Strong global demand and tight supply helped drive U.S. dairy product exports to a second consecutive volume record in 2021 and a new all-time high in value. Export volume in 2021 was equivalent to more than 17% of U.S. milk produced last year, also an all-time high, according to the U.S. Dairy Export Council (USDEC).
Based on details reported by USDEC’s William Loux, senior director of global trade analysis, in the most recent U.S. Dairy Exporter Blog:
- Volume basis: The U.S. set annual export records in cheese, nonfat dry milk/skim milk powder (NFDM/SMP), whey, lactose and fluid milk and cream. U.S. cheese shipments topped 400,000 metric tons (MT) for the first time, and whey surpassed 600,000 MT for the first time. NFDM/SMP fell just shy of 900,000 MT, topping out at 892,528 MT. At 57,487 MT, U.S. suppliers had their best year for butterfat exports since 2014. U.S. whey exports grew 10% to 613,944 MT in 2021, driven primarily by China. U.S. dairy exports to Mexico rebounded strongly in 2021, accounting for more than a quarter of total U.S. cheese exports in 2021 and 38% of U.S. NFDM/SMP shipments.
- Milk solids basis: 2021 U.S. export volume increased 10% over 2020 to more than 2.3 million MT milk solid equivalent.
- Value basis: The value of 2021 dairy exports rose 18% from the year before to $7.75 billion. Exports to Mexico were valued at $1.79 billion, up 27% from the prior year. Southeast Asia was the second-largest U.S. market in value terms, at nearly $1.4 billion, an increase of 11% over the previous year. However, the region was the hardest hit by delays and cancellations caused by U.S. supply chain issues, resulting in fairly flat volume performance overall.
What’s ahead?
Can 2022 provide a third consecutive year of double-digit growth? It’s possible but it won’t be easy, according to Loux.
U.S. dairy exporters managed to find success in 2021 despite substantial headwinds from logistics, and those challenges are expected to continue. Lack of trucking availability, shortages of equipment and containers, carrier companies ignoring export orders for blank loads and declining productivity at ports all took a toll on U.S. exports. Slower delivery times, higher shipping costs, unexpected fees and reputational damage all hurt U.S. exporters in key markets overseas and continue to limit the ability of U.S. dairy exports to reach their full potential.
Slower-than-average U.S. milk production growth could limit product availability for export in the short term – even if overseas demand for U.S. dairy is plentiful.
Finally, trying to match a record year of growth in existing markets will be difficult. Unlike the past two years where volumes were boosted by recovery in several key markets, 2022 growth will need to be built exclusively by new business.
Read Dairy export signposts, Part I: The macro factors and Dairy export signposts, Part II: Product breakdown for a two-part look at USDEC expectations for 2022.
CWT-assisted exports
The National Milk Producers Federation (NMPF) updated Cooperatives Working Together (CWT) program-assisted export contracts. Sales in 2021 were the equivalent of about 1.447 billion pounds of milk on a milkfat basis. January 2022 sales contracts covered 15 million pounds of American-type cheeses, 2 million pounds of whole milk powder and 1.7 million pounds of cream cheese, representing a milk equivalent of about 166 million pounds on a milkfat basis. CWT estimates are based on contracts for delivery, not completed export volumes.
Here’s a look at other export trends followed by Progressive Dairy:
Alfalfa hay exports set new record
Despite logistical problems, exports of alfalfa hay set a new record high in 2021 at 2.86 million MT, surpassing previous highs of about 2.69 million MT in both 2019 and 2020. The record came even though December shipments were the lowest since July. Total year alfalfa hay exports were valued at more than $1 billion. Alfalfa hay sales to China totaled 1.56 million MT in 2021, a new record high for any single country and representing about 55% of annual sales. At 612,710 MT, Japan was the second-leading market and represented 21% of the year’s total.
December exports of other hay were again on par with the average over the second half of 2021. Total shipments in 2021 hit 1.4 million MT, the highest since 2017. Total year exports of other hay were valued at about $497 million. At 835,625 MT, sales to Japan were the highest since 2013 and represented 60% of the U.S. total for the year. Sales to South Korea, at 304,410 MT, hit a nine-year low but still represented 22% of total annual sales in 2021.
Exports of alfalfa cubes and meal (dehydrated and sun-dried) were a mixed bag in 2021. Total volume was estimated at 163,231 MT, with a value of about $46.4 million.
Christy Mastin, sales representative with Eckenberg Farms, Mattawa, Washington, noted different factors impact hay exports to various countries.
December hay exports to China are usually down to avoid shipments arriving during the Chinese New Year’s festivals. Strength in yearlong 2021 exports can attributed to China’s attempt to increase milk production, believing milk boosts immunity to COVID-19.
In other markets, hay inventories in Japan and Korea are very low. “The delay in shipments is being felt, and we get asked to increase shipments or make earlier shipments often,” Mastin said.
Japan milk pricing hasn't changed, but dairy farmers are seeing increases in all costs, including feed. The increase in hay costs due to ocean freight, as well as unstable delivery, is causing concern among customers, and Japanese producers in search of a more consistent source of feed are turning to grains that arrive in breakbulk vessels on a more regular schedule.
Container ship delays and schedule changes have continued with little improvement, Mastin said. Hay volumes have not fully recovered for some exporters, who must be diligent to get bookings and educated about vessel opening dates, allocation and services.
In January, several days of work were lost because of the snow in Washington state, closing mountain passes and creating scheduling issues with trucks. Longer term, contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) are a concern, with hopes there is no strike or slowdown.
For more on hay exports and market conditions, check out Progressive Forage’s Forage Market Insights update.
Dairy heifer exports highest since 2018
Large year-end shipments of dairy replacement heifers to Pakistan and Vietnam pushed 2021 exports to the highest total in three years. December’s U.S. export total was estimated at 5,020 head, equaling a seven-year high in January 2020. Of the monthly total, 3,193 were shipped to Pakistan and 1,736 went to Vietnam.
As a result, exports U.S. dairy replacement heifers were estimated at 26,252 head in 2021, the highest annual total since 2018. Leading markets in 2021 were Pakistan (9,304), Vietnam (7,329) and Turkey (4,148). The two closest markets, Mexico and Canada, finished with 2,820 and 2,178 head, respectively.
Tony Clayton, Clayton Agri-Marketing Inc., Jefferson City, Missouri, said the recent rise in short-bred heifer prices has farmers and breeders with inventories to sell facing decisions over whether to hold heifers for a further rise in value in an environment of higher feed costs.
Early 2022 interest in dairy replacement heifers is on the rise. Pakistan buyers continue to seek animals before summer heat starts in late March. Another order has already been confirmed from Vietnam, and Russia may be tendering offers, although stringent animal registration requirements are likely to limit a U.S. response.
Meanwhile, use of beef sires on dairy females is limiting the availability of heifers bred to Holstein bulls. Beef prices, not only in the U.S but also Australia, are impacting dairy cattle prices worldwide, Clayton said. Clouding the picture is the escalating political tensions on the Russia-Ukraine border, which could drive fuel prices higher and begin to unravel a recovering world economy.
Other trade news
Here’s a summary of other issues about and affecting U.S. dairy and agricultural trade:
- Bottlenecks at U.S. ports and their impact on agricultural exports were the topic of a NMPF/USDEC webinar. See also an NMPF podcast summarizing the webinar and a USDEC summary.
- The USDA and dairy industry are taking steps to address logistical challenges at U.S. ports. Read previous Progressive Dairy posts: "USDA funding ‘pop-up’ site to boost dairy, ag exports" and "IDFA: Dairy Exporter Working Group formed."
- In early February, several U.S. senators representing major dairy states joined to co-sponsor the Ocean Shipping Reform Act (S. 3580), designed to alleviate delays and disruptions at U.S. ports. The House version (HR 4996) of the bill passed by a wide bipartisan vote in December. The Senate proposal gives the Federal Maritime Commission (FMC) greater rule-making authority to make it harder for ocean carriers to refuse goods ready to export at ports and set rules on what fees carriers can reasonably charge shippers.
