Saturday, May 13, 2017

Exports and Imports -Signs of Improvement

In the first quarter of 2017, 14% of U.S. dairy solids were exported.   This is a significant increase from the first quarter of 2016 when 12.6% of U.S. dairy solids were exported, but still well below the previous highs of 2014 and 2015.  Cheese, NDM, and dry whey net exports (exports minus imports) were all up over the prior year.  Butter exports were very low and imports were up, resulting in a lower and negative net export level compared to the prior year.

The improvements are especially significant considering the headwinds caused by a strong USD, which mostly remains unchanged from the prior year.  The most significant exchange rate is the USD/Euro.  This exchange rate fell continuously from 2008 to 2014 and then took a plunge.  It remained stable through most of 2016 at an average rate of around $1.12 and then took another fall in late 2016 to the $1.06 level.  A strong USD makes U.S. products more expensive in the international markets.


Cheese exports have improved from 2016, but still lag behind 2014 and 2015 in volume.  For the first quarter of 2017, cheese exports have increased from 5.3% in 2016 to 5.8% of production.


The increased level of cheese exports have resulted from increased exports to South Korea and Australia.  Exports to Mexico still slightly lag from the prior year.


Imports of cheese are down significantly from 2016.  International cheese prices have increased making them less attractive to U.S. cheese buyers.


In the first quarter of 2017, New Zealand cheese prices increased 23% vs. the prior year.  The impact is very visible in the graph below as imports of cheese from New Zealand have taken a significant fall.


As mentioned in the prior post, cheese inventories are still high and this is keeping the cheese price low.  However, exports and imports of cheese are currently on a favorable trend that should lower the inventories and improve prices.  Because the international markets can be significantly influenced by many external factors such as world supply and demand, exchange rates, political events, etc., there is always a high level of uncertainty in international forecasts, however, for now, the trends look encouraging.

The largest export product for the U.S. is NDM/SMP.  ( The difference between NDM and SMP were explained in a prior post.)  For the first quarter of 2017, NDM exports were at record levels.


However, imports were also at record levels for the fist quarter of 2017.


The imports came from many sources, as shown below.  Prices of NDM have fallen during 2017 as international supplies remain strong.  Because domestic butter consumption is up, there are significant volumes of skimmed milk available for production of NDM/SMP.  This is keeping NDM/SMP prices low and probably will continue to keep NDM/SMP prices low.


The USD has weakened vs. the NZD in 2016, favoring U.S. exports.  However, for the last few months this has reversed.  If the USD continues to strengthen against the NZD, the U.S. price of NDM may fall further to remain competitive with New Zealand.


It seems certain that the international market for dairy products will remain very active and price competitive in the future.  So far in 2017, 54% of nonfat dry milk/skimmed milk powder produced in the U.S. has been exported, so the domestic price of nonfat dry milk is determined primarily by the international markets.

The two major factors influencing producer prices for 2017 are the international dairy markets and the possible transition of California to a FMMO.  The financial analysis of the California change will be reviewed in the next blog post.



2 comments:

  1. Great work as always John! Would you be willing to post in the future about how the price of cheese sales to the consumer tie back to the Class III price paid to the farmer? IE, I can take 11.63 as an average across milk times the price of a gallon of milk and compare to Class I pricing. Thoughts?

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