Market Watch Diary: Imports are drying up

August 10, 2010 04:33 AM

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Once upon a time, all the world’s dairy suppliers wanted to sell to the U.S.

Since peaking in 2005, however, U.S. imports have trended lower. U.S. import volumes in 2009 were down about 20% compared with four years earlier. This year, imports are down about 20% more, to their lowest level since the late 1990s.

By value, cheese, casein and milk protein concentrate (MPC) make up two-thirds of our dairy
imports. All have tumbled since the mid-’00s, particularly cheese; in the first five months of 2010, U.S. cheese imports were barely half what they were in 2004.

Whereas world Cheddar prices (fob Oceania, reported by USDA’s Dairy Market News) averaged 44¢ less than U.S. National Agricultural Statistics Service cheese prices from 2001 to 2004, the tables have turned and U.S. prices have averaged 16¢ less in the 2007 to 2010 period.

And so New Zealand cheese exports to the U.S. have fallen nearly 60% during the last decade, even as its overall cheese exports have held steady. Instead, it’s selling more in Australia, Japan, Korea, the Middle East, China and Southeast Asia.

Likewise, the European Union, by far the largest cheese supplier to the U.S., has cut shipments by 27% since 2003. Import volumes from Australia and Argentina have both fallen by more than a third since the middle of the decade as well.

Probably the biggest factor here is the weakening of the U.S. dollar. In 2009–10, the value of the U.S. dollar was down about 50% versus the euro and the New Zealand dollar compared with 2001–02. That makes imports from these countries more expensive to U.S. buyers.

Declines in U.S. cheese imports coincided with the roll-down of EU export refunds too. And of course, U.S. manufacturers have done a better job of producing specialty cheeses at home that used to be purchased from abroad.

Meanwhile, U.S. production of MPC has displaced some of the imports from offshore. Last year,
domestic manufacturers produced 92.9 million pounds of MPC.

Imports fell from 139 million pounds in 2008 to 114.5 million pounds in 2009, the lowest figure since 2004.

This has been positive for the U.S. dairy trade balance. In April and May, net cheese exports averaged 2.8 million pounds per week. For comparison, during the previous six years, net weekly cheese imports averaged 4.5 million pounds.

Little of the overall trade data yet reflects the Cooperatives Working Together (CWT) Export Assistance program, which was reactivated in March. Through the end of 2010, some 38 million pounds of CWT cheese is slated for export.

Bonus Content:

U.S. trade database


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