Sunday, April 20, 2014

Strong Dairy Exports Continue in February

U.S. dairy exports remained robust in February 2014.   The table below lists the February exports of those milk products that directly influence the Federal Milk Marketing Order milk prices.  All of these  products show increases over February 2013, however, exports of Nonfat Dry Milk/Skim Milk Powder (NDM/SMP) were not as strong as they were for most of 2013.   Cheese exports remained at record levels in February.

NDM/SMP is the largest export item for the U.S. and is the basis for Class IV pricing.   For 2013, the U.S. was the world's leading exporter of NDM/SMP.

While February's exports remain strong and are a record for the month of February,  they represent 45% of NDM/SMP production vs. 58% for the full year of 2013.  The year 2013 was the first and only year that the U.S. was the world's leading exporter of NDM/SMP.  This may be challenged by the EU and/or New Zealand in 2014

Cheese exports were especially strong; up 45% YTD.   Cheese demand is especially important, as the resulting price is the most significant factor in Class III milk pricing which directly impacts over 50% of U.S. dairy producers.  Cheese exports accounted for 8.1% of production, an all time high.  These exports are putting pressure on cheese production.  This has resulted in low inventories and high prices as reviewed in the prior post to this blog.

The largest importer of U.S. Cheese is Mexico representing 22% of the export volume.  Next is South Korea, which represents 15% followed by Japan with 12%.  The most significant percentage increase over the prior year was the cheese exports to Saudi Arabia, representing 6% of U.S. exports.

Butter exports have remained strong, doubling the prior year export levels.   Although February exports were below January levels, they were still up 102% over February 2013.

These exports represent 11.9% of butter production.  Butter (and butterfat) prices do not strongly influence Class III prices.  However, from a producer's perspective, high butterfat prices do offer a good opportunity to increase revenue with increased butterfat production.  The high export levels are keeping butter inventories low and butter prices high. 

Dry whey prices are the basis of other solids pricing for the Federal Milk Marketing Orders paid on components.  Exports of dry whey remain strong with 65% of dry whey production being exported.  The pricing of dry whey is obviously driven by exports.  Dry whey prices have kept other solids near $.50/lb. for the last three years.  This has allowed other solids to consistently contribute over $2/lb. to the Class III milk price.

Whole Milk Powder (WMP) has never been a major production or export item for the U.S.  There is no domestic market for WMP and the majority of the world's exports are imported by just one country, China.  New Zealand has been the largest exporter of WMP by a significant margin.  However, the U.S.  is becoming active in this category with WMP exports up 236% over the prior year for the first two months of 2014.

WMP exports of 10,008 metric tons are small compared to NDM/SMP exports of 74,930 metric tons.  WMP pricing does not influence any of the Federal Milk Marketing Order formulas.  However, this is a significant change in U.S. dairy exports and will continue to be followed in this blog.


Exchange rates can significantly influence the competitiveness of U.S. dairy products in the International markets.   The two major global exporters of dairy products are the EU and New Zealand.  A weak USD has a positive influence on exports by making U.S. goods less expensive compared to international competitors.  On the charts below, a higher value indicates a weaker USD.

The Euro has been gaining strength and is at a three year high vs. the USD.  It currently takes around 1.38 USD to buy one Euro.  This provides a slightly favorable influence on U.S. dairy exports vs. the dairy exports from the EU.

The wide fluctuations in USD exchange rates vs. New Zealand were largely responsible for the 2008/2009 swings in U.S. dairy exports and the resulting swings in U.S. dairy milk pricing.  Since then, the exchange rates have settled down and have been showing a trend toward a weaker USD and stronger NZD.   

The exchange rates are currently favorable for U.S. dairy exports.  This will continue to be followed in future posts to this blog.


Exports are playing a major role in U.S. dairy markets and they will probably continue to grow in overall importance.  More details on the U.S. dairy export trends can be reviewed in the 2013 review of the international dairy markets.  Future developments will be reviewed in future posts to this blog.

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