While record cheese exports pushed U.S. exports to record heights in April, it was dairy ingredients that drove May volumes to nearly that same record level, according to a monthly update from the U.S. Dairy Export Council (USDEC). On a daily basis, May dairy product exports were the second highest for any month on record.
Overall, a surge in nonfat dry milk/skim milk powder (NFDM/SMP) to Mexico and the Middle East/North Africa (MENA) and the continued demand for whey in China were the primary drivers of ingredient export growth. Port issues continued to frustrate U.S. dairy exporters in May, but as we have seen the past few months, U.S. exporters are finding ways to manage the delays at port and address rising freight and trucking rates.
Here’s Progressive Dairy’s monthly recap of exports and trade news covering dairy products, dairy cattle, hay and more.
- Volume basis: Compared to May 2020, year-over-year growth in volume on a milk solids equivalent basis was 13%. At 88,729 metric tons (MT), shipments of NFDM/SMP were the largest that has ever shipped in a single month. Even after the record month, indications are more sales were booked and waiting for a ship. Through the first five months of the year, NFDM/SMP exports were at a record annual pace, supported by strong global demand and favorable U.S. pricing.
Cheese was the only U.S. dairy export to take a step back in May. Total volume was down 13%, with the Asia-Pacific market seeing the sharpest pullback. Much of that decline can be attributed to historically low cheese prices last year as the COVID-19 pandemic and food service closures hammered U.S. domestic cheese demand. While U.S. supply is booming this year thanks to new capacity, domestic demand also grew as food service establishments replenished pipelines for waves of customers, which also kept prices supported. On top of that, the port issues likely delayed some booked export orders in May.
U.S. total whey exports in May were up 28%, driven by growth in higher value products. No single market was driving the growth. Moving forward, the continued reopening of economies and the associated refocus on health and wellness should be a major boost for higher-valued whey demand.
- Value basis: Compared to a year earlier, the value of May 2021 U.S. exports rose by 18% to $690 million. Through the first five months of the year, the value of U.S. dairy product exports was estimated at about $3.13 bilion, up 13% compared to the same period a year earlier.
CWT-assisted exports
The National Milk Producers Federation (NMPF) updated year-to-date estimated Cooperatives Working Together (CWT) program-assisted sales totals. Through late June, accepted offers on 2021 sales have reached about 23 million pounds of American-type cheeses, 11.1 million pounds of butter, 7.1 million pounds of anhydrous milkfat, 17 million pounds of whole milk powder and 7.3 million pounds of cream cheese. These sales are the equivalent of about 836 million pounds of milk on a milkfat basis.
Hay exports remain strong
May 2021 alfalfa hay exports totaled 253,804 metric tons (MT), up slightly from April and contributing to the highest three-month total since March-May 2020. Shipments were valued at about $339 per MT, down $6 from April.
At 131,373 MT, China purchased about 52% of the monthly total. May alfalfa hay exports to the second-leading market, Japan, were about equal to April at 59,035 MT, representing about 23% of the total.
While still strong, May exports of other hay were down from April at 136,738 MT. Exports of other hay were valued at about $348.50 per MT, down $1 from April. About 61% (83,515 MT) of the month’s sales went to Japan, down about 9,000 MT from April. Shipments to another major customer, South Korea, were steady with a month earlier at 29,661 MT, representing about 22% of the total.
For more on hay exports and market conditions, check out Progressive Forage’s Forage Market Insights update.
Dairy heifer exports subdued
Dairy replacement heifer exports remained subdued in May at 462 head. With May’s sales, year-to-date exports total about 8,359 head, the second-lowest total for that five-month period since 2017.
Most of the heifer sales again stayed close to home in May: 206 relocated to Mexico and 133 moved to Canada. Other sales and destinations included 77 head to Thailand and 46 head to Pakistan.
On average, exported heifers were valued at about $1,755 per head, down about $150 per head from April. May sales to Mexico were lower, averaging $1,476 per head, while those sold to Canada averaged $2,103 per head. Elsewhere, the average was about $1,845 per head.
The business environment in the livestock export market is one not seen before, according to Gerardo Quaassdorff, T.K. Exports Inc., Boston, Virginia.
The good news is that inquiries from China, Pakistan and Vietnam are picking up. The bad news is that lines of credit and/or other financing in those countries is still slow or nonexistent, with uncertainty around currency volatility. Additionally, buyers in those countries formerly purchased lower-priced heifers from Australia and New Zealand and are seeking discounted prices for U.S.-sourced heifers.
Cattle exporters, on the other hand, can’t extend price offers more than a month due to volatility in transportation costs. Cargo planes are being used for COVID-19-related shipments that are more lucrative and certain.
Exporting dairy heifers has also become a lengthier process requiring more planning, Quaassdorff said.
To supply open heifers, exporters must get importers to commit funds well in advance to purchase heifers earlier and cover the cost of raising them to breeding age. To supply bred heifers is even more cumbersome and may be unprofitable because exporters must make sure those heifers are not bred to beef sires.
The main competition for the Chinese dairy, beef and feeder cattle markets is coming from Uruguay. Suppliers in Ireland, the Czech Republic and Russia are exporting truckloads of cattle to Central Asia.
Other trade news
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Southeast Asia, with an expanding population and rising middle class, remains the biggest growth opportunity for U.S. dairy exporters, according to a new report from CoBank. However, matching ample U.S. milk supplies with increasing demand in Southeast Asia will require U.S. processors to invest in manufacturing technology to meet the product needs of an ethnically and economically diverse consumer base. Rapid urbanization across Southeast Asia has raised per capita incomes and will lead to increased protein consumption as consumers seek healthier foods and beverages, said Tanner Ehmke, lead dairy economist with CoBank. Read the report: U.S. Dairy Processors Must Be Versatile to Compete in Southeast Asia.
- To foster further expansion of U.S. dairy exports, NMPF and USDEC called upon the Biden administration to seek renewal of Presidential Trade Promotion Authority (TPA), which expired July 1. The call for renewal comes on the one-year anniversary of the U.S.-Mexico-Canada Agreement (USMCA), enacted with the help of TPA.
