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Make New Friends with U.S. Dairy Exports, But Keep the Old

March 3, 2014
USDEC   Mexico   Walmart 5   Copy
A consumer samples U.S. dairy products at a Wal-Mart store in Mexico. (Photo: USDEC)  

While it’s critical for U.S. dairy suppliers to address Asia’s emerging needs, don’t forget that our biggest customer is not across the ocean but right here in our own neighborhood.

By Tom Suber, President, U.S. Dairy Export Council

Nine times out of ten when a news outlet reports on dairy export success and rising emerging market consumption, the journalist will focus on booming Asian demand, usually from China.

It is certainly appropriate to cite China’s global impact on U.S. dairy exports . . . as long as the flood of press doesn’t create tunnel vision.

While it is critical for U.S. dairy suppliers to address the emerging needs of Asia, it is equally important not to lose sight of the fact that our biggest current customer is not across the ocean but right here in our own neighborhood.

Mexico purchased a record $1.43 billion in U.S. dairy products in 2013, and structural factors point to continued healthy dairy import demand growth in the years ahead. The climate for U.S. dairy business in Mexico is arguably better than it has ever been.

Even though Mexican milk production has been growing 1.5-2% annually for the past decade, the country remains a deficit milk producer, relying on imports to satisfy about one-third of its annual dairy needs.

Evidence suggests further domestic milk production growth for at least the next five years will be insufficient to keep pace with rising dairy consumption—consumption being facilitated by 4-5% annual growth in the domestic food industry.

Local food and beverage companies and multi-nationals alike are committing significant investments to expand and upgrade food manufacturing and distribution. Nestlé, which last month announced a $1 billion, five-year Mexican investment plan that includes a new infant formula plant, a new pet food plant and a cereal manufacturing expansion, is the latest example.

Most of these companies are buying dairy ingredients and/or are using Mexico as a base to ship to Central America, the Caribbean and South America. Nestlé said about 40% of the output from its planned infant formula factory is earmarked for Latin America and the Caribbean.

Retail and foodservice channels in Mexico, the two most important distribution channels for dairy, are expanding annually. Food industry growth is what drove 2013 U.S. cheese exports to Mexico (the No. 1 U.S. cheese export market) to rise 26% and U.S. lactose shipments to increase 28%. Practically all of Mexican lactose imports come from the United States and go toward confectionery, bakery, infant formula, and UHT beverages.

Consumption and food industry expansion are underpinned by economic growth. Although Mexico’s economy is not booming, a decade of moderate gains has been sufficient to drive slow but steady middle class growth.

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RELATED TOPICS: Dairy, Exports, Dairy Products

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