March 2023 U.S. export data revealed weaker dairy product sales, escalating concerns regarding foot-and-mouth disease (FMD) in Middle East and African countries that is fueling demand for cattle, and mixed news for hay marketers. Here’s a look at Progressive Dairy’s monthly ag trade summary.
Dairy products face headwinds
On a milk solids equivalent (MSE), March 2023 dairy product exports fell below the same month a year earlier, ending an 11-month streak of year-over-year gains, according to the monthly market update from the U.S. Dairy Export Council (USDEC). Strong sales to Latin American countries and global demand for high-value whey protein were offset by weakening cheese sales to Japan, South Korea and Southeast Asia.
On the positive side, U.S. sales to Latin America (Mexico, Central and South America and the Caribbean) continue to grow. However, headwinds of increased competition, inflation, economic uncertainty and lackluster Chinese demand are taking a toll and should challenge U.S. suppliers through at least midyear, according to USDEC. The March trade data reflects the stiff competition in cheese trade over the last five months, with European Union cheese prices at a significant discount to the U.S.
Market diversification is one reason for optimism moving forward, according to USDEC.
Thanks to strong sales in January, year-to-date (January-March 2023) dairy products exports remain ahead of the same period in 2022, with volume up 5% (25,398 metric tons [MT]) and value up 3% ($65 million).
CWT-assisted exports
The National Milk Producers Federation (NMPF) said April 2023 Cooperatives Working Together (CWT) program-assisted export contracts covered 3 million pounds of American-type cheeses, 55,000 pounds of butter, 2,000 pounds of anhydrous milkfat (AMF) and 522,000 pounds of cream cheese. In milk equivalent, April contracts were equal to 85.6 million pounds of milk on a milkfat basis. These products will go to customers in Oceania, South America, Asia, Central America and the Caribbean, and will be shipped from April through October 2023.
CWT-assisted member cooperative year-to-date export sales total 15.6 million pounds of American-type cheeses, 495,000 pounds of butter, 24.5 million pounds of whole milk powder, 3.4 million pounds of cream cheese and 2,000 pounds of anhydrous milkfat and 24.5 million pounds of whole milk powder. This brings the total milk equivalent for the year to 361.4 million pounds on a milkfat basis.
The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to the bidders only when the export and delivery of the product are verified by the required documentation.
Other dairy export numbers
Separately, the Department of Commerce/Bureau of the Census estimated U.S. dairy exports through the first six months of fiscal year 2023 (October 2022 – March 2023) at almost $4.5 billion, up 12% from the same period a year earlier. Fiscal year-to-date dairy imports were estimated at $2.87 billion, up 30%, with cheese imports up 10%, at $818 million.
U.S. dairy, beef genetics exports
The latest monthly export report from USDA’s Foreign Agricultural Service (FAS) estimated March 2023 sales of U.S. dairy replacement heifers to foreign buyers at just 376 head. All shipments stayed close to home, with 217 heifers moving to Canada and 159 relocating to Mexico.
Beef cattle heifer exports were estimated at 806 head, with the vast majority (745) sold to buyers in Canada; 44 went to Mexico.
Exports of dairy embryos rebounded in March but remained behind last year’s pace. Of the 1,525 exported, about half (732) were shipped to China, which remains the leading market. The year-to-date U.S. total stands at 3,061.
Beef cattle embryo exports for the month were estimated at 1,129, bringing the year-to-date total to 1,651.
Looking ahead, FMD outbreaks in multiple Middle East and African countries are driving demand for U.S. cattle higher, said Tony Clayton of Clayton Agri-Marketing Inc., Jefferson City, Missouri. Recent shipments of dairy replacements departed U.S. ports on the East Coast and Texas for Turkey, where FMD continues to spread at a rapid pace and is devastating the country’s meat and milk industries. Jordan is the most recent country to see an FMD outbreak, and Clayton estimates a minimum 13,000 dairy heifers will be needed to repopulate the small co-op farms that have been impacted the most.
Minimal U.S. supplies of dairy heifers remain a challenge, he said, limited by dairy replacements bred to beef sires. Some of the most desperate foreign markets are now accepting beef-bred dairy replacements. Another factor holding down exports of live cattle is the strong price for U.S. beef, including cull cows.
Hay exports increase
While still lower than recent historical averages, monthly exports of most U.S. hay products increased in March.
Exports of alfalfa hay were estimated at 176,590 MT, a three-month high. Increased sales to Japan, Saudi Arabia, South Korea, the United Arab Emirates (UAE) and Taiwan helped offset lower purchases by China, which remained the leading market of U.S. alfalfa hay, at 72,813 MT. March exports of alfalfa cubes and alfalfa meal were mixed, with Japan remaining the leading market for nearly all products.
March exports of other hay hit a four-month high, at 83,542 MT. Increased sales to South Korea, Taiwan, China, UAE offset declining purchases by Japan, which remained the leading market of U.S. other hay at 43,156 MT in March.
For more on hay exports and market conditions, check out Progressive Forage’s Forage Market Insights update.
Ag trade balance: A big negative
The U.S. ag trade balance turned negative in March. The U.S. Department of Commerce/Census Bureau estimated the value of March agricultural exports at $15.86 billion and the value of ag imports at $17.68 billion, yielding a trade balance of -$1.83 billion for the month, the largest monthly deficit since September 2022. The calendar year agricultural trade deficit is about $1.86 billion through the first three months of 2023.
Other trade news
- The USDEC and NMPF joined a coalition of other ag, retail and transportation groups in seeking congressional action regarding “detention and demurrage” fees. At issue is rail storage, a form of demurrage, charged by railroads as part of the process of international ocean transportation at the nation’s interior rail terminals.
- The USDEC, NMPF and Consortium for Common Food Names (CCFN) urged the U.S. Trade Representative (USTR) to move forward with more assertive steps to preserve export access for food producers relying on common food and beverage terms. The USTR’s annual Special 301 Report outlines global challenges related to intellectual property, which includes efforts from the European Union to use geographical indications (GI) to confiscate generic terms – such as “Parmesan” or “bologna” – for its own producers.
