Strength in cheese and butterfat exports was offset by weaker sales of milk powders and whey, resulting in a small year-over-year decline in U.S. dairy export volume (milk solids equivalent) in October, according to the U.S. Dairy Export Council (USDEC).
Natzke dave
Dave Natzke
Editor / Progressive Dairy

However, shipments of higher-priced and higher-valued products boosted exports on a value basis. The bad news: U.S. port efficiency remains a challenge heading into the final two months of the year.

Based on details reported in the most recent U.S. Dairy Exporter Blog:

  • Volume basis: Compared to year-earlier levels, October export volumes were up 43% for cheese, 107% for butterfat, 220% for evaporated/condensed milk, 15% for milk protein concentrate and 13% for lactose. Among major category groups, year-over-year volume declines were reported for dry whey (-10%), whole milk powder (-26%) and skim milk powder/nonfat dry milk (-12%).

  • Value basis: At $660 million, the value of October U.S. dairy exports was up nearly $97.5 million (17.3%) from the same month a year earlier. Continuing the yearlong trend, the increased value is reflective of both rising global prices and increasing U.S. exports of higher-value products. Through October, year-to-date exports were valued at $6.48 billion, up 17% from the same period a year earlier and on a record-setting pace.

  • Milk solids basis: October 2021 exports on a total solids basis were estimated at 186,085 metric tons (MT), down 1,681 MT (0.9%) from the year before. Albeit small, it marked the first year-over-year decline since January.

Based on USDA preliminary October milk production estimates and Federal Milk Marketing Order (FMMO) butterfat and nonfat solids test results, Progressive Dairy estimates exports would represent more than 17% of total solids produced during the month.

Year to date, exports on a total milk solids basis are estimated at 1.9 million MT, up 11% from the same period a year earlier.

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In the blog, USDEC’s Stephen Cain, Paul Rogers and William Loux also provided updates on major U.S. dairy product importing countries:

  • Price competitiveness and struggling competitor milk production have helped bolster U.S. butterfat exports this year. The leading destinations for U.S. butterfat exports in October were Canada and the Middle East-North Africa (MENA), with sales also higher to Japan and South Korea. A primary competitor for the Canadian market is New Zealand. However, New Zealand has focused its product offerings to meet Chinese demand in whole milk powder and has had a lackluster start to its milking season, leaving less fat – at higher prices – available for butterfat production and export. The U.S. has also taken MENA butterfat market share away from the European Union and United Kingdom.

  • At 35,618 MT, October 2021 cheese exports represented the most cheese ever shipped in the month of October, the fourth month in a row in which U.S. suppliers set a monthly record. The question moving forward is how much the omicron variant will impact worldwide restaurant operations.

Port challenges remain

The fact that the U.S. remains on pace for a record year in volume, value and percent of milk production exports speaks to the resilience and creativity of U.S. dairy to ensure that customers receive their product.

In October, 68% of all containers exported out of the ports of Los Angeles, Long Beach, Oakland and Seattle-Tacoma were empty. Even though the percentage of empties was a small improvement from September, it’s still 6% higher than October 2020.

The major West Coast ports processed the fewest inbound containers since January and 80,000 fewer containers than October of last year. The story was similar with outbound containers as well (regardless of whether they were loaded or empty).

Not all is doom and gloom in the months ahead, according to USDEC. Spot shipping rates from Asia to the U.S. have started to decline, and the backlog of ships waiting outside the major California ports is starting to shrink.

CWT-assisted exports

The National Milk Producers Federation (NMPF) updated Cooperatives Working Together (CWT) program-assisted sales. Through November, accepted offers on 2021 sales have reached about 49.9 million pounds of American-type cheeses, 15.9 million pounds of butter, 6.1 million pounds of anhydrous milkfat, 45.1 million pounds of whole milk powder and 11.5 million pounds of cream cheese. These sales are the equivalent of about 1.404 billion pounds of milk on a milkfat basis. The latest report includes revisions from previous reports. CWT estimates are based on contracts for delivery, not completed export volumes.

Here’s a look at other export trends followed by Progressive Dairy:

Hay exports remain strong

A review of USDA Foreign Ag Service data shows alfalfa hay exports totaled 259,801 MT in October, up about 5,000 MT from September and the third-highest monthly total of the year. Sales to China totaled 162,856 MT, representing 63% of all alfalfa hay exports during the month. Shipments to Japan, South Korea, United Arab Emirates (UAE) and Taiwan were all up from September.

The USDA estimated the value of October alfalfa hay exports averaged about $377 per MT, up about $17 from September’s average.

January-October 2021 alfalfa hay exports total nearly 2.41 million MT, the highest volume on record for the first 10 months of the year.

At 119,578 MT, October exports of other hay hit a five-month high, with larger shipments compared to a month earlier to Japan, South Korea, Taiwan and UAE. Shipments to Japan increased to 61,518 MT, but its percentage of all other hay exports fell to about 51% for the month. Year to date, Japan has been the destination for about 60% of all other hay shipments.

The USDA estimated the value of October other hay exports averaged about $362 per MT, $3.30 more than the September average.

Year-to-date exports of other hay have now topped 1.17 million MT, up about 52,000 MT compared to January-October 2020 and the largest volume for that period since 2016.

For more on hay exports and market conditions, check out Progressive Forage’s Forage Market Insights update.

Dairy heifer exports

A large shipment of replacement dairy heifers to Vietnam propelled October exports to the highest monthly total since February. Of the 3,911 dairy heifers exported during the month, 3,400 went to Vietnam. The remaining heifers were exported to Mexico (402), Canada (105) and the Dominican Republic (4).

Year-to-date dairy heifer exports total 19,179, the highest number for the January-October period since 2018.

Other trade news

Here’s a summary other issues about and affecting U.S. dairy and agricultural trade:

  • On Nov. 8, members of the U.S. House of Representatives passed the Ocean Shipping Reform Act of 2021 (OSRA) on a bipartisan vote of 364-60. The bill, crafted with input from the newly formed Supply Chain Working Group of dairy exporters, USDEC and NMPF, supports steps to resolve supply chain obstacles. It amends the U.S. Shipping Act to provide new oversight and enforcement authority to the Federal Maritime Commission, expands opportunities for shippers to seek redress from ocean carriers, and increase transparency and accountability among ocean carriers and other parties. The bill specifically would restrain carriers’ abilities to deny export shipments, increase the availability of containers, improve protections against retaliation and better address unfair detention and demurrage charges. According to the dairy organizations, delays and disruptions at U.S. ports have cost the U.S. dairy industry well over $1 billion this year.

  • A recent update from Rabobank suggests declining milk production will impact global dairy trade in 2022. After more than two years of uninterrupted growth, global milk production is down, with growth expected to dip into negative territory in the final quarter of 2021, according to Mary Ledman, Global Dairy Strategist at Rabobank. While farmgate milk prices are on the rise, increasing costs of inputs, lack of labor and unfavorable weather will continue to limit production across the major milk-producing regions.

In addition to a supply reduction, dairy exports are slowed in response to logistic disruptions, rising transportation costs and elevated commodity prices.

Despite rising inflationary pressures on dairy and food companies, consumers have yet to face sticker shock for dairy products in most countries, supporting current demand. Rabobank expects that higher commodity prices from the second half of 2021 will be passed along to consumers in the new year, negatively impacting demand.

“Consumers will be bracing for cost-of-living pressures through much of 2022,” says Ledman. “New variants of COVID-19, inflation, labor and logistic challenges, along with others weigh on the global economic recovery with the potential for global dairy markets to teeter or totter.”

The court case stemmed from a USDA investigation into Donald Yorlets, a USDA-accredited veterinarian conducting business under the name Circle Y Veterinary Services, located in New Oxford, Pennsylvania. In August 2020, Yorlets pleaded guilty to charges he submitted fraudulent blood samples and health certificates for dairy cattle to be shipped in interstate and foreign commerce.

As part of their guilty plea, the Gutmans admitted that they were not only aware of Yorlets’ activities but also took part in the process. The fraudulent tests and health certificates enabled the Gutman Brothers, who own a large cattle farm in Spring Grove, Pennsylvania, to unlawfully export untested animals to Mexico, Canada, Qatar and Puerto Rico.

In connection with their guilty plea, Daniel and Benjamin Gutman have agreed to forfeit $1.4 million in U.S. currency, as well as make full restitution to all victims for the losses suffered as a result of their conduct. For example, in April 2018, they exported approximately 2,900 head of cattle to a buyer in Qatar. That buyer paid Gutman Brothers over $5.3 million.  end mark