The following update is provided by the U.S. Dairy Export Council (USDEC), a non-profit, independent membership organization that represents the global trade interests of U.S. dairy producers, proprietary processors and cooperatives, ingredient suppliers and export traders. Its mission is to enhance U.S. global competitiveness and assist the U.S. industry to increase its global dairy ingredient sales and exports of U.S. dairy products. USDEC programs and activities are supported by the dairy checkoff program, with additional funding from the U.S. Department of Agriculture, Foreign Agricultural Service and from membership dues.
Market more balanced; prices retreat
International dairy markets pulled back from their mid-December peaks, after a dramatic price run-up last autumn. The 2009 increase was attributed to users refilling depleted pipeline stocks. With that task complete, orders slowed measurably and the market settled into a better supply-demand balance.
In mid-February, global buyers were still mostly sitting on the sidelines, waiting for prices to stop sliding before returning to place strategic orders for later in the year.
Production is building toward the flush in Europe and the United States, so buyers aren’t panicking yet. However, there is some concern that global supplies will tighten in the second half of the year.
New Zealand milk production was on track to finish the 2009/10 season up just 1 percent after battling drought on the North Island. Australia milk output was down 8 percent in the September-December period, and is expected to finish the season 4-6 percent off last year’s pace. Both are coming into their off-season now.
The biggest uncertainty in the market in the next few months, says Rabobank International, is whether China can sustain recent milk powder import volumes. The world’s largest importer of dairy ingredients boosted purchases of whole milk powder nearly four-fold in 2009 and whey imports by 36 percent.
“Consumer appetite for imported product may be supported by the recent announcement that a number of smaller Chinese companies had been discovered selling melamine-tainted products carried over from 2008,” Rabobank says.
However, traders are keeping an eye on existing (and potential) intervention stocks in the EU hanging over the market. On Feb. 18, the Commission reported 192,000 tons of SMP and 25,000 tons of butter still available from last year’s intervention purchases. The 2009 program opened on March 1, though few if any sales to intervention were expected immediately. PD
Mexico still top U.S. customer
Mexico remained the top destination for U.S. dairy exports in 2009, with sales of $636 million. Major products were nonfat dry milk/skim milk powder (NDM/SMP), cheese and whey proteins.
In early 2009, when it was clear that global dairy demand had collapsed from previous levels, the U.S. Dairy Export Council made a strategic decision to focus program resources on core markets like Mexico. This included retail and foodservice promotions, applications seminars and trade-servicing activities.
The efforts paid off. More than one-fourth of all U.S. dairy exports last year went to Mexico. Despite contraction of the Mexican economy, U.S. cheese export volumes increased 9 percent last year, to 40,110 tons, and exports of whey proteins increased 18 percent, to 56,811 tons. Both figures are record highs. In addition, lactose exports increased 41 percent, to 23,803 tons.
Meanwhile, shipments of NDM/SMP dropped 10 percent, to 106,172 tons, due primarily to government efforts to buy more locally produced milk for its feeding programs. Sales of butterfat dropped 40 percent, to 3,638 tons.
Exports improve in fourth quarter
U.S. dairy export volumes and values increased in the fourth quarter of 2009, buoyed by stronger world markets. Overall volume (on a total-milk-solids basis) in the last quarter of the year was up 15 percent from the pace of the first three quarters, and up 15 percent from the prior year. On a value basis, exports were slightly below 2008 levels, but 25 percent above the pace of the first three quarters of 2009.
Exports accounted for 10.6 percent of U.S. milk solids production in the fourth quarter, up from 8.9 percent in the first three quarters.
U.S. suppliers enjoyed a resurgence of cheese and butterfat exports in the last few months of 2009. Cheese exports in the October-December period were up 20 percent (compared with the January-September average), while butterfat exports were more than three-fold. In addition, dry whey exports, which were strong most of the year, increased 22 percent in Q4, and whey protein concentrate shipments jumped 38 percent.
The recovery of nonfat dry milk/skim milk powder exports, however, was not sustained in December after a promising showing in October/November. December shipments were just 14,463 tons, 29 percent below year-earlier levels, and the lowest figure since February.
With full-year numbers in, dairy export sales totaled $2.32 billion last year, down 39 percent from 2008’s record level. Overall export volume was off 16 percent, at 2.178 billion lbs. of total milk solids. PD