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 USDA, Foreign Agricultural Service and from membership dues. www.usdec.org
Supplies tighten, driving prices higher
The volatile global dairy market turned decidedly more bullish in the last two months, fueled by concerns about supply availability in the second half of the year.
“The global supply-demand balance for dairy products has shifted to a slight supply deficit,” said Andrew Ferrier, CEO of Fonterra Co-operative Group, New Zealand. “On the supply side, global milk production has continued to slow.”
Drought hit New Zealand’s North Island, forcing farmers to dry off herds early and cutting into production projections. Now the world’s largest exporter is in its low season and production is mostly committed until the new season starts in September. A long, cold winter in Europe caused a delay in their spring flush, and output is only now starting to rebound.
That has left buyers scrambling.
“Demand from Middle East, North Africa and Asian markets continues to grow,” said Ferrier. China continues to buy in large quantities; in the first quarter, China imported 186 million lbs. of whole milk powder, up 61 percent from last year (see chart below). In addition, a heat wave in southern India put a dent in production, prompting the normally closed market to open for imports, and Russia has been taking more European product.
As a result, international spot commodity prices have jumped from their mid-February lows, propelled by a surprising jump in the Fonterra auction held April 6. Cheese, butter and powder prices are all near $1.80/lb.
Prices appear to be well-supported at these levels, at least until the fall when Oceania’s new season gets under way. However, as prices continue to climb it remains to be seen if buyers will push back.
In the meantime, U.S. suppliers would appear to be in an excellent position to fill supply shortfalls, particularly on skim milk powder and butterfat. American product is attractively priced, and the U.S. could be the only exporter with product to sell throughout the spring and summer. PD
High-value American WPC making its mark
U.S. suppliers are exporting whey protein concentrate (WPC) at record levels this year. In the January-February period, overseas sales of these high-value proteins reached 66.1 million lbs., up 86 percent from a year ago.
Major buyers of American WPC are China (27.2 million lbs. in January-February, +142 percent from 2009), Mexico (14.9 million lbs., +3 percent) and Southeast Asia (8.1 million lbs., +595 percent).
WPC has historically been used in bakery applications, confectionery products, dairy products, snack foods and processed meats, as well as animal feed. However, over the last year, production has shifted to within the category toward higher levels of protein, reflecting greater demand from the nutritional and functional food segments. Sales have been boosted by an emerging body of research identifying specific health benefits in areas such as muscle recovery and body composition.
The U.S. Dairy Export Council is helping to drive this trend by educating health professionals and consumers about the benefits of whey proteins. It also is sponsoring clinical research in Japan on the benefits of whey proteins among the elderly, who often suffer from muscle-wasting as they age.
Exports off to good start in 2010
U.S. dairy exports continued trending higher in February, with milk powder, whey, cheese, butterfat and lactose all posting gains compared with year-ago levels. Total dairy exports in February were valued at $221.4 million, 41 percent higher than last year. This is the highest figure (on a daily-average basis) since October 2008. In the first two months of the year, exports were valued at $444.2 million, up 34 percent.