Dave Natzke

Editor / Progressive Dairy

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Writing in the most recent U.S. Dairy Exporter Blog, William Loux, senior director of global trade analysis, summarized January 2022 dairy export data and discussed key reasons for the divergence between volume and value:

• Value basis: A tighter global market raised unit values across the dairy complex. January 2022’s total U.S. dairy export value grew 16% from a year ago, up $80.6 million to $586 million.

The average price of nonfat dry milk/skim milk powder (NFDM/SMP) exports increased by $739 per metric ton (MT) from the previous January. Dry whey rose by $458 per MT, and cheese increased by $68 per MT.

• Volume basis: Year-over-year export volume was up 4,202 MT (17%) for cheese and 1,707 MT (53%) for butterfat. However, the major volume decline came from whey, down 6,742 MT (16%).

A 74% jump in cheese sales to Mexico drove the gain, but Australia, the Caribbean and Southeast Asia also contributed. Other major U.S. cheese markets from 2021 – the Middle East/North Africa, Central America and Japan – took a breather in January. Those slowdowns might stem in part from food service uncertainty related to the omicron wave of the pandemic that began hitting importing nations in late November and is still making its way around the world.

• Milk solids basis: At 156,488 MT, the export volume of dairy solids declined by 3%, down 4,438 MT.

What’s ahead?

While it is important not to overstate one month of data, Loux expects export volume will likely be choppy in the first half of 2022 given supply chain difficulties and slower supply growth, Loux wrote.

The major driver behind the decline in dairy export volume is the decline in whey demand, particularly from China, which is more than a one-month blip. Loux cites two main factors: China’s falling demand and tight sweet whey supplies. Both factors are likely to act as a persistent headwind to U.S. dairy export volume through the first quarter even as value is likely to stay strong.

Most U.S. low-protein whey products shipped to China end up in the animal feed sector, and a combination of lower pork prices and higher feed costs have eaten into China’s pork industry’s margins and thus dampened the incentives to expand production.

Beyond a rebalancing market in China, the supply of sweet whey has been limited and expensive. Dry whey prices are at record highs, and U.S. dry whey production fell by 12% in the second half of 2021, caused by milk production slowing and demand for protein in the health and wellness sector.

More clarity on 2022 cheese demand should come in the months ahead, USDEC’s Paul Rogers wrote. However, the U.S. remains well-positioned from a production standpoint and in a favorable price position to meet overseas needs, with a geographic advantage to serve growing Latin American markets. Overall, sharply growing cheese exports should provide a major boost to U.S. export value.

CWT-assisted exports

The National Milk Producers Federation (NMPF) updated Cooperatives Working Together (CWT) program-assisted export contracts. February 2022 sales contracts covered 14.9 million pounds of American-type cheeses, 12.2 million pounds of whole milk powder and 1.4 million pounds of cream cheese.

Through the first two months of the year, contracts total 29.9 million pounds of American-type cheese, 14.1 million pounds of whole milk powder and 3.1 million pounds of cream cheese, for a total milk equivalent for the year of 402 million pounds (milkfat basis). CWT estimates are based on contracts for delivery, not completed export volumes.

Other trade news

Here’s a summary other issues about and affecting U.S. dairy and agricultural trade:

• The forecast for fiscal year (FY) 2022 U.S. dairy exports brightened further in the latest USDA quarterly Outlook for U.S. Agricultural Trade report, released in late February. The forecast value of U.S. dairy imports also jumped substantially.

FY 2022 (Oct. 1, 2021-Sept. 30, 2022) dairy exports were forecast at $7.8 billion, a new record high, based on rising unit values offsetting lower volumes.

The value of FY 2021 dairy exports topped $7.31 billion, continuing a three-year growth trend, up from $6.46 billion in FY 2020 and about $5.6 billion in both FY 2018 and 2019.

The forecast for FY 2022 dairy imports increased $700 million from last November’s report to $4 billion due to higher expected unit values and volumes of cheese, butter and milk proteins. Cheese imports were forecast at $1.6 billion.

FY 2021 U.S. dairy imports were estimated at $3.72 billion, with cheese imports valued at $1.43 billion in FY 2021.

• The heads of the USDEC and NMPF have endorsed the Ocean Shipping Antitrust Enforcement Act, introduced in the House.

“U.S. dairy exporters experience a litany of unfair practices from foreign-owned ocean carriers – including unprecedented shipping rates, fees often incurred out of the exporters’ control, intentional lack of transparency and continually rolled bookings,” said Krysta Harden, USDEC president and CEO. “Due to the high concentration of power in the largely foreign-owned shipping industry, American dairy exporters have little option other than to accept these unwarranted fees and delays as a business expense."

Jim Mulhern, NMPF president and CEO, said the dairy industry faced over $1.5 billion in added costs and lost sales in 2021 alone because foreign-owned shipping lines broke contracts and canceled shipments without warning.

• On her first anniversary as USDEC president and CEO, Harden examined past growth and future opportunities. Read her comments on the U.S. Dairy Exporter Blog.
  
  
• The USDA released year-end 2021 export data in February. As expected, U.S. dairy exports came through with double-digit growth to surpass all-time records for volume and value. The USDEC provides an infographic that quantifies, illustrates and illuminates the record year.

Editor’s note: Due to technical difficulties with its website, the USDA’s Foreign Ag Service was unable to provide updates on U.S. hay and dairy replacement heifer exports normally reported by Progressive Dairy. Check back later for updates when they become available.