U.S. dairy product exports stayed on a growth curve for a seventh consecutive month in October, according to a monthly market update from the U.S. Dairy Export Council (USDEC). Most product categories posted gains, including nonfat dry milk/skim milk powder (NFDM/SMP), which recorded its first year-over-year increase since November 2021.
Based on data summarized in the most recent U.S. Dairy Exporter Blog:
- Value basis: Compared to a year earlier, the value of U.S. dairy exports rose 24% to $818.7 million in October, attributed to increased shipments of high-value cheese and butter as well as higher dairy prices in general. Through 10 months, the value of 2022 U.S. dairy exports stood at $8.08 billion, already an annual record, topping the 12-month total of $7.7 billion set in 2021.
- Volume basis: NFDM/SMP exports grew 11%, ending 11 straight months of year-over-year shortfalls. Fueling the gain were shipments to Mexico, up 37% and the second straight month of double-digit increases. Whey exports rose 17%, with gains across all product categories. October U.S. cheese exports rose 4%, with strongest increases to Japan, the Middle East/North Africa and Mexico.
- Milk solids basis: October exports on a milk solids equivalent (MSE) basis were up 9% from a year ago; MSE year-to-date exports are up 4%.
Export drivers, challenges
An improved U.S. supply of NFDM/SMP, along with downward-trending pricing, have been the main drivers for growth in that category.
While year-over-year U.S. cheese exports have now risen for 16 straight months, gains moving forward may be more challenging. Through the first six months of the year, year-over-year U.S. cheese exports grew by 17% – but that pace has decelerated to about 4% since July.
More recently, according to USDEC, the factors have shifted less favorably to export growth: European milk production is recovering with higher farmgate milk prices, leading to more competition overseas; U.S. domestic sales of American-type cheese have picked up, limiting exportable supply growth; and Latin American cheese demand is being impacted by cheaper analogue cheese as palm oil prices have fallen of late and economic pressures push consumers toward low-cost alternatives. These headwinds are likely to remain in the market into 2023.
CWT-assisted exports
The National Milk Producers Federation (NMPF) said November Cooperatives Working Together (CWT) program-assisted export contracts covered 6.2 million pounds of American-type cheeses, 348,000 pounds of whole milk powder and 1.2 million pounds of cream cheese. The products, contracted for shipment between November 2022 and May 2023, are equivalent to 69 million pounds of milk (milkfat basis).
Through the first 11 months of the year, contracts total 92.1 million pounds of American-type cheese, 657,000 pounds of butter, 30.7 million pounds of whole milk powder and 8.8 million pounds of cream cheese, for a total milk equivalent for the year of 1.16 billion pounds (milkfat basis). CWT estimates are based on contracts for delivery, not completed export volumes.
Other dairy, export highlights
- Separately, the Department of Commerce/Bureau of the Census estimated January-October 2022 U.S. dairy exports at $8 billion, up 25% from the same period a year earlier. Calendar year-to-date dairy imports were estimated at $4.3 billion, up 34%, with cheese imports up 5%, at just under $1.3 billion.
- After setting a record deficit in September, there was some better news in the U.S. agricultural trade balance picture. October exports were estimated at $17.5 billion, with imports at $17.1 billion. That resulted in a $424 million ag trade surplus during the month, the first since a surplus in February. Year to date, the U.S. ag trade balance deficit is $4.68 billion.
U.S. dairy heifer exports remain low
The latest monthly report from USDA’s Foreign Agricultural Service (FAS) estimated October sales of U.S. dairy heifers to foreign buyers at 540 head. Although still low, it represented the largest number exported since June.
The dairy replacements stayed close to home, with 346 moving to Mexico and 194 to Canada. Year-to-date sales were estimated at 7,465, averaging 747 per month and nearly matching a 15-year low in 2016.
While inquiries for U.S. dairy replacement heifers continue to come in from Pakistan, Egypt, Qatar and Vietnam, low U.S. inventories are leaving exporters unable to fill shipments, said Tony Clayton, Clayton Agri-Marketing Inc., Jefferson City, Missouri. Supplies are limited because either dairy heifers are bred to beef bulls – undesirable for potential buyers – or dairy heifers are being held to serve as replacements in domestic herds or priced at levels international customers are not willing to pay. China has turned to Chile to source pregnant Holstein heifers.
Unfavorable exchange rates, high vessel charges and limited supplies of dairy-bred heifers continue to hamper exports, said Gerardo Quaassdorff, T.K. Exports Inc., Boston, Virginia. The next six months could be pivotal in how the market evolves. U.S. cattle exporters are attempting to persuade foreign buyers – especially buyers in countries with volatile economies – that dairy heifers bred to beef bulls might be a good option, providing more marketing flexibility to serve beef and dairy markets.
At 261 head, October exports of beef replacement heifers were also up slightly from September. Year-to-date beef replacement exports are estimated at 6,483 head.
Dairy embryo sales lower
Exports of dairy embryos held steady in October at 1,056, well below August’s 20-month high of 2,423. China remained the largest market for U.S. dairy embryos during the month, but sales dropped to a five-month low at 528. Other markets during the month were Australia (283), Japan, (95) the United Kingdom (61) and Germany (58).
For the January-October period, dairy embryo exports totaled 13,005, the highest 10-month total to start the year in the past five years.
Hay exports slower
At 220,246 metric tons (MT), October alfalfa hay exports slipped to four-month low. Monthly exports were down nearly 28,000 MT from the month before and down 117,000 MT from August.
Much of the decline can be attributed to lower sales to China, which also hit a four-month low at 147,978 MT. Despite the volume decline, sales to China represented 67% of all alfalfa hay exports in October.
At 24,764 MT, sales to Japan were up slightly from September but still near a seven-year low and represented 11% of the month’s total.
Demand for other U.S. alfalfa products also slowed. At 3,130 MT, October exports of dehydrated alfalfa cubes were the lowest since November 2008. Monthly shipments of sun-dried alfalfa meal dried up completely, with no export volumes reported. Exports of dehydrated alfalfa meal fell to a 37-month low.
Export volume for other hay hit a four-month high but remained weak in October. Foreign sales totaled 86,643 MT, up about 10,000 MT from the month before. At 51,692 MT, October sales to Japan were the highest since June and represented about 60% of the monthly total. October sales of other hay to South Korea were the fourth lowest of the year.
For more on hay exports and market conditions, check out Progressive Forage’s Forage Market Insights update.
