Export Ship
June 26, 2018

Record Run for U.S. Exports

 |  By: Tom Vilsack

U.S. dairy exports are off to a record start in 2018. Many factors are responsible, including increasing demand driven by robust global economic growth. In the first four months, U.S. dairy exports were equivalent to 16.8% of milk solids produced—well above the historical average. April, set an all-time, single- month high, as U.S. exports equated to 18.8% of milk solids produced. Growth has been broad-based across product lines and geographies. But in volume terms, no country or region has grown more this year than South East Asia. U.S. shipments of milk powder, cheese, whey products, butterfat and lactose to SE Asia rose 34% in the first four months, or 87 million pounds. This should not come as a surprise. SE Asian dairy potential is one reason USDEC signed an agreement in May with the Food Innovation and Research Center at Singapore Polytechnic.

The partnership provides a platform for U.S. suppliers to become more customer-centric, enhance their service and innovate to elevate the U.S. profile in the region and grow sales. Additional personnel in USDEC’s SE Asia office and a series of supplementary activities will support and accelerate U.S. exports. The investment is part of an industry- wide effort called “The Next 5%” to lift U.S. dairy exports from 15% of milk solids to 20% by expanding people, partnerships and promotions in key markets.

Based on underlying demand fundamentals, USDEC projects U.S. suppliers can increase sales to SE Asia—primarily the six markets of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam—by 328 million pounds of dairy ingredients and 55 million pounds of cheese over the next five years.

It’s a story of geography, economy and demographics. Strong economic development is fuel- ing middle class expansion and dietary shifts. The International Monetary Fund projects annual growth greater than 5% for SE Asia through at least 2023. A healthy birthrate will add 72 million mouths to feed by 2030, more than double the projected population gain in the U.S. over the same period. This is a young, increasingly urban population open to new tastes and seeking convenient, nutritious foods that fit a faster paced lifestyle. Dairy is a perfect fit.

Domestic food processors are eager to meet the call for dairy, not only for their own markets but for surrounding markets. Association of Southeast Asian Nations (ASEAN) member countries signed more than 40 free trade agreements since 2000 and are in the process of negotiating more than a dozen more deals. In addition to its own 650 million consumers, the region borders nations with more than 2.7 billion people. This is a region intent on building export ties, with food being one of the main areas of trade. It has already become a major supplier to North Asia.

Local as well as multinational companies, are investing in Indonesia, Malaysia, Singapore and others to build capacity and increase product development. It has created a significant market for dairy ingredients—often high-value items made to tight specifications. There is a long way to go in 2018, but SE Asia is one reason U.S. dairy exports are trending up this year.

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