January 22, 2024

Challenging landscape for US dairy exports expected to continue in 2024

The USDA Dairy: World Markets and Trade report for December 2023 revealed that the fiscal year 2023 posed significant challenges for United States dairy exporters, with the first half of 2024 expected to see persistent year-on-year price declines, Agro Perspectiva reported.

Factors such as sluggish economic growth among importers, heightened competition from New Zealand and the European Union, and weakening demand in key markets contributed to a challenging environment. While a slightly weaker US dollar in 2023 provided some relief in price competitiveness, export values of non-fat dry milk (NDM), cheese, and whey remained lacklustre throughout the year.

The impact of higher interest rates globally, affecting discretionary spending and particularly impacting dairy consumption in non-traditional markets like Asia, was notable. As Asian countries, a significant growth region for major exporters, faced slowing GDP and income growth, discretionary spending on dairy products dwindled.

China, the largest import market for dairy products, experienced surplus raw milk production, leading to government subsidies and reduced demand for imports. The first half of 2024 is expected to see persistent year-on-year price declines for several US dairy products, exerting pressure on export values.

Key factors impacting demand in Asian markets in 2023 are anticipated to continue into 2024. Governments have focused on curbing fiscal spending, leading to central banks raising interest rates and affecting private business investment. Slower GDP and income growth, coupled with high food inflation, currency depreciation, and increased energy costs, have collectively impacted consumer purchasing power. The report suggests that a shift in demand patterns may occur in the latter half of 2024, with stronger demand for skim products as US price competitiveness improves.

Specifically, the report forecasts sustained lower prices for NDM and whey in the first half of 2024, with weak volumes due to soft demand from East and Southeast Asia. Average NDM prices are projected to be 8% lower than FY2023 levels, with a more pronounced decline in the first half of FY2024. Cheese prices are expected to average US$1.71 per pound, representing an 8% decrease from FY2023.

-       Agro Perspectiva