February 15, 2013

 

US dairy exports rise over 13% in 2012

 

 

The US exported more than 13% of its annual milk solids for the second straight year, a continued sign that US dairy suppliers are building a more major role in meeting the needs of burgeoning global dairy demand.

 

"US dairy exports are now a US$5-billion business," says Tom Suber, president US Dairy Export Council (USDEC). "Export value hit a record US$5.21 billion in 2012 and the nation's dairy suppliers sent 3.295 billion pounds of total milk solids into export channels last year." USDEC, primarily funded by the dairy checkoff, leads overseas market development on behalf of the US dairy industry.

 

With more dairy products moving overseas, US dairy producers have been able to grow in the last decade while minimising the accumulation of burdensome inventories in the domestic market, notes Paul Rovey, a dairy producer from Arizona and chairman of USDEC. "Since 2003, US milk production has increased 18% and more than half (56%) of the incremental milk volume has been sold overseas," Rovey says. "USDEC's long-term engagement in overseas markets has helped make that possible."

 

The US posted broad gains across geographies and product lines. Among the 2012 highlights, cheese, whey protein concentrate (WPC) and non-fat dry milk/skim milk powder (NDM/SMP) all set volume records.

 

US cheese exports cleared 260,000 tonnes (573 million pounds), nearly twice the volume shipped just four years earlier in 2008, with Mexico, Japan, South Korea and China fuelling gains. NDM/SMP shipments grew 2% to 444,727 tonnes (980 million pounds), driven by strong demand from across Latin America and the Middle East. WPC toppled the previous volume record, jumping 27% to 233,362 tonnes (514 million pounds), powered by Southeast Asia, Mexico and South Korea.

 

Key US markets-Mexico (+6%), China/Hong Kong (+16%), Canada (+11%), Japan (+3%), South Korea (+2%) and the Middle East/North Africa (+16%)-all boosted their US purchases. Only Southeast Asia (-4 %) declined among major US customers.

 

US suppliers leveraged USDEC programmes in market development, market access and trade policy programmes to improve their sales to overseas customers. Last year (and through early February 2013), they announced significant investment in WMP capacity to service the overseas growth, upgrades to NDM/SMP to cater to the high-spec demands of overseas buyers, and new whey processing capacity to meet booming protein demand here and abroad.

 

Despite the positive overall advancement, the second half of 2012 illustrated a marked difference from the first. US export volumes grew nearly 8% January-June, compared to the same period the previous year, but declined 2% July-December. And aggregate US export volume in the second half was 9% lower than shipments in the first half.

 

"Our export softness in the second half primarily stems from unfavourable pricing shifts," says Suber.

 

In the first half of 2012, near-perfect weather and strong returns for dairy farmers in major export regions triggered record milk production, pushing global prices about 20% lower, on average, than the previous year. When the US drought hit, domestic supply concerns sent US prices, which had been tracking closely with Oceania, sharply higher.

 

Meanwhile, world demand held strong. Shipments from the world's top five exporters (Argentina, Australia, the EU, New Zealand and the US) for July-December 2012 grew about 9%. But Oceania suppliers picked up share of this growing trade at the expense of the US.

 

"The underlying fundamentals behind rising global dairy consumption remain, but a cyclical price rise in the US reined in US supplier growth in the second half," says Suber.

 

Pricing difficulties notwithstanding, there are positives in US suppliers' second-half numbers.

 

"The fact that US exports did not plummet, as they did following the 2008 financial crisis, supports the contention that US suppliers are maturing in their approach to the export market," says Suber. "The overall US performance reflects a greater industry-wide move towards exports as a strategic growth path."

 

Moving forward, USDEC contends that a major global milk oversupply of the kind that characterised the first half of 2012 is not in the cards for 2013. And even though milk powder inventories have grown in recent months, stock levels appear manageable.

 

"Global economic signs are starting to move in a more positive direction, demand and consumption will continue rising, and world prices are expected to come more into line with US prices," says Suber.

 

And while the US industry is shifting its focus to make world markets an integral aspect of the business, more challenges lie ahead. The Innovation Centre for US Dairy^®, established through the dairy check-off programme, noted a number of key objectives necessary for the US to solidify itself as a consistent global supplier. Work continues on many of those objectives, enumerated in the organisation's Globalisation Studies in 2009 and 2011, to upgrade the US' global competitiveness to withstand new and emerging competitors.