Another point to consider is that 2016 was an “outlier” in terms of record-high dairy exports; therefore it is not surprising year-to-date export volumes are down.
“In the second half of last year, EU’s milk production was down 3%, NZ was down – that created some opportunities for us, so exports jumped,” Levitt said.
“Whereas this year, everyone’s got more milk even with players that historically haven’t been there like Canada and Turkey.”
Levitt added that most buyers have had their fill of NDM/SMP and have become a “little complacent” and are not as interested in powder dairy exports at the moment.
US loses ground on NDM/SMP
A clear drop can be seen in US exports of NDM/SMP, declining 34% in October compared to the same month last year, driven by decreased shipments to Mexico, the Philippines, and southeast Asia.
“The world market demand for powder is really weak right now and there’s not really much prospect for it to go higher anytime soon,” Levitt said.
“There’s plenty of supply out there and we’re all competing for this finite demand.”
As a result, US inventories of NDM reached a record high at the end of October of 149,000 tons, and the global oversupply of SMP drove prices to a 14-year low, according to USDEC.
Mexico, the largest dairy trading partner to the US, has decreased its reliance on the US NDM/SMP exports over the past year (43,319 tons in October 2016 dropping to 23,872 tons in October 2017).
However, other markets such as Canada (+415%) and the EU (+153%) have stepped up their exports of SMP to Mexico, with the EU increasing its share of imports from 3% in 2016 to 15% in 2017.
This could be that other markets are more aggressively targeting Mexico, or Mexico is more receptive to trading with other countries, Levitt said.
A possible bright spot for US dairy exports is whey, which reached all-time high volumes in 2017, with shipments of modified whey products (primarily permeate) showing especially strong growth, mostly coming from China.
Total whey products exports increased 9% in October, bringing the year-to-date increase to 8%, according to USDEC. Exports of modified whey were up 20% in October, WPC shipments were up 15%, and WPI exports were up 22%.
Roughly 40% of the US whey exports go to China and it projects that global whey trade will grow 4.6% annually through 2021 as consumers look to incorporate more protein into their diets.