U.S. Exporters Once Again Put Milk Powder on Sale
To compete with overseas suppliers, U.S. dairy exporters again reduced their price on milk powder. Meanwhile, butter exporters cannot move shipments out of the country fast enough to keep place with butter imports. With the value of the dollar declining, though, the import/export picture could be improving somewhat.
“Since early March, the U.S. dollar index has fallen more than 5% against a basket of currencies, making U.S. dairy product exports more competitive and imports less attractive,” says Sarina Sharp, agricultural economist with the Daily Dairy Report. “The dollar index fell to a 15-month low in the first week of May. But even after adjusting for currency relationships, U.S. cheese and butter prices remain significantly higher than the cost of product from overseas. A weaker dollar could trim U.S. dairy product imports at the margins, but U.S. dairy product exports are likely to remain depressed until domestic prices fall closer in line with the global market or global prices rise.”
U.S. dairy exporters lowered prices by 8% in March, or more than 7 cents per pound, compared to February prices to keep milk powder moving, says Sharp. U.S. exporters shipped 90.8 million pounds of nonfat dry milk abroad in March, a 25% drop compared with the prior year and 6.8% less than in February, adjusted on a daily basis. Nonfat dry milk export prices in March were more than 30% lower than a year ago when prices averaged $1.226 per pound.
U.S. cheese and butter exports remained depressed in March, notes Sharp. At 56.2 million pounds, U.S. cheese and curd exports fell 2.2% below daily average exports in February and 19.5% below a year ago. Similarly, exports of butter and milkfat in March of just 7.3 million pounds were down 24.1% from February. On the bright side, she says, butter and milkfat exports were 25% larger than March 2015 volumes.
U.S. exports of butter, however, were dwarfed by imports. In March, the United States imported 14.4 million pounds of butter and milkfat—the highest monthly volume since June 2004. U.S. cheese imports of 40.9 million pounds fell slightly from February levels but were still 16.2% larger than a year ago, according to Sharp. “While we are importing quite a bit of cheese, we are exporting even more,” says Sharp.
The EU factor
Ever since Russia banned dairy products from the European Union and other major dairy exporters in August 2014, EU exporters have had to find alternative markets for their surplus butter and cheese. Prior to the embargo, Russia was Europe’s largest market for cheese and butter. In 2013, the European Union exported more than 256 million metric tons of cheese to Russia, which equated to nearly one-third of the trading bloc’s total exports that year, according to Eurostat. EU exporters also sent 30 million metric tons of butter to Russia out of a total of 101.7 million metric tons of butter exports in 2013, again nearly one-third of all EU butter exports. Eurostat data shows that since Russia’s embargo, the United States has become Europe’s largest market for both butter and cheese.
Last year, the United States imported 17.4 million metric tons of butter from the European Union and 140.1 million metric tons of cheese. When the gap between U.S. and EU butter prices eventually narrows, however, U.S. imports of butter from Europe could decline significantly, notes Sharp.