How did Dairy Exports and Imports do in 2020?

This post will review the dairy exports and imports for 2020 compared to prior years.  Only cheese and butter will be reviewed in this post as they are the most important commodities used to price milk.  Nonfat Dry Milk (NDM) and dry whey, which are primarily export items, are priced based on global conditions.    NDM is really the by-product of butter production and whey is the by-product of cheese production.  Exports of these two commodities do not result in more demand for producer milk.  Exports of NDM and dry whey will be reviewed in a future post.

Cheese will be reviewed first as it is the most important commodity in pricing producer milk.

Cheese Exports

Following some nice gains in 2017, cheese exports (Chart I) have been level for the last four years, with only a five percent variation from the highest to the lowest.  In 2020, total cheese exports declined by one percent.

Chart I - Total U.S. Cheese Exports

Chart II shows exports as a percent of U.S. milk production.  With the exception of 2016. cheese exports have remained in a very tight spread between 5.8 and 5.9 percent of U.S. cheese production.  In 2020, they remained in the middle of this spread.  While stability is typically good, it would have been nice to see some improvement in cheese exports.

Chart II - Cheese Exports as a Percent of U.S. Production

Mexico remains the main U.S. customer with a very steady volume of cheese purchases (Chart III).  Sales to Mexico made up 26 percent of total cheese exports.  South Korea had gains of 67 percent from 2016 to 2020 and ended 2020 with some great growth momentum.  Cheese sales to South Korea now make up 20 percent of total cheese exports.  The South Korea gains in 2020 were offset with loses of 40 percent in sales to both Saudi Arabia and the United Arab Emirates.

Chart III - Export Sales to the six Largest Countries

Cheese Imports

Cheese imports have consistently fallen over the last four years (Chart IV).  From their high in 2016 to the low in 2020, cheese imports have fallen by nine percent.   With fewer imports, there is room for more domestic cheese to be consumed.

Chart IV - Imports of Cheese

Chart V shows cheese imports as a percent of U.S. cheese production.  In 2016, Cheese imports were 3.6 percent of domestically produced cheese.  In 2020, that had fallen to three percent.

Chart V - Cheese Imports as a percent of Domestic Production

Chart VI shows the imports from the six largest cheese importing countries. The decrease in imports of cheese occurred primarily from lower imports from Italy, France, and Spain.  These are all specialty cheese producers with a niche market.  Niche markets of branded products are typically difficult to compete against, but consumers are apparently finding other fine cheese domestically.

Chart VI - Cheese Imports by Country

Butter Exports

Butter exports are minimal as there is little butter available for exports after domestic demand is satisfied.  With the exception of 2018, butter exports have been minimal and with only slight growth (Chart VII).

Chart VII - Total U.S. Butter Exports

Butter exports are currently running at 2.7 percent of domestic butter production.  Butter exports as a percent of production when compared to the same statistic for cheese (Chart II) is about half.  With butter inventories increasing (see the January 24 post to this blog), some increases in butter exports may be possible.

Chart IX - Butter Export as a Percent of Domestic Production.

Butter exports by country are sporadic, but long-term, Canada is the primary buyer of U.S. butter.  Canada has a long-term shortage of butterfat and must import butterfat from external sources.

Chart X - U.S. Butter Exports by Country

Butter Imports

The most dynamic event in this post is the imports of butter.  Imports of butter have grown by 72 percent over the six-year history shown in Chart XI.

Chart XI - Total U.S. Butter Imports

When expressed as a percentage of U.S. butter production, imports have grown from four percent to 6.4 percent over the six-years shown in Chart XII.

Chart XII - Butter Imports as a Percent of Domestic Production

The story behind this huge growth in butter imports is the amazing marketing job done by the Irish dairy cooperative Ornua, which is marketing their branded cultured butter globally.  It is a cultured butter marketed primarily as Kerrygold.  Although the market growth has slowed in 2020, it is now commanding a 50% market share of butter imports into the U.S.

The Kerrygold brand is being expanded with cheese products branded as Kerrygold "Dubliner" and Kerrygold Cheddar.  The marketing of the dairy products from Ireland should get an A+++ rating.

Chart XIII - Butter Imports by Country

Summary

The growth of dairy exports of cheese and butter is a story of no growth, especially in the last four years.  Leadership of the USDEC has now changed and with that change hopefully an increase in cheese and butter exports will restart.   Both cheese and butter consumption in the U.S. is growing, and the growth is in the area of two percent annually.  With the declining consumption of fluid milk, growth products are essential.  While the growth in butter consumption is around two percent, some of that growth is being captured by increased imports from Ireland.   U.S. dairy exports seem to be centered around commodity sales of dairy products.  Lessons can be learned by the actions of cooperatives such as Fonterra in New Zealand and Ornua in Ireland which develop and emphasize branded products.