Slumping milk powder exports weigh on U.S. performance

U.S. cheese exports rise 24% in third quarter.

Weak sales of nonfat dry milk/skim milk powder (NDM/SMP), particularly to Southeast Asia, depressed overall U.S. export totals in the third quarter, according to Alan Levitt, vice president of communications and market analysis at the U.S. Dairy Export Council (USDEC).

U.S. suppliers shipped 460,204 tons of milk powder, cheese, butterfat, whey and lactose during the July-to-September period, down 2% from last year. Despite the decline, U.S. exports were valued at $1.3 billion in the third quarter, 9% higher than during the same period last year.

Exports of NDM/SMP in the third quarter totaled 131,988 tons, down 18% compared to last year. Sales to Southeast Asia were just 34,536 tons, a 35% decline, with significant volume lost in Indonesia (down 60%) and Vietnam (down 76%). Shipments to Mexico were also lower, falling 19% below last year’s pace.

Levitt said official U.S. Department of Agriculture data continue to show an increase in WMP exports to Mexico, but he noted that Mexico's import data and trade sources don’t corroborate this. USDEC believes the volume represents SMP sales that were misclassified at the port. Therefore, NDM/SMP and WMP trade data for June 2016 to September 2017 were adjusted to account for this misclassification.

With declining powder exports, USDEC reported that U.S. inventories of NDM increased in the third quarter for the first time since 2008. At the end of September, stocks were a record-high 146,000 tons, nearly 50% higher than last year.

“Lagging U.S. exports reflect strong competition from European suppliers as well as a slowdown in global buying activity. Oversupply in the world market has led SMP prices to fall to their lowest level since spring 2016,” Levitt explained.

Southeast Asian countries also took less U.S. whey in the third quarter, USDEC reported. Exports were 22,072 tons, down 11% from the same period last year. Sales of whey protein concentrate (WPC) and modified whey were off by 23%. Meanwhile, lactose shipments to the region were down 26%.

Overall U.S. exports to Southeast Asia in September were just $40 million (down 29%), which USDEC said was the worst month since February 2010.

Total whey exports in the third quarter were up slightly from a year ago. In addition to lost Southeast Asian business, USDEC reported that shipments to China were also a little lower, while exports to Mexico and Japan improved. This wasn’t enough to arrest falling global prices or prevent a buildup of U.S. dry whey stocks to record levels at the end of September, USDEC noted.

U.S. cheese exports, on the other hand, were up 24% to 84,485 tons in the third quarter. Rising sales to Australia (up 140% to 9,265 tons) and Japan (up 78% to 9,329 tons) drove the gains.

“In addition, cheese exports to the Middle East/North Africa region are beginning to recover, with September volume the highest in more than three years,” Levitt said.

Lactose exports in the third quarter were 2% lower than last year. Southeast Asia and New Zealand imported less, but China and Mexico imported more.

In September, exports of butterfat were the lowest in more than a year. Suppliers saw a large drop-off in sales to Canada in September, and few other countries have bought U.S. butterfat over the last 18 months.

Though volumes are still very low, exports of whole milk powder (WMP) improved in September, with increased sales to China/Hong Kong.

Fluid milk/cream exports were down 8% in the third quarter, compared with strong sales to Canada and Mexico realized in 2016. Shipments to Taiwan continue to climb, up 38% in the third quarter.

On a total milk solids basis, U.S. exports were equivalent to 14.2% of U.S. milk production in September, while imports were equivalent to just 3.0% of production.

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