 percent to 551 million lbs. Salesof whey protein concentrate (WPC) and other modified whey proteins increased 1 percent to 404 million lbs. and exports of whey protein isolate (WPI) increased 3 percent to 38 million lbs.
• China and Southeast Asia continue to drive whey volume, accounting for more than half of 2011 exports. Sales to China were up 16 percent, while Southeast Asia was up 1 percent. Most other major markets for U.S. whey products posted declines: exports to Mexico were down 10 percent, Canada down 3 percent, Japan down 15 percent and South Korea down 23 percent.
• Shipments of butterfat increased 12 percent to 138 million lbs. More than 40 percent of the volume went to the Middle East/North Africa region (primarily Saudi Arabia, Morocco and Egypt). U.S. butterfat also moved into the EU and Mexico.
• U.S. lactose exports were 687 million lbs., up 13 percent from a year earlier. The leading destination was Oceania, where processors in New Zealand (and to a lesser extent, Australia) use lactose for standardization. Sales to the region were 135 million lbs., 75 percent more than the previous year. Other major markets included China, Southeast Asia, Japan and Mexico.
• Exports of fluid milk and cream increased 9 percent in 2011 to 173 million lbs. Sales to Canada were flat, while shipments to Mexico decreased 16 percent. However, exporters captured significant new sales (24 million lbs.) to South Korea.
• Ice cream exports gained 15 percent to 81 million lbs. Sales to Mexico, the primary market for U.S. frozen desserts, increased by 16 percent.
• Exports of food preparations (blends) increased 14 percent to 156 million lbs. Nearly half of the volume went to Canada, where purchases were up 26 percent from prior year.