U.S. dairy exports posted their strongest month of growth in a year and a half in July, climbing 9.6 percent year-over-year in milk-solids-equivalent terms. In contrast to prior months, where cheese and high-protein-whey products were the only products posting significant growth, gains were made across multiple categories in July. In particular, reduced-protein whey has become the star of the show after lagging throughout 2023, gaining 27 percent in July and marking the fourth-consecutive month of growth. Not to be outdone, despite declines in production, nonfat-dry-milk and skim-milk products surprise by increasing 11 percent for the month. Cheese and high-protein whey also maintained momentum, growing 10 percent and 23 percent, respectively.
July’s strong export growth is a welcome signal after an up-and-down first half of the year. But weaker comparisons certainly played a part in explaining why July’s figures were particularly robust. July 2023 was the weakest month of the year in that year with whey figures for the month being the worst since October 2019, when U.S. exports to China were still subject to retaliatory tariffs and the country was still suffering from the worst of the African swine fever outbreak. As such, the 10 percent gain in July appears slightly less impressive upon closer examination.
Yet even with that caveat, July can still be described as a positive month given the breadth of other bullish signals. The reduced-protein-whey trade has grown four straight months to China and 10 out of the past 11 months to Southeast Asia. Cheese sales to Mexico continued to soar even with a weaker peso and whey-protein-concentrate80+ sales continue to expand to both established and emerging protein markets.
U.S. dairy exports overall remain remarkably stable despite global headwinds, with gains continuing to be made in multiple products – especially in cheese and whey proteins.
Southeast Asia outlook improves
U.S. dairy exports to Southeast Asia gained 25 percent in July, the largest single-month gain in more than two years, which also came on the heels of a similarly impressive June. The gains in July were spread across multiple products but ingredients were the clear winner. U.S. nonfat-dry-milk and skim-milk shipments to the region gained 23 percent thanks almost entirely to a 6,003-metric-ton growth in shipments to the Philippines. U.S. reduced-protein whey improved by 27 percent, continuing an almost year-long stretch of growth. Just as in nonfat-dry-milk and skim-milk products, the Philippines accounted for the majority of the growth to the region by more than tripling its purchases compared to the same month the year prior.
After three straight years of declining exports, two months of growth do not yet constitute a new trend for U.S. dairy exports to Southeast Asia – especially given limited milk-powder production in the United States. But there are positive factors that are working in our favor and could signal future growth ahead, even if challenges remain during the next several months.
Fundamentally, demand in the region is improving thanks to several factors.
• inflation cooling rapidly throughout the region
• an improved economic outlook boosting spending power
• reduced palm-oil prices increasing demand for fat-filled milk powder and other blends utilizing whey or skim milk powder
Global trade to the region – from all exporters, not just the United States – improved by 9 percent in the first half of 2024.
Unfortunately, other suppliers have captured most of the growth in demand. New Zealand’s exports to the region climbed 6 percent from January to June, the European Union 27 gained 9 percent and Australia’s shipments increased an astonishing 77 percent. Effectively, with China’s purchasing remaining well less than prior years, Oceania and European exporters are focusing on regions where demand is growing. They hold critical advantages, especially on tariffs in the case of New Zealand and Australia. As such, with growing demand in Southeast Asia and a tight milk-supply situation in Europe, the United States has the potential to grow exports to the region. But competition will remain fierce for market share so long as China’s demand remains subdued.
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