The latest trade reports reveal another month of poor markets, with U.S. dairy product exports slipping 5% from the modest growth seen in April. Despite concerns for the relatively flat U.S. dairy export performance in 2024, cheese continues to impress. Here’s Progressive Dairy’s 30,000-foot view at dairy-related export categories.
Falling exports in May add to rollercoaster year
U.S. dairy exports fell in May on the heels on an exciting rise in April, according to the U.S. Dairy Export Council’s monthly market update. The 5% decline reflects a pattern where some products are thriving in the markets while others are not; cheese is one of those that continues soaring month after month.
In May, U.S. cheese exports were recorded at 48,029 metric tons, a tremendous increase of 47% year over year and just shy of surpassing March’s record-high volume. Cumulatively, exports of cheese over the first five months of 2024 are up 27%. Whey, too, continued an upward swing with exports increasing 19% in May compared to a year prior, mostly due to China’s demand as the country’s pork industry strengthens.
Despite wins in the cheese and whey categories, a steep decline in demand for nonfat dry milk and skim milk powder in Southeast Asia drove the month’s dip. May’s subpar performance in these two categories is less than half of last year’s at a 51% loss year over year (14,265 metric tons). Reasons for this decline include global competition from Australia, Europe and New Zealand, and weaker currencies in Southeast Asia.
CWT-assisted sales surpass 5 million pounds in June
National Milk Producers Federation (NMPF) reported July 8 that Cooperatives Working Together (CWT) program-assisted member cooperatives secured 56 contracts in June for an additional 5.4 million pounds of products added to sales in 2024.
Year-to-date export sales total 45.9 million pounds of American-type cheese, 309,000 pounds of butter, 769,000 pounds of anhydrous milkfat, 18 million pounds of whole milk powder and 5.9 million pounds of cream cheese. These sales – to be delivered to 27 countries in five regions – are the equivalent of 627.8 million pounds of milk on a milkfat basis.
The amount of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to bidders only when export and delivery of the product is verified by required documentation.
On June 24, the CWT Task Force approved several proposals developed from the three working groups. The recommendations included updates or added resources for the following:
- All cheese varieties will be eligible for CWT’s price gap support.
- CWT will create targeted pilot programs to address tariff coverage for value-added skim milk powder sales to Southeast Asia and a target market premium for cheese sales to Central America and the Caribbean.
- CWT will offer fat-equivalent support for the following products: ESL/aseptic fluid milk, evaporated/condensed milk and ice cream
- CWT will increase its operating program bid flexibility to extend eligible delivery periods to 12 months and remove volume limits on a trial basis.
- CWT staff will provide increased insight on bid acceptance parameters, sharing a brief summary with weekly offers explaining shifts in support levels.
- CWT will create an advisory group to provide strategic direction and market development support, with a phase one emphasis on precompetitive support that provides opportunities for all cooperatives to participate.
The recommendations are being reviewed by the NMPF Executive Committee and later the full board of directors with intent to include these improvements in the next CWT program cycle beginning Jan. 1, 2025.
May dairy heifer replacements remain in North America
Dairy heifer replacement exports were down significantly in May with product only being distributed to North American partners. In May, total dairy replacement exports were 241, down 87% from April’s 1,808 total. But remember, Turkey and Vietnam made significant purchases (more than 2,000 head) last month. Mexico led the way with 178 purchases, and Canada, 63.
In total, the U.S. has exported 11,604 dairy heifers in 2024. May’s exports reflect numbers last seen in February, where a majority of dairy heifer replacements were purchased from neighbors to the north and south. Numbers last seen this low were recorded in September 2023 at 185.
On the contrary, dairy embryo exports rose 13% to 737. Major purchasers included the United Kingdom (157), Germany (126), and China and Honduras (both 100). Germany saw the greatest increase in purchases at 52% from 83, whereas Brazil decreased imports from 93 to 75.
Hay exports slip in second consecutive month
For the second month in a row, hay exports slipped. The total of purchased U.S. alfalfa hay in May was down 12% at 198,993 metric tons; year-to-date sales are at 1,013,054 metric tons. China and Saudi Arabia continued to lead in purchases (79,313 and 42,374 metric tons, respectively), although May’s purchases were down in both countries, China (13%) and Saudi Arabia (8%). Japan saw a 2% increase in purchases at 35,442 metric tons of alfalfa hay.
Other hay exports were also down, but the difference was not quite as stark. May posted a 1% change in other hay purchases. The leader of those purchases was Japan at 55,178 (up 11% from April) and South Korea at 25,466 (down 13% from April). In total, the U.S. exported 96,303 metric tons of other hay in May, and since January, the U.S. has exported 464,352 metric tons of other hay.
Trade deficit forecast to reach $32 billion
May’s U.S. agricultural trade balance added to the growing deficit. The U.S. Department of Commerce/Census Bureau estimated May agriculture exports at $13.739 billion and imports at $18.009 billion, for a trade balance of -$4.269 billion.
The fiscal year-to-date (Oct. 1 2023, to May 2024) balance is at a deficit of $15.218 billion.
These deficits are the largest on record, and the USDA’s Economic Research Service estimates there will be a record $32 billion trade deficit by the end of 2024. Prior to fiscal year 2019, the U.S. had not experienced an agriculture trade deficit since at least 1967, possibly never. This is the fourth time in six years the industry has faced a deficit.
According to an analysis by American Farm Bureau Federation (AFBF) economists, the grim forecast is due to falling commodity prices for American crops and a strong U.S. dollar. The lack of affordable and available labor for produce production is also a factor. Additionally, the U.S. has not entered into a trade agreement with new countries since 2012 while other countries have done so.
“This is a difficult time to be a farmer, and looking ahead at another year with a record ag trade deficit proves that,” says AFBF President Zippy Duvall in the organization’s Market Intel report. “Our farmers are facing high labor costs – if they can hire help at all – competition from growers in other countries and stagnant, outdated trade agreements.”
