U.S. Powder Sales Set New Record High

July 10, 2014 07:19 AM
U.S. Powder Sales Set New Record High

The all-time high is due largely to one export customer.

As the U.S. dairy industry focuses on butter, U.S. exports of nonfat dry milk and skim milk powder surged 10% in May from April levels to post a new all-time monthly high.

In May, U.S. exporters sent 60,358 metric tons, or 133 million pounds, of nonfat dry milk and skim milk powder (NDM/SMP) overseas, a 7.8% increase from May 2013 levels, according to USDA’s Foreign Agricultural Service.

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"The surge in May’s export volume was largely due to greater sales to Mexico," says Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman and Associates, Libertyville, Ill. "Mexico’s purchases of U.S. powder accounted for 41% of all U.S. nonfat dry milk exports in May."

Mexico purchased 24,862 metric tons, or 54.8 million pounds, of U.S.-produced NDM/SMP in May. Prior to that, January through April sales to Mexico—the largest buyer of U.S. powder—showed exports were lagging the prior year by 14.8 million pounds. When Mexico’s May purchases are added to January through April volumes, the country’s imports of U.S. powder rise 3% above 2013 levels at 79,668 metric tons, or 175.6 million pounds.

"There was a downturn in the market in May," says Ledman. "It appears that some companies and countries were able to purchase product at favorable prices and at favorable volumes that moved product from manufacturers’ warehouses."

U.S. nonfat dry milk prices moved higher into mid-June, but are now trending lower again, which should continue to be positive for NDM/SMP exports.

"One school of thought is that buyers were left out of the market when nonfat dry milk prices were over $2 a pound," says Ledman. "As prices come down, there will be companies and countries that step in to buy."

The Philippines and China have also increased year-over-year imports of U.S.-produced NDM/SMP through May. For the January through May period, the Philippines, the second largest buyer of U.S. NDM/SMP, purchased 56% more product than the comparable period in 2013. Total 2014 sales through May to the Philippines totaled 32,153 metric tons, or 70.9 million pounds. U.S. exports of U.S NDM/SMP to the Philippines are less than half of Mexico has purchased.

China is now the third largest buyer of U.S.-produced NDM/SMP. For the first five months of this year, China bought 24,110 metric tons, or 53.2 million pounds, of U.S.-produced powder. China’s year-to-date purchases through May are up 124% from prior-year levels.

"China will buy skim milk powder from Oceania, the European Union, and the United States in the second half of this year, and price will be the major consideration," notes Ledman. "If we want to export, we will have to offer product at a competitive price. I don’t think we have any choice."

Between 2010 and 2012, U.S. dairy exports equated to about 13% of U.S. milk production. In 2013, exports accounted for 15.5 percent of production.

"This year, exports as a share of milk production will likely be somewhere in between," Ledman adds.

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