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Despite Logistical Challenges, US Dairy Exports Set To Record Stellar Year, Led By SMP, Cheese

Washington—Despite the logistical challenges posed by the coronavirus pandemic, US dairy exports are set to record a stellar year, led by shipments of skim milk powder (SMP), cheese, and butter, according to the Dairy: World Markets and Trade report released last Friday by USDA’s Foreign Agricultural Service (FAS).

Skim milk powder/nonfat dry milk shipments through October had already reached 689,000 tons (1.52 billion pounds), accounting for nearly one-third of the $6.4 billion of dairy exports already shipped, the report noted. For the year, SMP exports are forecast to reach a record 887,000 tons (1.96 billion pounds), up almost 10 percent from 2020.

For 2022, growth is anticipated to moderate, with SMP exports set to grow by 3 percent to 917,000 tons.

Global prices of SMP have been rebounding recently as a result of lackluster milk production in Oceania and the European Union (EU), the report noted. SMP prices in those regions are currently hovering around $1.60 to $1.65 per pound. While US prices remain competitive, import demand is expected to be tempered as food processors seek more cost-effective substitutes.

One notable trend, according to the FAS report, is that US global market share of SMP among major exporters has been steadily climbing from around 30 percent in 2015 and is forecast to reach 41 percent in 2022. Since 2014, the EU has been the dominant supplier; however, this year US exports of SMP are expected to surpass EU shipments.

This trend is likely to persist into next year as US milk production is expected to continue to grow, the report said.

US exports of other dairy products, such as cheese and butter, have also posted strong gains this year, the report continued. In the case of cheese, shipments this year are expected to grow by 16 percent to reach a record 412,000 tons (908 million pounds).

US cheese exports in 2022 are forecast to be fractionally higher than in 2021. A slowdown in the growth of milk production coupled with relatively strong domestic demand is anticipated to limit exportable supplies. However, shipments of cheese have been strong in 2021 and the export forecast has been revised up by 9 percent to 412,000 tons. This has largely been due to shipments to Mexico, which through October had grown by 9 ercent year-overyear and accounted for about onequarter of US shipments.

Despite stagnant milk output in 2021, EU cheese production is forecast to grow by 1 percent in 2021 due in part to the opening of several new cheese plants producing Mozzarella for the food processing industry. For 2022, cheese production is expected to moderate and grow by one-half percent to reach 10.4 million tons.

For 2022, EU cheese exports are forecast to grow by 1 percent with the bulk of the cheese likely destined destined for the UK, the US and Japan. In 2021, shipments were up 1 percent through August with about 30 percent going to the UK.

While shipments to the UK were down 12 percent over this period, the EU is successfully expanding in the Japanese market, the report noted. EU cheese exports to Japan have grown by an annual average rate of 13 percent between 2016-2020 and Japan’s import data indicates that the EU will have a strong second half of this year. The US is an equallyimportant market for the EU and while exports to the US fell by 10 percent in 2020, cumulative shipments in 2021 through August are up 17 percent year-over-year.

This rebound was largely attributable to the five-year suspension of US import tariffs originally imposed due to Boeing-Airbus World Trade Organization dispute, the report pointed out.

After a strong 2021 during which New Zealand’s cheese production ramped up by 11 percent, cheese output in 2022 is slated to drop by 1 percent. However, it is likely that more Mozzarella cheese will be produced at the expense of Cheddar as there is strong demand in Asia for New Zealand-produced Mozzarella, the report said.

New Zealand cheese exports for 2022 are forecast down 5 percent to 355,000 tons following a banner year when exports are on track to reach a record 372,000 tons. Exports to China have grown rapidly and shipments through October 2021 compared to the same period in 2020 have grown by 39 percent from last year and account for about a quarter of the total volume of cheese shipped.

Australia’s cheese exports are forecast to grow 3 percent in 2022, reaching 165,000 tons. Trade will be supported by further demand growth in China, the second-largest market for Australian cheese, trailing only Japan.

US butter has also been highly sought after as it is highly competitive in a tight global market, the report noted. Recent Oceania prices have been around $2.65 per pound while EU prices have been higher. Exports of US butter this year are expected to more than double from last year to reach 60,000 tons (132 million pounds).

After several years of declining production, butter output in New Zealand in 2022 is forecast to grow by 3 percent to 485,000 tons.

The 2022 forecast is supported by the higher expected global prices of SMP and butter, which will likely channel milk away from cheese.

However, there is an increasing volume of milkfat being used to produce ultra high temperature (UHT) cream for export rather than butter.

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