With cheese playing a starring role, U.S. dairy product exports capped another strong month in April. Meanwhile, exports of dairy replacement heifers remained in a slump, but hay exports were strong. Here's Progressive Dairy's monthly update on dairy-related products and global markets.
Dairy products: Say cheese
U.S. Dairy Export Council (USDEC) staff summarized April 2022 dairy product export data in a recent U.S. Dairy Exporter Blog:
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Value basis: April 2022’s total U.S. dairy export value soared 22% from a year ago to $845.6 million, second only to March 2022 as the highest month on record. In a separate report from the U.S. Census Bureau and USDA Economic Research Service, year-to-date fiscal year (FY) 2022 (Oct. 1, 2021-April 30, 2022) dairy exports were valued at $4.8 billion, up 22% from the same period a year earlier.
- Volume basis: Cheese continues to be the U.S. export star in 2022. After shipping a record 41,693 metric tons (MT) of cheese in March, U.S. suppliers repeated the performance in April with 41,375 MT in exports. It was the first time the U.S. ever exported more than 40,000 MT in two consecutive months. New U.S. cheddar capacity is helping to fuel the gains. Year-over-year U.S. cheddar exports more than doubled in April to 9,231 MT, with a big portion destined for Japan, up 271% to 3,409 MT.
Total butterfat exports grew 25% to 6,762 MT. However, that increase was attributable to a nearly fivefold increase in exports of anhydrous milkfat (AMF). Year-over-year U.S. butter exports fell for the first time in 17 months, dropping 10% to 4,476 MT.
U.S. lactose exports in April rose 12% to 43,475 MT. Whey product shipments were down 0.1% to 54,302 MT, although that was due wholly to a 19% decline in sweet whey due to lower demand from China.
Outside of sweet whey, the biggest U.S. dairy export decline in April came from nonfat dry milk/skim milk powder. Volume fell 6% to 73,529 MT.
- Milk solids basis: At 213,193 MT, April 2022’s export volume of dairy solids rose 1% from a year ago, setting a new record high for the month. April 2022 was only the fifth time U.S. dairy exports topped 200,000 MT (milk solids equivalent), the others being March 2022 and March-May 2021.
CWT-assisted exports
The National Milk Producers Federation (NMPF) updated Cooperatives Working Together (CWT) program-assisted export contracts. May 2022 sales contracts covered 5 million pounds of American-type cheeses, 49,000 pounds of butter, 13 million pounds of whole milk powder and 679,000 pounds of cream cheese.
Through the first five months of the year, contracts total 47.7 million pounds of American-type cheese, 95,000 pounds of butter, 28.5 million pounds of whole milk powder and 5 million pounds of cream cheese, for a total milk equivalent for the year of 690 million pounds (milkfat basis). CWT estimates are based on contracts for delivery, not completed export volumes.
What’s ahead
The latest USDA quarterly Outlook for U.S. Agricultural Trade, released in May, projects the value of U.S. dairy exports at a record-high $8.4 billion in FY 2022 (Oct. 1- 2021-Sept. 30, 2022). That’s up from $7.8 billion forecast in February. The increase is based on higher forecast exports of cheese and butter coupled with higher unit values for a range of dairy products.
The forecast for FY 2022 dairy imports increased $100 million from last February’s report to $4.1 billion, due to higher unit values and volumes of cheese and milk proteins. Cheese imports were forecast at $1.7 billion, also up $100 million.
Dairy heifer exports in slump
Exports of U.S. dairy replacement heifers remained in a slump in April, with continued pressure from limited supplies, higher prices and transportation costs, and geopolitical unrest. With 259 head exported during the month, the year-to-date total stands at 3,170 head, the smallest number for the January-April period since 2016 and the second-lowest total for that period since 2009.
The April shipments stayed close to home: 175 head were exported to Canada and 84 head moved to Mexico. Even those nearby markets are feeling the pressure of higher fuel and trucking costs, according to Gerardo Quaassdorff, T.K. Exports Inc., Boston, Virginia.
Quaassdorff said the U.S. is becoming a preferred supplier of cattle and foreign inquiries continue to come in. However, higher costs and fears of further inflation prevent potential buyers from signing purchase contracts, and those market conditions are stressing the ability of exporters to stay in business.
Besides volatile feed and fuel costs, geopolitical uncertainty is adding another cost: Insurance rates are increasing to move ships through the troubled waters of the Black Sea and South China Sea.
Quaassdorff said foreign demand for feeder cattle and beef replacement cattle is currently higher than for dairy replacements, but those markets face the same headwinds. Traveling to Algiers in June for an international exhibition, he said his current focus is on creating new market access for U.S. cattle in Central Asia and Northern Africa.
Meanwhile, exports of dairy embryos were up slightly in April at 647. For the January-April period, dairy embryo exports total 4,082 head, surpassing the pace in 2019 and the highest four-month total to start the year in the past five years.
Hay exports: Strong month but concerns are plenty
April exports of alfalfa hay were down slightly from March, but an uptick in foreign sales of other hay offset most of that decline.
At 231,906 MT, April alfalfa hay exports came off a five-month high, down about 20,000 MT from March. China remained the leading market for alfalfa exports at 110,191 MT, about 48% of the month’s total. At 64,944 MT, Japan was the second-leading market and represented 27% of the month’s total. Alfalfa hay exports were valued at about $399 per ton, up about $5.50 from March.
At 138,353 MT, April exports of other hay hit a 12-month high. Sales to Japan hit a 12-month high at 84,446 MT (63% of the total), while sales to South Korea at 35,441 MT were the highest in 23 months and represented 26% of the month’s total. Other hay exports were valued at about $399 per MT, up about $10 from March.
China’s hay import market still has potential to grow, according to the USDA. In February 2022, China’s government announced a five-year (2021-25) “National Feed Hay Industry Development Plan,” noting China has a 50 million MT shortage of good- quality forage.
Elsewhere, hay exporters are catching up on orders, and warehouses in Japan and South Korea are filling up, said Christy Mastin, sales representative with Eckenberg Farms, Mattawa, Washington. There are plenty of concerns, however.
Past shipping delays mean there is still old-crop hay entering the market, slowing the transition to the movement of higher-valued new crop hay. Additionally, buyer exchange rates have weakened. Since last November, pricing for Japan has increased 36%, South Korea is up 30%, and China is up 7%. Higher hay prices and transportation costs may push U.S. suppliers out of traditional markets, she said, as potential buyers turn to Australia, Europe and Canada for supplies.
Export container availability remains a concern, as many are still being shipped back to China and Asia. Negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union are underway and remain a worry, Mastin said.
Separately, the USDA’s Foreign Agricultural Service said China’s swine farms are increasingly using alfalfa pellets as feed for pregnant sows. Mastin said tight supplies and high demand for baled hay mean less U.S. hay is available for cubes and pellets, keeping the U.S. out of that market.
The USDA report did note some Chinese feed suppliers have pelletized imported baled U.S. alfalfa hay for the swine market. Spain held a 90% market share in China in 2021 and an 85% market share to start 2022. Other leading suppliers are Italy and Kazakhstan.
For more on hay exports and market conditions, check out Progressive Forage’s Forage Market Insights update.
Other export news
- The dispute over Canada’s administration of dairy tariff rate quotas (TRQs) continues, with the potential for another dispute settlement panel and a call for retaliatory tariffs on the horizon. On May 25, U.S. Trade Representative (USTR) Katherine Tai announced that the U.S. is triggering a second consultation under the U.S.-Mexico-Canada Agreement (USMCA) regarding Canadian trade practices deemed to be unfairly blocking key export opportunities for U.S. dairy farmers and processors. Read: U.S.-Canada dairy trade dispute continues.
- USDEC CEO Krysta Harden participated in a trade mission to Rome, May 22-26, to champion U.S. dairy’s critical role in nutrition security, sustainable food systems, trade and climate-smart agriculture. During the visit, the USDEC also convened an event welcoming diplomatic leaders from G-77 countries plus China. Attendees discussed dairy’s critical role in empowering women, child nutrition, farmer livelihoods and sustainable food systems and how U.S. dairy exports can help nourish vulnerable populations.
- Appearing on a panel during a conference on economics and sustainability, USDEC’s Harden said responsibilities to achieve greenhouse gas (GHG) neutrality, optimize water use and improve water quality must not all rest on the backs of dairy producers, but must include willing partnerships throughout the supply chain.
- The NMPF and USDEC welcomed the launch of the Indo-Pacific Economic Framework (IPEF), but also expressed the need for additional focus on addressing tariff and nontariff barriers that weigh down the ability of U.S. dairy exporters to keep pace with European Union and Oceania competitors that have successfully negotiated agreements across the Asia-Pacific region.
- A June 2022 USDA Foreign Agricultural Service Global Agricultural Information Network report detailed dairy production, consumption and imports in China. In 2022, China’s raw milk production is expected to reach 39.65 million metric tons (MMT), 4.5% higher than 2021 due to a larger dairy herd and improved efficiency. Import growth in 2022 is expected to slow to 1.3 MMT due to higher global prices and competition with domestic production.
- Michael Best Strategies’ Mike Dankler reported that, as of June 3, there were 79 ships in and around the ports of Los Angeles and Long Beach. The time it takes for a container to cross the Pacific fell from 102 to 100 days; the cost to ship a container from Shanghai to Los Angeles ticked up slightly from $8,700 to $8,720.
