The continual, almost unbroken stream of increases in U.S. dairy export volume and value is like the broken record one never tires of hearing.
U.S. dairy export volumes have been increasing at an average annual rate of 12% over the past decade. And barring any fourth quarter 2013 hiccups, volumes this year will be up another 14 to 18% in 2013. The value of those exports is even sweeter music, up an average of 20% over the past decade and up 25 to 30% this year.
Yesterday, I had the opportunity to sit down with Alan Levitt, vice president of communications and market analysis for the U.S. Dairy Export Council.
The bottom line on exports, he says, is that "world demand for dairy products is up, and the world is willing to pay for them."
Levitt is cautiously optimistic as the calendar flips toward 2014. Yes, world milk production—driven by the European Union, the United States and New Zealand--is again back in growth mode. He expects global milk supplies to grow 2 – 2 ½% next year—or 10 to 13 billion pounds.
"This will put some downward pressure on world prices," he acknowledges. But it will likely be more of a soft landing than a hard crash. Some importers have been out of the market because of high 2013 prices. Lower prices will mean they’ll back, sopping up some of the increased supply.
"And most of the buying is underpinned by China. It is already the world’s biggest buyer of dairy products, and it needs to import even more," Levitt says. "The Chinese are willing to pay what it takes to get dairy products into the country."
In fact, China has now over taken Canada as the Number 2 destination for U.S. dairy exports. By value, China increased its purchase of U.S. products 41% in the first seven months of 2013 over the same period a year ago. And that’s despite the fact our sales to Canada increased 20% over 2012.
Another very good piece of news is that Dairy Farmers of America’s whole milk powder plant being built in Fallon, Nev., will start operation next year. This plant is the first in the U.S. wholly dedicated to the export market, and designed specifically to meet Chinese product needs. Once fully operational, Levitt calculates the Fallon plant, plus WMP capacity added earlier this year by Darigold and Michigan Milk Producers Association, could export the equivalent of two billion pounds of milk annually, or 1% of U.S. production.
"This is clear, tangible evidence that a U.S. farmer cooperative is committed to the global market," says Levitt. "It’s really a milestone point that we’ve taken saying we’re all in."
Undoubtedly, there will be bumps in the road as the U.S. sells more and more of its milk overseas. That is inevitable, and dairy farmers, co-ops and processors must be prepared for that eventuality. In other words, risk management will become increasingly important. For now, however, the future looks bright. The only way forward is to keep driving forward. There’s no turning back.
More information on U.S. dairy trade data can be found here.