Analysis: U.S. Exports of Dairy Products Climb in the Past Two Years

After years of near balance between the total quantity of U.S. dairy imports and exports, exports of U.S. dairy products in 2004 and 2005 surged ahead of imports during the same time period. Using data for January through October for each year (October 2005 is the latest data available), the total quantity of U.S. exports grew by 35% in 2004, and are up another 15% in 2005 (see Figure 1 below). Importantly, since early 2004, these exports have been prompted without U.S. government subsidies through the Dairy Export Incentive Program.

The increase in U.S. dairy exports has far outpaced the increases in dairy product imports, which grew by 5% in 2004 and 7% in 2005 through October each year.

The value of U.S. dairy exports is also growing faster than the value of imports. Through October 2005, U.S. dairy product exports totaled nearly $1.4 billion, up 20% over the same period in 2004. U.S. imported dairy product value in the same 2005 time period increased only 11%, to $2.1 billion.

The top six countries receiving U.S. dairy products in 2005 include the nation's two continental neighbors, with $419 million of exports going to Mexico and $181 million to Canada. Other destinations with more than $50 million in U.S. exports include Japan, Philippines, Indonesia and China. The United Sates is on the receiving end of $460 million in dairy products from New Zealand, $313 million from Canada, and more than $150 million each from Italy, Ireland and France.

This growth of U.S. exports comes during a time when world prices for dairy products are on the rise. For the first time in recent memory, the annual average world price for skim milk powder has been above both the U.S. dairy support price and the benchmark price for West Coast nonfat dry milk for the past two years (See Figure 2A). For cheddar cheese, the annual average world price has risen above the U.S. support price for the past two years, while the gap between the world price and the U.S. price for cheddar cheese in 40-lb blocks is the narrowest in recent memory (See Figure 2B). While the annual average world butter price has moved up in recent years, it remains far below the U.S. market price for Grade AA butter (See Figure 2C).

For more information, contact the IDFA economics group at 202/737-4332.

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Posted January 9, 2006