Butter Imports and Exports

In the prior post, exports and imports of cheese were analyzed.  In this post, exports and imports of butter are analyzed.  The title for this post is "Imports and Exports" not "Exports and Imports", because the most impactful changes for butter are related to imports.   Butter domestic consumption has experienced strong growth in recent years, but domestic production of butter has lingered (Chart I).  How can this be?

Chart I - U.S. Butter Production

Butter consumption in the U.S. is typically considered a growth area for dairy.  Butter domestic consumption grew by 21 KMT in 2018, which represents a growth rate of 2.4% over the prior year.  Unfortunately, this growth in consumption is not significantly impacting U.S. butter production (Chart I).  The reason for very limited growth in production is simply that a significant amount of the growth is coming from imported "Irish butter."

In 2018, 28 KMT of butter were imported from Ireland, which was an increase of 9 KMT over the prior year.  Depending on how one views this, the 9 KMT growth of "Irish butter" accounts for about half of the increase in U.S. butter disappearance of 21 KMT.  Viewed differently, the 28 KMT of imported "Irish butter" was larger than the entire growth of domestic disappearance in 2018.  Viewed either way, "Irish butter" is responsible for much of the growth in domestic butter consumption.

The unanswerable question is how much of the imports of "Irish butter" cannibalize domestic butter consumption and how much cannibalize plant-based spreads.

To put these numbers in perspective, total domestic disappearance (domestic consumption) of butter in 2018 was 862 KMT.  The imports of "Irish butter" were 3.3% of the domestic consumption.  That is a reasonable estimate of "Irish butter's" market share.  Based on the first quarter 2019 import statistics, that market share is trending to 4.2% in 2019.

Charts II and III below review the growth of butter imports from Ireland.   Chart II displays annual "Irish butter" imports for 2015 to 2018.  During this time "Irish butter" imports increased by 300 percent.  Chart III compares the first quarter imports of "Irish butter" from 2015 to 2019.  During this time, "Irish butter" imports increased by over 500%.  Consumer acceptance of "Irish butter" has been phenomenal, and the growth rate, judging from the first quarter 2019 statistics, is continuing to increase.

Chart II - Annual Butter Imports from Ireland 2015 to 2018

Chart III - Q1 Butter Imports from Ireland 2015 to 2019

"Irish butter" is not a revolutionary product, but the marketing has been extremely well done and the product has made major inroads in U.S. consumption of butter.  Charts IV and V below show the imports of butter by country for 2015 and 2018.  In 2015, 27 per cent of imported butter came from Ireland.  By 2018, imported butter from Ireland has risen to 57 percent of imports.

Chart IV - Butter Imports - 2015

Chart V - Butter Imports 2018

This simply means that the growth of butter consumption in the U.S. is only slightly helping U.S. dairy producers, because it is sharing the domestic consumption growth with dairy producers in Ireland.

Exports of butter have been minimal, and the first quarter of 2019 showed no growth (Chart VI).  The majority, 67%, of the butter exports went to Mexico and Canada.  The U.S. is not a player in the international markets for butter exports.  Chart VII shows the inventory levels of butter in the U.S.  It clearly shows that there are very little supplies available for export.

Chart VI - Butter Exports by Year

Chart VII - Domestic Butter Supplies

SUMMARY

U.S. dairy producers are plagued by a lack of market for their milk. Fluid milk is declining quickly, and the only real growth market is cheese.  The above analytics in this post show that the U.S growth market for butter, is not as healthy as portrayed by the increasing U.S. domestic market consumption.  Much of the increased U.S. butter consumption is being supplied by imported butter from Ireland.

Without innovation, the U.S. butter consumption increases may be claimed by imports from other countries.  Future posts to this blog will continue to follow these trends.