Competitive Europe is hurting US dairy exports

Sales in March amounted to approximately 226.000 tons, a fraction less than in previous years. Nevertheless, the figures were the first decline in a year and could therefore be called a break in the trend. Almost all products, with the exception of lactose, show a small decline in volume. At 78.000, skimmed milk powder remains the largest export product.

Headwinds on the global market
USDEC speaks of headwinds on the global market. The main reason is increasing competition. Europe, where dairy prices have fallen significantly, is specifically mentioned. For many manufacturers, America is no longer the most competitive on the world market in terms of price, and sales are suffering as a result. This is also evident when we compare prices. In the fourth quarter of 2022 and early 2023, Europe was significantly cheaper in milk powder (in dollars) than the US. The proportions are often the other way around.

Inflation, economic uncertainty and reduced Chinese demand are also mentioned as causes. Remarkably, export figures to China in March were above last year's level. Perhaps, however, the Americans had expected more, now that China has lifted the lockdowns. USDEC expects market conditions to continue to be challenging in the coming months. This is despite the fact that Chinese demand is expected to pick up and milk production in Europe will probably level off.

Weakening growth in milk supply
American milk production is still showing growth figures, but the margin is becoming increasingly smaller. Figures from the US Department of Agriculture (USDA) show that milk production in April amounted to 8,34 million tons. This is an increase of 0,5%. This means that growth is continuing to weaken. In January the lead was still 1,5% and this had already fallen to 0,5% in March. Viewed over the entire first quarter, 1% more milk was produced than the same period last year.

The declining milk production is due to a decline in the number of cows. In March, the USDA counted 15.000 in April compared to a month earlier. The decline is probably related to the milk price, which, just like in Europe, has been severely depreciated. The class 3 milk price, based on the valorization of cheese, has fallen to approximately €37 per 100 kilos. The decline had stopped in April. In addition, the availability of roughage has been tight for some time. This is due to a dry growing season in 2022. In addition, it is lucrative to send dairy cows to slaughter, due to the high carcass prices that recently reached a record in Chicago.