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Dairy exports mark 13th straight month of increase

Krissa Welshans

November 5, 2020

U.S. dairy export volume in milk solids equivalent rose 5% in September, marking the 13th straight month of year-over-year increases, according to newly released data compiled by the U.S. Dairy Export Council (USDEC).

The latest numbers show that the aggregate volume of major products (milk powder, whey, cheese, butter and lactose) through the first three quarters of 2020 grew 14% to 1.7 million metric tons, which USDEC noted puts exports on pace to exceed the record year in 2018, when the U.S. exported 2.2 mmt. Overall, the U.S. exported 16.2% of milk solids produced over the first nine months.

Strong year-over-year growth in whey products, primarily destined for China, drove September’s export expansion. Additionally, USDEC said despite domestic cheddar prices being above world market levels since May, better-than-expected cheese exports to Asia Pacific markets also aided the increases.

Lower exports of nonfat dry milk (NFDM) and skim milk powder (SMP) in September were primarily the result of reduced purchases from Mexico, although exports to Southeast Asia, Latin America and China all grew, USDEC noted.

U.S. exports to China recovering

The latest numbers reveal that U.S. dairy export volumes to China are recovering to pre-retaliatory tariffs and pre-African swine fever levels.

The recovery, USDEC said, has been driven primarily by whey products, with 2020 exports through September nearly doubling 2019 levels (up 93%) to reach 149,094 mt. September was no different, with whey export volume to China up 134%.

“While a large portion of this growth can be attributed to a recovering pig herd and extended tariff exemptions for whey permeate, the growth is not limited to whey destined for feed,” the council said.

USDEC further noted that volumes of whey proteins have expanded rapidly since the U.S.-China Phase One trade deal was implemented. Volumes of whey protein concentrate (80+) are up 69% from 2019 levels and show few signs of slowing down.

“Expansion in China is crucial to growing U.S. whey exports overall, as China has accounted for 35% of total whey traded internationally in 2020,” USDEC said.

The recovery of U.S. market presence in China following the Phase One agreement is not limited to the whey stream, USDEC added. Through September, exports of SMP/NFDM went from negligible in 2019, at just 3,721 mt, to 18,911 mt this year.

“While volumes and market share in China remain small relative to the U.S. presence in Southeast Asia and Mexico, inroads are clearly being made,” USDEC said. “A smoother and more secure trading environment for U.S. dairy in China, through measures such as extending retaliatory tariff exemptions for SMP and cheese, would help ensure this growth in exports is sustained and even expanded.”

Southeast Asia emerging as largest destination for U.S. milk

USDEC reported that Southeast Asia posted another strong month in September, extending a yearlong growth streak. Through September, 28% of total U.S. exports in 2020 on a milk solids basis went to Southeast Asia, which is the equivalent of 4.5% of total U.S. milk production.

USDEC explained that Southeast Asia’s emergence as the largest destination for U.S. dairy has been driven primarily by SMP shipments to Southeast Asia’s six main markets -- Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam -- which rose 23% in September, a gain of 4,887 mt. Year to date, U.S. SMP shipments to the region were 259,311 mt, an increase of 106,037 mt.

The Philippines led U.S. SMP buyers in September, up 219%, while sales to Malaysia (up 77%) and Thailand (up 160%) were also strong. USDEC noted that, together, they made up for a disappointing month in Vietnam that saw sales fall 69% to 1,901 mt, its smallest monthly import total for more than a year.

Although September whey shipments to Southeast Asia declined 6%, cheese sales for the month jumped 76% to 2,432 mt. USDEC said shipments to Indonesia, the second-largest cheese buyer in the region, were particularly encouraging.

U.S. cheese volume to Indonesia — a market traditionally dominated by New Zealand — more than doubled on the year to over 1,000 mt in September. While only a single month of data, USDEC said the increase may be a sign of increased U.S. supplier focus on winning share in a promising growth market as well as Indonesia’s ongoing effort to diversify its dairy sourcing, both of which bode well for the future.

Exports to Mexico lag

According to USDEC, U.S. dairy shipments to Mexico lagged in September, particularly in the key categories of NFDM/SMP and cheese. Ongoing economic troubles, accentuated by the COVID-19 pandemic, have reduced demand from the U.S.’s largest market and southern neighbor, the group said.

NFDM/SMP shipments to Mexico fell 33% in September to 22,789 mt, while cheese sales declined 21% to 6,125 mt. USDEC explained that both products were facing strong months of comparison, so the declines are not as drastic as they sound. However, a return to growth — or even flat year-over-year purchasing — remains uncertain. For NFDM, reports of a tight budget for LICONSA (Mexico’s social program that supports milk powder purchasing) and the federal government’s effort to use more domestic milk in its feeding programs will add to the uncertainty. Moreover, USDEC said a tight U.S. cheddar market makes U.S. cheese expensive for importers and Mexican consumers, especially when converted into pesos.

One bright spot is that Mexico’s economy rose sharply (up 12%) in the third quarter as businesses began reopening after COVID-19 shutdowns.

“While year-to-date economic growth is still lagging, if the country can continue to rebound from the first half — and barring additional pandemic lockdowns — an improved economic situation could help reinvigorate demand moving forward,” USDEC said.

Market recap

February live cattle futures were mostly higher this week, closing Monday at $110.525/cwt. and Thursday at $111.45/cwt.

January feeder cattle futures started the week higher but posted gains as the week progressed. Contracts closed higher Monday at $134.050/cwt. and Thursday at $135.40/cwt.

The Choice and Select cutouts closed higher at $212.55/cwt. and $198.97/cwt., respectively.

February lean hog futures started the week lower but saw gains as the week progressed. Contracts closed higher Monday at $65.30/cwt. and Tuesday at $68.05/cwt. but fell Thursday to close at $65.60/cwt.

The pork cutout was mostly higher this week. The wholesale pork cutout was at $86.38/cwt. Loins and hams closed higher at $75.82/cwt. and $98.36/cwt., respectively. Bellies were higher at $112.92/cwt.

Hogs delivered to the western Corn Belt were lower, closing at $61.46/cwt.

The U.S. Department of Agriculture reported the Eastern Region whole broiler/fryer weighted average price at 66.75 cents/lb. on Oct. 30.

According to USDA, egg prices were steady, with a steady undertone. Supplies were moderate to heavy, and offerings were light to available. Demand was moderate to good.

Large eggs delivered to the Northeast were lower at $1.07-1.11/doz. Prices in the Southeast and Midwest were slightly lower at $1.12-1.15/doz. and 99 cents to $1.02/doz., respectively. Large eggs delivered to California were lower at $1.76/doz.

For turkeys, USDA said the market was steady to firm, and demand was light to mostly good. The price range for hens and toms was $1.15-1.20/lb.



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