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Why Dairy Exports Could See Another Record Year

Anna-Lisa Laca

December 7, 2020

In the first quarter of 2020, when the COVID-19 global pandemic began, many analysts were concerned about the outlook for dairy exports. However, throughout the year we’ve seen dairy exports post record highs month over month. The U.S. Dairy Export Council believes there are two factors that could lead to another record year of exports.

1. China Drives Record Whey Volumes

Volumes of U.S. whey exports to China hit an all-time high in October at 55,655 MT of whey products shipped. That was a 64% increase from October 2019 – an improvement of over 20,000 MT, USDEC reports.

“China was far and away the primary driver of the growth, accounting for 48% of total U.S. whey exports in October,” the organization wrote on their blog. “For much of the past year, we have talked about 2020 as a recovery year for whey following retaliatory tariffs placed on U.S. dairy going to China and African Swine Fever reducing demand in 2019. However, October volumes to China demonstrate that the market has moved from recovery to demand expansion.”

Additionally, whey sales to Southeast Asia are also higher (42%) than last year thanks to growth in Vietnam (+2,847 MT) and smaller gains in Indonesia, Philippines, Thailand, and Malaysia.

“These improvements confirm market reports that increased export interest was a major driver of strengthening dry whey prices over the past couple of months,” USDEC says. “With prices still supported at the time of writing, this should indicate that volumes could keep up the momentum through Q4 and into early 2021.”

2. Asia Keeping NFDM/SMP Market in Balance

USDEC reports the October story for nonfat dry milk and skimmed milk powder was also positive. October shipments posted another month of growth, up 9% (+6,056 MT), with a 20% expansion in volumes to Southeast Asia (+5,125 MT), making up for a 10% decline in volumes to Mexico (-3,195 MT).

“A 5,000-MT gain in volumes to Southeast Asia (despite strong 2019 figures) signals robust demand for U.S. powder to the region. One piece to watch moving forward is which countries in the region grow,” USDEC says. “In October, the Philippines was the market driving growth (+137%, +7,611 MT) while others in the region were static or fell slightly in October. Determining whether this results from a change in market share, slower demand growth, or a combination of both will need to wait for the European Union’s data.”

Additionally, other regions grew their use of SMP powder as well. SMP exports to China have proven sustainable after six straight months of greater-than-1,000-MT volumes. October exports to China came in at 3,833 MT compared to just 463 MT in October 2019

“Ultimately, strong export volumes – particularly to Southeast Asia and China – have helped keep markets in balance, despite the substantial increase in milk production in October and weaker Mexican demand,” USDEC says. “While inventories climbed in October, they are far from burdensome, especially compared to March-April-May levels.”

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