June Exports Confirm Critical Role of Mexican Market
Robust demand from Mexico drove strong U.S. exports of dairy products in June, but that could change given newly implemented tariffs in Mexico and China on U.S. dairy products.
“The late-June tariff announcements did not impact U.S. trade performance in June,” notes Sara Dorland, analyst with the Daily Dairy Report and managing partner at Ceres Dairy Risk Management, Seattle. “U.S. dairy product exports continued to perform well in June, with some products extending their year-over-year gains. Increases were spread across all categories, with Mexico driving most of the gains.”
Looking at cheese first, U.S. exporters shipped 34,191 metric tons (MT) to foreign buyers, up a sharp 11.9% from June 2017, and the largest monthly volume so far in 2018. Cheese exports to Mexico alone were 3,680 MT higher than last year, and at 12,218 MT accounted for 36% of total cheese exports in June.
“The much higher volume of cheese exports—particularly to Mexico—could reflect acceleration of orders ahead of the tariffs that began in July,” Dorland says. “It will be interesting to see what happened in July when those numbers are released in September.”
U.S. exports of butterfat were also robust in June at 3,840 MT, or 3.4% more than the prior year. For the first six months of 2018, the United States exported 64% more butterfat than the same period in 2017. Anhydrous milkfat (AMF) and butter oil exports surged 68% from the prior year, while exports of dairy spreads and butter declined. “As with cheese, higher exports to Mexico drove total U.S. butterfat results in June,” Dorland notes.
Nonfat dry milk (NDM) powder exports also recorded spectacular gains in June even though they were lower than they were in April and May. In June, U.S. export of NDM climbed 24% above year-earlier levels to 56,835 MT.
“Higher domestic prices could have slowed orders toward the end of the second quarter when CME nonfat dry milk prices eclipsed EU prices for a time. Mexico, once again, was a driver behind June’s higher exports, but June’s nonfat dry milk exports were likely driven by stronger demand because there were no announced tariffs on U.S. milk powder,” Dorland notes. Shipments of U.S. NDM to Mexico increased by 2,269 MT, and accounted for 44% of total NDM exports.
Demand for NDM from other markets was also strong, with U.S. exports doubled to Malaysia and were up 32% to the Philippines, compared to June 2017 levels.
Meanwhile, U.S. imports of dairy products in June were mixed compared to a year ago. Cheese imports declined by 10.4% to 13,283 MT on lower imports from Italy, but butterfat imports soared 34% to 4,417 MT. “Butter from Ireland drove the year-over-year increase in U.S. imports,” Dorland notes. “Given some of Ireland’s production slowdown in early spring, higher June imports could reflect some catch up as Irish milk and butter production recovered in late spring and early summer.”