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USDA Dairy Products


14 December 2012

USDA Dairy: World Markets and Trade - December 2012USDA Dairy: World Markets and Trade - December 2012


Dairy Products Prices

US Exports of Cheese Forecast to Reach a Record 254,000 Tons in 2012

Led by a surge in exports of nonfat dry milk (NDM) – up 16 percent during the first 5 months of this year in comparison to the same period last year - U.S. exports of dairy products are on track to hit a record $4.8 billion in 2012. Shipments of cheese have been equally impressive and continue an upward trend that started in mid-2009. In fact, cheese exports for 2012 are forecast to reach a record 254,000 tons. While shipments to Mexico have so far accounted for 23 percent of total cheese exports, other markets such as South Korea and Japan have been growing rapidly and highlight the growing diversity of U.S. markets for cheese.

Dairy Production and Trade Developments

Summary

Following a two-year period of relatively strong international prices dairy farmers in the major exporting countries (U.S., EU-27, Australia, and New Zealand) responded by rapidly increasing milk output. Weather conditions in Oceania also played a role as conditions were ideal for pasture growth and the abundant rainfall replenished depleted water supplies. Consequently, milk production among the major exporters, jumped by over 2 percent in 2011 and is forecast to expand by a similar amount in 2012. This follows a four year period between 2007 and 2010 when average milk output among these countries grew by a modest 1 percent annually.

This growth has translated into a sharp increase in exportable supplies which has been a factor in pressuring prices downward during the first half of this year. In addition, import demand particularly from some key importers in the Asian and North Africa region has been lackluster. Algeria, for example, a major purchaser of milk powder is forecast to decrease its 2012 imports of milk powder by 13 percent to 285,000 tons. Nevertheless, dairy markets appear to have attained a degree of balance. International prices have stabilized albeit at relatively low levels and the probability that prices will show further significant declines seems less likely.

A key element affecting the outlook for the balance of the year is likely to be influenced by weather events. In the United States, drought is seriously affecting the major corn growing regions and the monthly milk feed ratio – a measure of dairy profitability – stood at its lowest levels since the early 1980’s. Dairy farmers are being squeezed by relatively low milk prices and rising feed prices. This has traditionally signaled a contractionary period and U.S. milk production for 2013 is currently forecast to register only minimal growth. Perhaps in anticipation, domestic prices have been demonstrating some strength. On the Chicago Mercantile Exchange, butter and cheese prices from mid-May to date have increased by 19 percent and 12 percent, respectively, while prices for nonfat dry milk on the West coast have increased by over 9 percent to reach $2,500 per ton.

In Oceania, the beneficial effects of the “La Niña” weather pattern may be coming to an end. Recent weather predictions suggest that there are early but as yet inconclusive signs of a shift to an “El Niño” weather pattern towards the end of 2012. If realized, this would likely result in drier weather conditions which could impact on Australian dairy production.

Another factor will be import demand. As noted earlier, the picture is mixed; however, some major purchasers such as China are on track to import significant volumes. Despite a slowdown in the growth of imports of WMP, imports of SMP are forecast to jump sharply by 65 percent in 2012. Domestic consumption is expected to remain fairly robust driven by continued urbanization and economic growth. Further, there is a continued lack of confidence in the integrity of the dairy supply chain. Consequently, China’s overall imports of milk powder for 2012 are anticipated to grow by an impressive 14 percent to reach 512,000 tons.

December 2012

Published by USDA National Agricultural Statistics Service (NASS)

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