June 22, 2016

Changing Tastes South of the Border Boost U.S. Powder Exports

Top Story  |   |  By: Fran Howard

Consumer food preferences in Mexico are changing and that is helping boost U.S. exports of nonfat dry milk powder.

“Rapid growth in the Mexican food industry is the primary driver contributing to growth in U.S. dairy exports to Mexico,” says Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill.

According to a recently released USDA-Foreign Agricultural Services’ Global Agricultural Information Network (GAIN) report, shifts in consumption patterns toward value-added products that offer health benefits are curtailing fluid milk demand in Mexico. Moreover, this is occurring despite the higher cost of these value-added products.

Even though the Mexican government supports fluid milk consumption among low-income people through the state-owned company LICONSA, demand for fluid milk in Mexico continues to decline as manufacturers respond to the growing demand for specialized products, according to the report.

“As a result of shifting consumption patterns, demand for imported nonfat dry milk in Mexico is expected to remain strong to support the country’s processing needs and growing demand for specialized food products,” Ledman notes. “Changing consumer consumption patterns for food products manufactured from nonfat dry milk are spurring import demand for milk powder and this is helping to boost U.S. exports.”

Since 2014, Mexico’s annual production of nonfat dry milk has been steady near 50,000 metric tons, due in part to lower-priced imported product, notes Ledman. Over the same period, Mexican consumption of nonfat dry milk has grown from 258,000 metric tons in 2014 to an estimated 320,000 metric tons this year.

“The U.S. dairy sector is benefitting from Mexico’s growing demand for nonfat dry milk powder,” says Ledman. “And Mexico, which accounted for 45% of all U.S. nonfat dry milk exports last year, is the largest customer for U.S.-produced nonfat dry milk.”

U.S. year-over-year exports of nonfat dry milk to Mexico grew 24% last year to 252,426 metric tons, and through April 2016, nonfat dry milk exports to Mexico were running 1% ahead of last year’s robust pace, she says.

“Even though U.S. exports of nonfat dry milk to Mexico are increasing, the United States faces greater competition than it has in the past,” Ledman says. “In 2014, the United States accounted for 99% of Mexico’s NDM imports, but U.S. market share fell to 95% last year. Through April 2016, it has been closer to 92%.”

At the same time the United States is losing market share, Ledman notes that New Zealand’s market share, which was 2% in 2015, is now nearing 4%, and European suppliers have also increased trade to Mexico.