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Dairy exports fly high

Dairy exports fly high

U.S. dairy exports rebounded sharply in November, climbing 19 percent in volume – milk-solids equivalent – and an astonishing 32 percent in value compared to the same month in 2020.

• Nonfat-dry-milk and skim-milk-powder exports grew 25 percent for plus 15,119 metric tons.

• Cheese exports grew 40 percent for plus 9,556 metric tons.

Through the first 11 months of 2021, U.S. dairy export volume – milk-solids equivalent – grew 12 percent and had already surpassed the annual record established in 2020. Additionally U.S. dairy-export value also ran 18 percent ahead of the same period the previous year, reaching $7.14 billion through November.

For the past three years we’ve seen strong October nonfat-dry-milk and skim-milk-powder shipments followed by weaker Novembers. This year that pattern reversed.

After shipping 66,862 metric October – only the second month in 2021 that U.S. volume failed to be more than 70,000 metric tons – U.S. nonfat-dry-milk and skim-milk-powder exports boomeranged to 76,422 metric November – easily a record for the month.

Gains were broad-based, though clearly led by Southeast Asia. U.S. shipments to Southeast Asia grew 37 percent for plus 7,275 metric tons year-over-year, driven by significant increases to Vietnam at 292 percent growth and the Philippines at 76 percent growth. Backlogged product finally making it to buyers likely contributed to regional volumes in November, but the percentage gain to Southeast Asia also benefitted from a weak November 2020. As a result the United States shipped only 19,611 metric Southeast Asia in November 2020 – which was the smallest monthly total of the year until that point. December 2020 dipped to 17,181 metric tons.

U.S. suppliers also posted significant increases in most major markets beyond Southeast Asia.

• South America grew 37 percent for plus 2,834 metric tons.

• Mexico grew 9 percent for plus 2,229 metric tons.

• Central America grew 196 percent for plus 2,024 metric tons.

• China grew 27 percent for plus 726 metric tons.

An exponential increase in exports to Honduras – 1 metric ton in 2020 vs. 1,372 metric tons in 2021 – drove the Central America total. And a 45 percent increase for plus 2,417 metric tons to Colombia – presumably in anticipation of January’s quota opening – lifted South American volumes.

Mirroring the spike to Honduras, U.S. nonfat-dry-milk and skim-milk-powder shipments to Yemen jumped from 25 metric tons in November 2020 to 1,325 metric tons in 2021. Both nations made a rare appearance in the top-10 U.S. nonfat-dry-milk and skim-milk-powder destinations in November.

Global nonfat-dry-milk and skim-milk-powder demand remains strong. In the months ahead readers should watch whether the U.S. price advantage with the European Union and New Zealand, which has narrowed significantly since September, will affect U.S. performance as we move further into the New Year.

Cheese soars

U.S. cheese exports have surged in the second half of 2021, placing U.S. cheese exports on pace to finally surpass the annual export record set in 2014. Strong demand from U.S. major partners and weak production from primary competitors have been crucial to accelerated sales. In November volumes to Mexico particularly shone with an increase of 65 percent for plus 3,539 metric tons.

• The rest of Latin America was not far behind – it grew 46 percent at plus 2,313 metric tons.

• South Korea grew 48 percent at plus 1,745 metric tons.

• Australia grew 107 percent at plus 1,157 metric tons.

The United States has seen growth in multiple cheese types as economies rebounded in 2021; tourism returned and consumers went back to restaurants regularly. But digging into the data more, we see that cheddar exports, in particular, are having a resurgence. During the past several years, cheddar production has primarily been geared toward the domestic market, with exports increasing by less than 3 percent per year since 2015.

But with expanded capacity in the United States and competitive pricing, the amount of cheddar cheese moving overseas has reached its greatest point since 2015. Year-to-date cheddar exports have increased by 30 percent, with an increase of more than 10,000 metric tons. In just the past three months volumes increased more than 7,000 metric tons year-over-year. Although from a much smaller base, cheddar-cheese exports are growing at the fastest pace of any of the major cheese-export categories.

Overall most of that growth is attributable to Japan’s increased purchasing of cheddar for further processing. In what is arguably the most competitive cheese-import market in the world, U.S. competitors failed to have sufficient product for Japanese buyers. U.S. prices were much more in line with global benchmarks, both of which have enabled the United States to gain market share.

Looking ahead the picture for cheese exports – particularly cheddar – appears favorable in the new year. International cheese demand appears resilient despite renewed COVID outbreaks. U.S. prices remain competitive and even with tight milk supplies domestically, cheddar cheese plants continue to run at full capacity. All those factors should support further growth in cheese exports in 2022.

Total whey exports in November were essentially flat compared to November 2020; they grew 0.3 percent at plus 158 metric tons.

Increased exports to Southeast Asia and other smaller partners helped offset the strong decline in shipments to China.

• Southeast Asia grew 26 percent at plus 2,249 metric tons.

• Japan grew 40 percent at plus 894 metric tons.

• South Korea grew 22 percent at plus 455 metric tons.

• Mexico grew 40 percent at plus 1,269 metric tons.

• China declined 24 percent at minus 5,245 metric tons.

Let’s dig into whey-protein concentrates specifically.

• Total exports declined 18 percent at minus 3,233 metric tons in November.

• China declined 40 percent at minus 3,950 metric tons.

• Canada declined 12 percent at minus 301 metric tons.

Two factors are likely playing into the reduced exports.

1. Export prices of U.S. whey-protein concentrates are the greatest they’ve been in about eight years. November export prices reached $4,576 per metric ton, almost 60 percent more than the average 2020 price of $2,901 per metric ton. The increased prices are pushing buyers to purchase only what they need in the short term.

2. There is likely less exportable supply available. U.S. production of whey-protein concentrates did grow in October as output reached its greatest monthly level since early 2018. Usually with increased production exports would be the primary destination for the increased volume. But strong domestic demand – an increase of 6 percent year to date – has kept the product at home and contributed to an overall decline in whey-protein-concentrates inventory of 2 percent year-over-year. The data tracks with the renewed focus on health and wellness as consumers returned to gyms and pursued healthier lifestyles; both are driving increased-value protein consumption.

So while exports of whey-protein concentrates may have decreased, it’s unlikely that reduced international demand is the culprit. Instead it’s due to increased prices and tighter exportable supply slowing export growth.

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