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Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

U.S. Dairy Exports Shatter Records

Jan 10, 2014

U.S. dairy export numbers through November were released last week, and the news couldn’t be better. For the first 11 months of the year, the U.S. sent $6.1 billion worth of dairy products to customers outside our borders.

That’s 17% more than last year. And if sales continue on this torrid pace, the U.S. is likely to be up 30% for the year when the December numbers are released next month. Through November, the U.S. was exporting 15.6% of all of its milk solids to foreign customers. That’s an astounding feat, since just 10 years ago, we were exporting just 3% and importing a like amount. Today, exports exceed imports by a factor of four.

"While favorable pricing and supply shortages in New Zealand may have accelerated growth in 2013, overall U.S. performance was not surprising given long-term trends," says Tom Suber, president of the U.S. Dairy Export Council (USDEC). "This year marked the fourth consecutive year of record U.S. dairy export volume and the ninth record year in the past 10."

Prospects for 2014 are also bright. "Long-term demand from a growing middle class in emerging markets and an inability of traditional supply sources to keep pace continue to fuel international dairy trade," says Suber.

But it also should come with some tempering. U.S. milk production in 2013, expected to come in at 201.2 billion pounds, was up only 0.5% over 2012. European milk production was up just 0.3%, and New Zealand production was down 4.3%.

Global milk supplies are expected to rebound in 2014, says Jerry Dryer, editor of the Dairy and Food Market Analyst newsletter and author of Dairy Today’s Market Watch Diary column. He expects U.S. milk production to climb 1.7%, Europe’s to grow 2% and New Zealand’s to climb 4.5%. If those increases materialize, that will add another 12 billion pounds of milk to global markets.

This supply, says Dryer, will "barely keep pace with anticipated demand growth." But there are always hiccups. "The lapse of unemployment insurance and cuts to the Supplemental Nutrition Assistance Program (food stamps) will be a drag in the U.S. domestic market," he says.

And then there’s the unknown. It was 10 years ago last month that a Washington state dairy cow was discovered to be infected with bovine spongiform encephalopathy, commonly known as "mad cow" disease. The chart below shows it took the U.S. beef industry almost 10 years to recover its export market.

Dairy Talk chart 1 10 14

And the scary part is, the U.S. is really not much closer to a national identification program to trace, track and locate infected animals than it was in 2004. Yes, we’ve tightened feed regulations. And USDA now requires some form of identification of animals 18 months of age or older before they can move across state lines. But it’s been left up to the states to trace animals within their borders. But metal ear tags and paper ID for interstate travel is at best 19th Century technology coping with 21st Century globalized trade.

My point is not to scare you. (Well, maybe it is.) But U.S. dairy exports, as powerful a market driver as they’ve been, are only as strong as our next animal health crisis. Increasing levels of exports make us ever more vulnerable to market crashes.

Yes, let’s celebrate these gains. But the industry needs to be even more vigilant for health and milk quality events. It must continue to fight for rational, national animal identification. And it can never assume ever growing exports are now our birthright. Past performance does not guarantee future prosperity.

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