October 2023 U.S. agricultural export numbers were mixed, helping slow growth in the U.S. ag trade deficit. Dairy product export headwinds remain. Here’s Progressive Dairy’s 30,000-foot look at dairy-related categories.
Dairy product exports mixed
Global inflation and poor economic growth continue to challenge U.S. dairy product export suppliers, according to a monthly market update from the U.S. Dairy Export Council (USDEC). USDEC data indicates bright spots in the October dairy product trade picture were related to whey proteins, cheese and lactose, offset by declines in milk powder, butterfat and other whey products. The end result was the ninth straight decrease in year-over-year shipments on a milk solids equivalent (MSE) basis.
There is some good news: U.S. MSE dairy exports fell 6.6% in October after monthly declines averaged more than 12% since April.
In most categories, the news was mixed. Increased cheese sales to Mexico and China were offset by larger declines to Japan and Korea. Strong double-digit growth from grated or powdered cheese was offset by declines from other cheese types. While whey protein concentrate volume rose, that was countered by sharp declines in U.S. shipments of dry and modified whey. The biggest increase in U.S. sales came in lactose, but butterfat exports plummeted.
With October’s numbers, the Department of Commerce/Bureau of the Census estimated calendar year 2023 (January-October 2023) dairy product exports at about $6.78 billion, down 16% from 2022. Calendar year 2023 dairy imports were estimated at just under $5 billion, up 4%, with cheese imports up 12% at $1.44 billion.
CWT-assisted exports
The National Milk Producers Federation (NMPF) said October 2023 Cooperatives Working Together (CWT) program-assisted export contracts covered almost 59 million pounds of milk on a milkfat basis. Year-to-date CWT export sales were equivalent to 751.6 million pounds on a milkfat basis.
Rabobank outlook
A new report from Rabobank said limited world milk supply growth and lackluster demand led to soft dairy commodity pricing in 2023. However, the global dairy market appears to be transitioning to the next phase in its cycle, with prices expected to move higher through 2024. Still, the market remains finely balanced, and uncertainty remains surrounding underlying demand for 2024. Rabobank’s milk supply outlook for 2024 has weakened, with sluggish growth expected across most export regions. Year-over-year milk production from the “Big 7” exporting regions (U.S., European Union, China, Australia, New Zealand and South America) is forecast to decrease through the first quarter of 2024 before turning positive. Overall, milk supply is forecast to grow by a modest 0.3% for the entire year.
Dairy export forecast
The value of fiscal year (FY) 2024 (Oct. 1, 2023-Sept. 30, 2024) dairy product exports is expected to fall back to 2021 levels. The value of exports is forecast at $7.2 billion, down from $9.1 billion in FY 2022. The forecast for FY 2024 U.S. dairy imports is $5.4 billion, up from $5.28 billion in FY 2023.
Read: Weekly Digest: DMC payments, dairy export updates
Dairy heifer sales jump
The USDA’s Foreign Agricultural Service (FAS) estimated export sales of U.S. dairy replacement heifers jumped to a 22-month high in October, with strong demand from cattle buyers where foot-and-mouth disease (FMD) outbreaks decimated herds. October sales totaled 4,202 head, with 3,835 heifers moving to Saudi Arabia.
January-October exports now total 14,773 head, nearly double the number exported during the same period a year ago.
Besides live dairy replacements, exports of dairy embryos were estimated at 403 in October, the lowest monthly total since August 2018. The year-to-date now stands at 8,754, well below a year ago. China is the leading market for the year with 3,982.
Alfalfa exports lower
October exports of alfalfa hay were estimated at 181,581 metric tons (MT), a three-month low. Export volume to China was the highest since February, taking more than 47% (85,828 MT) of the total. January-October sales are still the smallest for that period since 2015.
October exports of other hay hit a 17-month high at 99,268 MT. The increase was primarily supported by increased sales to longtime market leaders Japan and South Korea, which both purchased highest volumes of the year. Year-to-date sales total 812,583 MT, the smallest total to start a year in at least two decades.
Ag trade deficit smaller
October’s U.S. ag trade balance was negative, although the deficit was the smallest in eight months. The U.S. Department of Commerce/Census Bureau estimated the value of October agricultural exports at $16.64 billion and the value of ag imports at $16.09 billion, yielding a trade balance of -$261.7 million for the month. Through October, the calendar year 2023 agricultural trade deficit is about $20 billion.
The latest ag trade forecasts paints a cloudy picture for overall U.S. agricultural trade.
Fiscal year (FY) 2024 ag exports are now projected at $169.5 billion, down $2.5 billion from FY 2023. FY 2024 ag imports are forecast at $200 billion, up about $4.6 billion, yielding an ag trade deficit of $30.5 billion. The U.S. ag trade balance was last positive in FY 2021, with exports ($171.8 billion) topping imports ($163.3 billion).
Read: Weekly Digest: DMC payments, dairy export updates
Other trade news
In late November, a U.S-Mexico-Canada Agreement (USMCA) panel ruled in favor of Canada in a long-simmering dispute with the U.S. dairy industry over market access. In the ruling, the panel ruled that Canadian tariff rate quota (TRQ) allocations do not breach commitments established under the agreement. U.S. dairy organizations expressed disappointment in the ruling.
Read: Dispute panel sides with Canada over TRQs, dairy market access
In early December, House Republican members from Wisconsin wrote to the USDA and U.S. trade representative, protesting the ruling and calling on the Biden administration to evaluate all possible options.
