Trade data released Tuesday show that eight months into 2020, the value and volume of U.S. dairy exports continues to grow at a double-digit pace. Volume on a milk solids basis was up 17% compared to last August, putting year-to-date performance up 16%. Value grew by 11% (YTD up 14%).
Most major product categories booked strong gains in August. U.S. suppliers shipped 190,435 tons of milk powder, cheese, whey products, lactose and butterfat—a record for the month. The August increase capped a full year—12 straight months—of year-over-year increases in aggregate U.S. dairy export volume.
In August, the United States’ core categories—NDM/SMP, cheese and whey products—propelled a strong month overall and extended year-to-date gains. Each was fueled by different factors.
Total U.S. NDM/SMP exports rose 35% to 68,798 tons, driven primarily from a doubling of shipments to Southeast Asia, with the aid of competitive pricing and a committed U.S. presence in the region. Total U.S. NDM/SMP exports were up by 17,714 tons; shipments to the six primary markets in Southeast Asia grew 14,288 tons.
Another bright spot: Shipments to China went from virtually nothing in August 2019 (173 tons) to 5,343 tons in August 2020, making it the third largest destination for U.S. milk powder for the month. Our No. 2 market, Mexico, lagged in August, with U.S. NDM/SMP shipments down 15% to 23,754 tons.
Even though U.S. NDM/SMP export volumes have decelerated over the past three months, the latest USDA Dairy Products report shows a decline in August inventories and levels remaining below 2019 comparables after the March and April surge. This suggests the market remains in balance despite weakness in Mexican demand.
Cheese enjoyed a surprisingly strong month: U.S. exports grew 17% to 31,009 tons, with impressive growth across the core U.S. markets. U.S. cheese exports to Mexico rebounded in August with a 29% increase to 8,807 tons, while sales to South Korea (+88%), Japan (+49%) and Australia (+53%) soared.
U.S. cheese export prices were well below May-June U.S. domestic prices, suggesting U.S. exporters accepted lower margins to maintain international relationships.
Other markets, where tourism accounts for larger shares of GDP and cheese consumption – such as Central America, the Caribbean and Southeast Asia — continue to lag in cheese buying. International tourism in most import regions remains significantly restricted by COVID-19.
August whey shipments recorded double-digit gains in all categories with U.S. whey strength almost entirely due to China and its continuing attempts to rebuild its hog herd. Total U.S. whey exports grew 29% in August, an increase of 11,281 tons; U.S. shipments to China for the month jumped 318% or by 17,212 tons.
At +318%, it was a significant month-to-month surge that could be a signal of an increase in U.S. whey market share thanks in part to the Phase I trade agreement. U.S. whey export growth to China should be further supported by China’s move last month to extend a retaliatory tariff exemption on U.S. permeate for animal feed.
The Chinese whey import gain more than made up for declines to other regions, like Southeast Asia (-14%) and Mexico (-60%).
In other products, U.S. butterfat exports rose 4% with gains to Canada, Saudi Arabia and Japan.
Lactose volume fell 8% to 29,168 tons, with declines to Mexico (-23%), China (-12%) and South America (-33%).
MPC exports rose 37% and Canada was the top U.S. MPC market. The increase was a hopeful sign that changes to Canada’s Class 7 pricing scheme mandated by the USMCA might be effective in helping U.S. suppliers reestablish business (MPC and ultrafiltered milk were the major U.S. exports affected by Class 7).
Provided by the USDEC