June 5, 2020

Despite COVID Setbacks, April Dairy Exports Surprisingly Positive

Top Story  |   |  By: Anna-Lisa Laca

During the month of April dairy exports were surprisingly positive for the eighth straight month. This was driven largely by record exports of dry ingredients to Southeast Asia in addition to rebounding volumes of whey products to China. 

In April 2020, dairy exports were $150 million dollars more in terms of value sold than last year at this time. That’s roughly 50,000 metric tons more product sold this year than last year, according to data from the U.S. Dairy Export Council. 

“Certainly, unexpected, but obviously welcome news,” Tom Vilsack, president and CEO of the United States Dairy Export Council told Clinton Griffiths on Farm Journal Live Friday. “Southeast Asia and China critically important to those numbers.”

In southeast Asia, the growth can be attributed to a few factors, Vilsack says. 

“First of all, we're dealing primarily with ingredients and powder. These are countries that dealt with this virus very aggressively at the outset, so their economies have opened up a little more quickly than ours has,” he says. “The second explanation is that we were very price competitive in a very tough market. And the third explanation is that we have really deepened our presence recently in Southeast Asia in terms of the industry. We have a center of dairy excellence now located in Singapore we're doing a lot more promotions. We're out there, so people are aware of the opportunities for U.S. dairy.”

In China, imports of U.S. products were largely driven by whey permeate. According to Vilsack, the explanation is pretty simple–China is rebuilding their hog herd.  

“We expect and hope that those will continue,” he says. “The Phase One agreement I think also provided some help and assistance because it's limited, if you will, the retaliatory tariffs that had been a drag on sales last year.”

Cheese Prices Weigh on Global Sales

Exports to Mexico, U.S. dairies No. 1 customer, were lower for the month of April. Vilsack attributes this to a combination of things including the coronavirus. Additionally, cheese sales were lower across the board. 

“As we saw cheese prices increase, I think we became less competitive in the world market,” Vilsack says. “But in Mexico we're seeing a weakened in large part because of the price of oil going so low. I think there are multiple reasons for concern in that market.”

Hopefully the ratification and implementation of the U.S. Mexico Canada Agreement (USMCA) will help preserve the market, but Vilsack says this situation is a good reminder of the importance of geographically diversified export customers. 

“Cheese prices have risen,” he says. “We're now well above the global price and so it will make it a bit more difficult for us in terms of future contracts.”

Still he notes the good news is that higher prices eventually trickle down to dairy producers. 

Second Half 2020 Outlook

What dairy exports for the remainder of the year look like depends largely on the global economy, Vilsack says. 

“If we see a global recession because of the virus, that's obviously going to impact sales,” he says.  “We were optimistic going into 2020 with a Phase One China agreement, the Phase One Japanese trade agreement, the USMCA coming into effect and potentially new opportunities in Canada. We remain somewhat optimistic and hopeful towards the tail end of 2020, but we may have a few rough patches between now and then.”