Diversifying consumer demands and emerging markets in the Asia-Pacific region provide bright spots of opportunity for U.S. dairy exports in markets abroad, according to recent reports from the U.S. Department of Agriculture (USDA). The Global Agriculture Information Network (GAIN) reports, covering dairy markets in 12 countries, explain that tumultuous weather conditions disrupted domestic dairy markets in several countries and show the impact of decreasing milk production, as well as new trade pacts. The reports determine that these markets are expected to open new opportunities to U.S. dairy exports in 2019.
USDA’s Foreign Agricultural Service (FAS) releases GAIN reports to provide timely information on the agricultural economy, products and issues in foreign countries that are likely to have an impact on United States agricultural production and trade. The department last month released 12 annual reports specifically analyzing dairy markets. IDFA has prepared a brief analysis of the reports for members, grouped into regions.
Asia-Pacific Region
USDA reports that the Asia-Pacific region will maintain its strong demand for U.S. dairy products because severe weather conditions and heat stress in cow herds disrupted production of dairy products in Japan and Australia. Taiwan and Indonesia remain solid importers of U.S. dairy, but their free trade agreements with other countries mean more competition for American exporters.
Australia
USDA forecasts that Australian milk production will be lower than last year due to severe weather conditions in dairy producing regions, but cheese and butter production will remain stable. USDA also expects Australian processors to send more butter and cheese exports to Japan, while the Australia continues to import butter and cheese for domestic consumption.
China’s demand for imported dairy products is expected to increase to satisfy changing consumer preferences and decreasing domestic dairy production. However, China’s retaliatory tariffs on U.S. dairy products will make it difficult for U.S. dairy companies to take advantage of this situation and gaining market access will be difficult, USDA said.
Indonesia
U.S. dairy exports to Indonesia increased by 87 percent this year after Indonesia revised its dairy partnership regulations. While the revisions are welcomed by the United States, competition for American dairy exporters will increase as Indonesia engages in established and pending free trade agreements with competing suppliers.
Japan
Japanese milk production is predicted to decline because of health issues with domestic cows and a summer heat wave. That decline offers opportunity for other countries with abundant production because Japan’s dairy consumption is stable, and USDA forecasts an increase in Japanese imports of butter, cheese and milk powder.
New Zealand
New Zealand’s 2019 milk supply forecast will remain the same as 2018, USDA said. Total dairy exports are expected to moderately expand for the next couple of years, alongside a small increase in production.
Taiwan
Taiwan continues to experience strong growth in fluid milk demand. The United States is the largest exporter of fluid milk to Taiwan, followed by New Zealand. New Zealand milk products are gaining a strong competitive advantage in Taiwan as all tariffs and quotas will phase out to zero by 2025 when New Zealand’s free trade agreement with Taiwan goes into effect.
North America
Demand for dairy products in Canada stabilized this year, resulting in a decrease of domestic dairy production. Also, dairy imports from the EU are expected to increase following the first year of the Canada-European Union Comprehensive Economic and Trade Agreement. USDA expects Canada to sign the U.S.-Mexico-Canada Agreement (USMCA), which will further open the Canadian dairy market to the United States.
European Union
Severe weather conditions and an increase in consumer demand for dairy products will provide room for more foreign dairy products to enter European Union markets, especially cheese and butter.
According to the report, cheese consumption in 2018 and 2019 will continue to grow due to higher production and growing demand for mozzarella and processed cheese. Butter consumption in 2018 and 2019 will grow because of higher domestic demand and reduced exports.
Northern and Eastern Europe experienced severe drought in 2018. Although dairy cow inventories will continue to trend lower through 2018 and into 2019, milk output will not be affected, as higher milk-yields will compensate for the decline in the overall herd size. Early 2018 milk production outputs are expected to cause an uptick in future production of cheese, butter and non-fat dry milk.
South America
Argentine dairy production continues to experience shifts from industry consolidation and recover from weather damage in 2016 and 2017. USDA said it expects the country to improve its milk output in 2019 based on lower feed costs, greater industry efficiency and a future increase in farm milk prices. Argentina’s milk powder exports are expected to grow as its milk production increases. Because of Argentina’s recent currency devaluation, the country’s dairy exports will also be more competitive in international markets.
Brazil
As a result of a nationwide trucker strike in May, USDA expects Brazil to produce less milk and ship fewer exports. The Brazilian dairy sector is expected to expand in 2019 along with the continued growth of the overall Brazilian economy.
Chile
The Chilean market for dairy products continues to expand as consumer demand grows for high-quality dairy products.
Eastern Europe
Ukraine
Overall efficiency of the dairy sector in the Ukraine is improving, according to USDA, because dairy yields are growing while the number of dairy cows is decreasing. A spike in disposable income in 2018 resulted in a growing demand for dairy products.
Members with questions may contact Beth Hughes, senior director of international affairs, at bhughes@idfa.org.