Sunday, November 13, 2016

Update on U.S. Dairy Exports & Imports

Dairy import and export data is now available for the month of September 2016.  Exports of NDM/SMP remain robust, but at low prices.  Exports of butter remain near zero and exports of cheese remain stable.


Net exports (exports minus imports) of cheese and butter remain low, as international prices remain lower than U.S. prices.   Shown below are the net exports of cheese and butter through September 2016.  In each case, there is no obvious trend and net exports remain very low.  If imports were not limited by the two tier quota and tariff program, net exports volumes would probably be lower prompting lower domestic prices.  The phased elimination of the two tier quota and tariff process is one of the items included in the TPP agreement now before congress.  See the October 16 post to this blog for more details on the TPP.


The most significant export market for cheese and butter is Mexico.  In the case of butter, more is imported from Mexico than exported.   Exports of butter to Mexico have remained relatively stable while exports to most other countries have fallen.  Imports recognize the lower international prices and international availability of butter.


The real activity in exports is in exports of NDM/SMP.   Exports remain robust compared to prior years.  NDM/SMP exports hit a record high for the month of September.   Unlike cheese and butter exports, NDM/SMP exports have not fallen since 2014.   


The largest customer for NDM/SMP is again Mexico.  Nearly 50% of the NDM/SMP exports are destined for Mexico.


How has the export of NDM/SMP remained robust while exports of cheese and butter have languished?  The answer is really pricing.  As shown below, while NDM prices have shown some improvement in 2016, they are still at a very low price compared to historical prices.  U.S. pricing has remained very competitive with the other major exporters, the EU and New Zealand.  The domestic price must reflect the export pricing because 54% of NDM/SMP is exported, unlike cheese and butter.  Further price improvement is forecast in the futures market with NDM/SMP reaching prices close to $1.40/lb. compared to the current price of $.92/lb.


This could impact overall U.S. dairy pricing as discussed in the prior post and covered in detail in an earlier post.  

From 2007 to 2013, production of SMP (which is an export only item) has nearly tripled.  NDM production was up by about 14% during this same time span.  Ten years ago SMP amounted to less than 13% of the total production of NDM/SMP.  In 2013 it was 30% of the total combined production of NDM/SMP.   However, beginning in 2014 to the present, total exports of SMP have declined due to competitive international prices and now are at about 20% of the total NDM/SMP production. Although the mix has shifted, the combined total is clearly growing.


Imports of NDM remain robust, as there is available product on the international market at low prices. A lot is imported from New Zealand where there is oversupply.  Competition from the EU has taken NDM volume from New Zealand  Very little U.S. dairy product product goes to Canada, but a significant amount of NDM comes in.  


What is the difference between NDM and SMP?  It begins with how the standards are set for each product.  The standard for SMP is set in Geneva Switzerland while the USDA/FDA sets the standards for NDM.  The subject is "complicated" and will be covered soon in a separate post to this blog.

The most important item for milk pricing is cheese.  In the next year there does not seem to be any major change in exports in the wind.  This will leave an abundance of cheese available in the U.S., which will keep prices near current levels.   This stable level of cheese pricing is reflected in the CME futures market.  The most dynamic change to dairy exports/imports centers on trade agreements.  The current election returns could influence this.  Passage of the TPP could hurt U.S. exports of cheese and a revision of NAFTA could go either way.  



1 comment:



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    من خلال زيارة موقعنا الالكترونى

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