A continuation of elevated prices and increased high-value exports drove the value of U.S. dairy exports higher in February, according to the U.S. Dairy Export Council (USDEC).
Overall export volumes were down, however, due to supply constraints and higher prices. Writing in the most recent U.S. Dairy Exporter Blog, USDEC staff summarized February 2022 dairy export data and discussed key reasons for the divergence between volume and value:
- Value basis: February 2022’s total U.S. dairy export value surged 23% from a year ago to $696.8 million, a new record high for the month.
- Volume basis: Strong U.S. shipments of cheese, butterfat and lactose came close to offsetting declines in milk powder and whey but fell just shy. U.S. shipments of butterfat jumped 75% to 6,755 metric tons (MT), the biggest month for U.S. butterfat exports since April 2014. U.S. lactose exports grew 15% to 28,776 MT, and cheese gained 9% to 32,953 MT, setting a record for the month and extending the year-over-year growth streak to eight consecutive months.
That was offset by volume declines of nonfat dry milk/skim milk powder (NFDM/SMP) to most major buyers, led by declines to the top two U.S. milk powder markets, Mexico and Southeast Asia. Reduced Chinese demand continues to dampen U.S. whey exports, but overall volume in February finished better than expected, slipping only 4.5%.
- Milk solids basis: At 175,602 MT, the export volume of dairy solids declined by 1%.
What’s ahead?
Global cheese demand remains strong, and tight supply and favorable pricing continue to benefit U.S. suppliers. Much of the U.S. cheese growth in February came from a 59% increase in cheddar volume, which is being primarily driven by competitive pricing, available supply and good demand.
There were some encouraging signs in whey in February, including a 14% increase in modified whey shipments and a much stronger buying presence by Japan.
The recovery in U.S. dairy exports to Mexico has somewhat stalled as of late. In February, overall U.S. dairy exports to Mexico contracted 10% in terms of milk solids equivalent but jumped 28% in value. While the government remains optimistic about milk production in 2022, Mexico’s leading dairy trade association has pushed back against the official statistics and expects production to be down by 3.3% this year. This tighter domestic environment for milk is supportive of U.S. imports into the country, and it is likely to continue in 2022. However, a strong dollar could still temper demand.
CWT-assisted exports
The National Milk Producers Federation (NMPF) updated Cooperatives Working Together (CWT) program-assisted export contracts. March 2022 sales contracts covered 6.7 million pounds of American-type cheeses, 37,000 pounds of butter, 611,000 million pounds of whole milk powder and 895,000 pounds of cream cheese.
Through the first three months of the year, contracts total 36.5 million pounds of American-type cheese, 37,000 pounds of butter, 14.7 million pounds of whole milk powder and 4 million pounds of cream cheese, for a total milk equivalent for the year of 477 million pounds (milkfat basis). CWT estimates are based on contracts for delivery not completed export volumes.
Here’s a look at other export trends followed by Progressive Dairy:
Hay exports rebound somewhat
After slumping to a 12-month low in January, February exports of alfalfa hay hit a four-month high at 232,170 MT. Most of the rebound was attributed to the two major markets, China and Japan, each up about 14,000 MT from the month before. Exports to China in February 2022 totaled 123,614 MT, a three-month high and represented about 54% of the month’s total. At 62,768 MT, Japan was the second-leading market and represented 26% of the month’s U.S. total. Alfalfa hay exports were valued at about $399 per ton, up $19 from January.
At 116,897 MT, February exports of other hay also rebounded slightly. Sales to Japan were estimated at 72,139 MT, representing 62% of the U.S. total for the month. Sales to South Korea at 24,881 MT hit a four-month high and represented 21% of total sales in February 2022. Other hay exports were valued at about $394 per ton, up $18 from January.
The outlook for U.S. hay exports is improving, although logistical struggles remain, according to Christy Mastin, sales representative with Eckenberg Farms, Mattawa, Washington.
For more on hay exports and market conditions, check out Progressive Forage’s Forage Market Insights update.
Dairy heifer exports slow
After setting a three-year high in 2021, the export of U.S. dairy heifers is off to a slow start in 2022. Although February’s numbers were boosted by a large shipment to Pakistan, dairy heifer exporters warn the outlook for the rest of the year has turned cloudy.
Dairy heifer export totals for the month were estimated at 2,619 head, up from just 195 head in January, based on USDA Foreign Ag Service (FAS) data. Nearly all of the February exports went to Pakistan at 2,584 head. The remaining 35 head moved to Canada.
Through the first two months of the year, FAS reported U.S. dairy heifer exports at just 2,814 head, the smallest two-month total since 2016. Year-to-date exports to Canada and Mexico stand at just 81 and 134 head, respectively.
Exporters cite limited heifer supplies, higher prices and transportation costs, and geopolitical unrest for the possible downturn this year.
Read: Dairy heifer exports slow and headed for challenging year.
Other trade news
Here’s a summary other issues about and affecting U.S. dairy and agricultural trade:
- Several members of the U.S. House of Representatives sent a bipartisan letter to U.S. Trade Representative Katherine Tai and U.S. Secretary of Agriculture Tom Vilsack calling on the Biden administration to reject Canada’s recent dairy proposals under the U.S.-Mexico-Canada Agreement (USMCA). Canada had proposed changes to its dairy tariff-rate quota (TRQ) allocations after a USMCA dispute panel found existing rules do not meet trade agreement requirements. Read: Panel sides with U.S. in Canadian dairy trade dispute and Weekly Digest: U.S. dairy groups reject Canadian USMCA dairy market access proposal.
- Testifying before a House Agriculture Subcommittee on Livestock and Foreign Agriculture hearing, USDEC President and CEO Krysta Harden called on Congress and the Biden administration to support a number of specific policy proposals that will help grow U.S. dairy exports. Harden laid out a comprehensive trade roadmap to support U.S. dairy exports, focused on both farm bill provisions and essential trade policies that can complement the farm bill. Excerpts from here written testimony are available here.
- The NMPF and USDEC praised a bipartisan letter from 87 members of the U.S. House of Representatives who called on Tai and Vilsack, “to make agriculture a priority in the Indo-Pacific Economic Framework.”
- Jeff Lyon, general manager at FarmFirst Dairy Cooperative, called on the Biden administration to increase efforts to expand export markets through prioritizing bilateral and multilateral trade agreements.
- The USDA is partnering with Northwest Seaport Alliance (NWSA) to enhance access to a 49-acre “pop-up” site to accept either dry agricultural or refrigerated containers for temporary storage at NWSA in Seattle, Washington. The site is designed to reduce operational hurdles and costs by enhancing loading operations at the export terminals. The NWSA includes the marine cargo operations of the ports of Seattle and Tacoma and is the fourth-largest container gateway in the U.S. A similar pop-up site was launched at the Port of Oakland on March 1.
- The Port of Savannah’s container volume grew nearly 18% in February, extending year-over-year increases to 19 consecutive months. In light of the sustained increase in cargo volumes, Georgia ports will make major investments in expansion projects that will increase the Port of Savannah’s annual capacity from the current 6 million to 9.5 million 20-foot equivalent unit (TEUs) containers by 2025.
