June 16, 2020

 

Southeast Asia reports record US dairy purchases

 

 

Southeast Asia claimed the top customer spot for US dairy in April with record purchases of US$124.9 million products, a jump of 52% on-year, Capital Press reported.

 

Those strong sales drove total US dairy exports in April 7% higher in volume and 4% higher in value on-year, according to the US Dairy Export Council (USDEC).

 

In total, US suppliers shipped 182,437 tonnes of milk powders, cheese, whey products, lactose and butterfat at a value of US$521 million.

 

On a volume basis, April shipments were up 35% to Southeast Asia and 47% to China, helping to offset an 18% drop in exports to Mexico.

 

Reduced dairy demand in Mexico sent total US export volumes there to the lowest in nearly four years, with a 15% drop in value to US$98.7 million.

 

"Mexico had a strong spring flush, and their economy and currency are weaker as a result of COVID-19," William Loux, USDEC director of global trade analysis, said.

 

At one point in April, the peso had deteriorated 26% compared to pre-COVID levels, he said.

 

"While the peso has strengthened some as of late, a weaker peso still makes imported product more expensive," he said.

 

Gains in Southeast Asia made up for some of that loss. Shipments of milk powders to the region hit record highs, up 62% in volume on-year and accounting for half of total volume sales of non-fat dry and skim milk powders.

 

Southeast Asia capitalised on a break in prices, according to USDEC.

 

"The global powder market crashed in March, as did every other market as the world went into lockdown," said Alan Levitt, USDEC vice president of market analysis and communications.

 

"Also, there was an expectation that there would be all this excess milk that would have to be dried into powder for long-term storage. So that also put downward pressure on the market," he said.

 

In addition, EU market share in the region in 2019 was inflated due to discounted skim milk powder coming out of public intervention and onto the world market, Loux said.

 

"That discounted product is now gone, so the US is reclaiming market share," he said.

 

The US was also price competitive, partly because the US had additional powder available due to weakened demand out of Mexico last year. And lower production in Europe limited the EU's available supply, he said.

 

Those factors combined with commitments by many US dairy exporters to expand their presence in the region helped grow US market share to record highs through April, he said.

 

COVID-19 makes forecasting difficult, he said. "We do expect demand for dairy to be challenged," he said.

 

Global dairy trade declined 1.6% on-year through the first quarter of 2020. The sharp contraction in demand from restaurants, hotels and catering services will impact dairy purchasing in markets around the world, he said.

 

"The US is well placed to weather the storm and has managed growth this year despite headwinds, but we'll see what May export data brings," he added.