Dairy Market Update: 2006 Exports Set Record for Second Consecutive Year

Dairy-related product exports hit a record high in 2006, increasing 12.5% in both volume and value over the previous record set just one year earlier. According to the U.S. Department of Agriculture's Foreign Agricultural Service, the United States exported 2.51 billion pounds of dairy-related products valued at $1.83 billion, showing an increase of 300 million pounds over 2005 exports.

Several factors have contributed to the growing demand for U.S. dairy exports. Oceania, which normally provides dairy products to Asian countries, experienced weather-related supply problems and could not meet the increased demand from growing economies in China and other countries. With an increase in domestic milk production and available processing capacity, the U.S. dairy industry was positioned to fill this void in the international market.

Three products - whey, non-fat dry milk and lactose - accounted for 81% of U.S. dairy exports last year. Whey exports grew 25% in 2005, reaching 741 million pounds and overtaking non-fat dry milk as the top dairy export. Increasing only 3.3% over 2005, non-fat dry milk exports reached 632 million pounds last year. Although lactose exports ranked third with 524 million pounds in 2006, they represent the fastest growing dairy export segment, increasing by 29% over 2005.

North America and eastern and southeastern Asia account for 86% of all U.S. whey exports and 79% of U.S. lactose exports. When exports to North Africa are included, the four regions account for 84% of U.S. non-fat dry milk exports.

Whey, non-fat dry milk and lactose also represented 59% of the total export value of dairy-related products last year. Non-fat dry milk exports in 2006 reached $589 million, accounting for 32% of total dairy export value. Whey accounted for 18% of export value at $326 million, while lactose exports reached $163 million last year.

U.S. cheese ranked fourth in export volume, reaching 158 million pounds last year. Although it represented only 6% of total export volume, cheese accounted for 13% of total export value at $157 million. More than 25% of U.S. cheese exports in 2006 went to eastern Asia, while 25% went to Canada and Mexico. Countries in the Caribbean and Central and South America accounted for another 15% of these exports.

Because many of the factors contributing to the record demand for U.S. dairy exports are expected to persist through the next year, the industry can look forward to continued strong global demand. Projected higher domestic prices may slow demand for some products, like butter, cheese and ice cream, but whey, non-fat dry milk and lactose are already at relatively high prices because of international demand. Look for their export levels to remain high in the coming year.

Posted March 26, 2007