U.S. dairy exports finished what was an already stellar year with gusto, according to a monthly market update from the U.S. Dairy Export Council (USDEC). Based on December and annual data summarized in the most recent U.S. Dairy Exporter Blog:
- Value basis: Year-over-year exports grew 21% in December (+$128 million), putting total 2022 value at over $9.6 billion, up 25% (+$1.9 billion).
- Volume basis: Compared to December 2021, most all major export products grew in December 2022, with cheese up 16%, nonfat dry milk/skim milk powder up 8%, whey products up a combined 20% and lactose up 30%. Of the major products, only butterfat and fluid milk/cream were down, about 4% each. Total annual volume topped 2.57 million metric tons (MT), up nearly 6% from a year earlier.
- Milk solids basis: December exports on a milk solids equivalent basis were up nearly 16%, pushing year-to-date exports to 2.4 million MT, up 5% from 2021. Export volume was equivalent to about 18% of U.S. milk produced last year, an all-time high.
Export drivers, challenges
Despite the strong finish to the year, total 2022 nonfat dry milk/skim milk powder exports were down 6%, primarily limited by lack of production and supplies. Looking to 2023, global supply and inventory management will be key drivers of trade. With lower prices, many key importers are rebuilding stocks, but the major question hinges on China, where imports have been extraordinarily weak in 2022.
Available and affordable U.S. cheese drove exports to record heights in 2022, finishing just shy of 1 billion pounds, easily setting a new record. Looking ahead, favorable tailwinds are likely to dissipate. Competition from Europe is increasing as their milk production climbs. With China’s demand for ingredients remaining weak, New Zealand has increased its focus on cheese production and exports.
Exports of high-protein whey products were flat in 2022, as strong domestic demand kept production at home and high prices likely gave international buyers pause. Turning to 2023, domestic purchasing is running weaker to start the year, while cheese (and therefore high-protein whey) production is holding strong, suggesting an increase in exportable supplies.
Low-protein whey exports were bolstered by growing Chinese demand in the back half of 2022, driven by increased use in hog feed. Looking into 2023, falling pork prices could diminish whey demand. With growing pessimism surrounding the Chinese economy, demand is in question – including pork – as consumers rein in expenses. Like many other products, expect U.S. low-protein whey exports to face increased competition in 2023, as global production increases and demand faces headwinds.
CWT-assisted exports
The National Milk Producers Federation (NMPF) said 2022 Cooperatives Working Together (CWT) program-assisted export contracts covered 98 million pounds of American-type cheeses, 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 1.212 billion pounds (milkfat basis). CWT estimates are based on contracts for delivery, not completed export volumes.
“For the third consecutive year, U.S. dairy farmers have proven how their dedication to innovation and sustainability leadership increasingly have made them the world’s provider of choice for nutritious dairy products,” said Jim Mulhern, NMPF president and CEO. “In both value and in volume, U.S. sales are at all-time highs, and in 2022, a record percentage of U.S. milk production was exported overseas. This happened despite the headwinds our exporters battled last year, which included supply chain challenges, a lack of new trade agreements to establish more level playing fields abroad and other barriers to trade that threatened to upend progress.”
Other dairy export highlights
- Separately, the Department of Commerce/Bureau of the Census estimated 2022 U.S. dairy exports at $9.15 billion, up 25% from the same period a year earlier. Calendar year-to-date dairy imports were estimated at $5.27 billion, up 34%, with cheese imports up 6% at just under $1.57 billion.
U.S. dairy heifer exports picking up
A large shipment to Russia in December wasn’t enough to change the narrative related to dairy replacement heifer exports in 2022.
The latest monthly export report from USDA’s Foreign Agricultural Service (FAS) estimated December sales of U.S. dairy heifers to foreign buyers at 2,860 head, the highest monthly total of the year. Of those, 2,484 headed to Russia, with the remainder moving to Mexico (263) and Canada (103).
Total 2022 dairy replacement heifer exports were estimated at 10,688, averaging 891 per month. Both were the lowest since 2007. Pakistan was the leading market for the year at 2,584 head.
At 1,501 head, December beef heifer exports were the second-highest monthly total of the year. Most (1,253) were exported to Canada. Total 2022 exports were estimated at 8,988 head, with about 71% (6,374 head) shipped to Canada.
While 2022 has been a struggle, exporters could see a stronger start to 2023, said Tony Clayton, Clayton Agri-Marketing Inc., Jefferson City, Missouri. January shipments to Turkey included both dairy and beef cattle, and a dairy cattle shipment departed for Vietnam in early February.
“There is more interest from international buyers, with strong inquires from Turkey, Egypt, Algeria, Qatar, Pakistan and Vietnam, just to name a few,” Clayton said. With an outbreak of foot-and-mouth disease in Jordan, importing dairy cattle will be necessary to fill dairy product demand.
“The problem is all of these countries will be in a bidding war for a low number of cattle that are available,” he continued. For the countries in the Middle East that take shipments off the U.S. East Coast, dairy heifer supplies are very limited. And, while there seems to be more cattle west of the Mississippi River, trucking rates to move thousands of cattle cost a small fortune. European companies are calling the U.S. trying to source dairy cattle but are frustrated with low supplies and the high percentage of dairy heifers bred to beef bulls.
Dairy embryo sales strong
In contrast to live animals, exports of dairy embryos posted another strong month in December. At 2,026, it marked the fourth-highest monthly total of the year. China remained the largest market for U.S. dairy embryos during the month at 1,760, bringing the annual total to 12,150. Dairy embryo exports totaled 17,579 in 2022, surpassing the recent record high of 14,590 in 2020.
Hay exports end year weaker
Easing logistical problems and strong demand from China supported alfalfa hay exports all year, but a weak December left 2022 alfalfa hay export volumes below 2021’s record high.
December 2022 exports of alfalfa hay were estimated at 189,265 MT, the lowest monthly total since January 2021. At 100,013 MT, sales to China were the lowest since January 2021. At 2.847 million MT, total 2022 alfalfa hay exports came in about 15,000 MT less than the year before. China was the destination for about 57% of all U.S. alfalfa hay exports during the year, topping 1.63 million MT. Exports of alfalfa hay peaked in August at more than 337,100 MT and averaged about 237,250 MT per month.
With higher alfalfa hay prices, there was a surge in sun-dried alfalfa meal exports in 2022.
Exports of other hay continued to soften all year, with December’s total at just 70,640 MT, the lowest monthly total since at least 2005. Sales to the major markets of Japan and South Korea were weaker. With the annual total of just under 1.2 million MT, it was also the lowest volume in at least 17 years. Japan maintained its spot as the top market, taking about 59% of other hay shipments during the year, followed by South Korea at 24%. Monthly exports of other hay peaked in March-May and averaged about 99,590 MT per month, down nearly 17,000 MT from 2021.
Ag trade balance
The U.S. ag trade balance was positive for a third consecutive month in December, but that wasn’t enough to overcome trade deficits in eight of 12 months during the year. The U.S. Department of Commerce/Census Bureau estimated the value of December agricultural exports at $17.03 billion and the value of ag imports at $15.8 billion, yielding a positive trade balance of over $1.2 billion for the month. However, the 2022 calendar year agricultural trade deficit was just over $2 billion.
