Sunday, December 17, 2017

Contrary to Many Reports, Exports are Doing Very Well

Contrary to many reports on exports, the review below shows that exports are doing very well.  While Nonfat Dry Milk (NDM) is the largest export item, when it comes to setting producer milk prices, the commodity to watch is cheese.  See the March 12 post to this blog if you have any doubt about this.

Cheese exports were near a record level for the month of October.  They were above 2014,2015, 2016, and near the same volume as 2013.  That is excellent growth in a competitive global market.
Chart I - Cheese Exports
Imports of cheese (Chart II) were unfortunately up significantly in October, however, they were still at or below the prior two years.
Chart II - Cheese Imports
The heavy imports kept net exports from reaching record levels, but net exports were still above the prior two years and close to 2014.
Chart III - Cheese Net Exports
Cheese exports by country show amazingly strong growth in 2017.  Exports to the top ten buying countries were all up with one very small exception, Canada.
Chart IV - Cheese Exports by Country
Cheese imports by country also show YTD improvement.  For each of the seven countries supplying cheese to the U.S., that volume was down.  This helps take pressure off high inventories.
Chart V - Cheese Imports by Country
Of course there is always room to further improve, but the statistics on exports and imports of cheese look very strong.  With a continuance of this effort, 2018 could see lower cheese inventories, higher cheese prices, and higher Class III milk prices.  With about 95% of U.S. cheese consumed in the U.S., the price is primarily controlled by domestic events.

Cheese futures prices on the CME are down from current levels.  The continuing recovery is very dependent on more positive results for cheese exports.  China is a growing market and there are new agreements with China on imports of dairy products,   While the future is always cloudy, there is a reasonable expectation of continuing improvements in cheese exports.

Exports of butter continue at the levels of the prior three years.   October exports were up, but still on a very small base.  In the last five years, there has only been one period of significantly higher butter exports and that was in late 2013 and early 2014. 

Chart VI - Butter Exports
Butter exports are small, and they are concentrated in exports to one country, Canada.  The current NAFTA discussions between the U.S. and Canada do not seem to be going anywhere. If NAFTA does not stay in place, Chart VI below could change drastically.
Chart VII - Butter Export by Country
Much of the current news on NDM has centered on slowing exports, growing domestic inventories and lower NDM exports.  While all this is true, the analytics do not show extreme weakness.  Certainly global prices of NDM are low and inventory is plentiful.

However, as seen below in Chart VIII, October exports were at or above prior years except for 2016 when NDM exports peaked.  The October 2016 peak was driven by specific events and was only temporary.  Yes, inventories are high, but the highs are driven by over production as shown in Chart IX below.  Production data is currently available only through September.  In the months of August and September, when export levels did not grow, production did grow.  The result is obvious, bloated inventories.
Chart VIII - NDM Exports
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Overall, dairy exports are not in bad shape. 

There are no planned posts to this blog for the remainder of 2017.  Happy Holidays to all and new posts will start in early 2018.