The United States exported more nonfat dry milk (NDM) and skim milk powder (SMP) in May than any month in the past decade. Combined NDM/SMP exports were 60,358 metric tons (MT), or 133 million pounds, putting May exports up 9.9% more than April on a daily average basis and 7.8% more than a year ago. Year-to-date (YTD) through May, U.S. NDM/SMP exports are running 10% higher than the same period last year. The top five export destinations accounted for 78% of total exports in May. U.S. exports to Mexico were 58% higher than a year ago, followed by Vietnam (+107%), Philippines (+42%) and China (+2.8%). Indonesia was the only top five region to slip below year ago export levels (-14.3%).
May NDM/SMP exports to Mexico at 24,861MT, or 54.8 million pounds, represented the highest volumes since records began back in 1967. Prior to this, October 2010 held the record at 22,369MT, or 49.3 million pounds. U.S. NDM/SMP exports to Mexico have been rising at a rapid rate, growing 23% on a compounded annual growth rate between 2009 and 2012. However, high prices took their toll on U.S. NDM/SMP exports to Mexico late last year when volumes fell below the prior year by 6.6%. U.S. exports to Mexico continued to suffer at the start of 2014 which left volumes behind the prior year through April by almost 11%. With the record large May activity, U.S. YTD exports to Mexico have surged back to 3% ahead of the same period a year ago. It appears price was largely at fault for slowing exports. During April 2014 NDM/SMP exports to Mexico averaged $4,417/MT ($2.004/lb.) compared to $3,785 ($1.72/lb.) in May. This price adjustment brought May within $186/MT, or 8¢ per pound more, of pricing from a year ago.
U.S. manufacturers continue to expand whole milk powder (WMP) exports as well. In May, the United States exported 19,658MT, or 43 million pounds, of WMP, 1% more than April and 87% higher than a year ago. A substantial increase over last year, likely the result of the newest WMP plant coming on-line at the end of April. Additionally, USDA’s Foreign Agricultural Service (FAS) made significant revisions to its historical WMP data. 2013 Dry Whole Milk & Cream category went from exports of 39,145MT to 126,209MT over three times the volume as first stated. FAS made no corresponding adjustments to NDM/SMP, so WMP was probably being recorded under another harmonized tariff code (HTC). It is common for FAS to make adjustments to reporting categories. Historically WMP has been an insignificant export volume, so proper categorization was less important. With U.S. manufacturers increasingly focusing on WMP, the importance of its volume has increased in the last year necessitating a review and proper classification.
For months, market participants have speculated as to what would happen to dairy prices and buying patterns as China’s need for powder eased and world milk production grew. If May is a glimpse into the future, then buyers are indeed coming back to the market as prices ease. Several countries, accustomed to buying U.S. dairy products, were edged out last year as China bid the price of nearly every dairy commodity higher in order to gain access to the volumes needed to shore up its domestic demand. Although China will continue to buy large amounts of dairy products this year, the frenzied buying seems to have passed at this point allowing world prices to moderate. For now, buyers are comfortable purchasing available milk powders at current price levels which have helped to support prices at the start of summer.
New Zealand begins its 2014/15 production season this month, with marketing getting underway in earnest. As milk production in the southern hemisphere gets started, buyers may also be sensing an opportunity to see prices edge lower anticipating greater product availability in a few months. Indeed this is consistent with the first Global Dairy Trade (GDT) event in July which seemed to signal that further price easing may be on the horizon. That said, current price levels brought other regions of the world deprived of dairy products last year back to the market this year. While most anticipate more dairy products available to the market this year, it could come with more buyers seeking those products, and that could keep prices from plummeting.