Exports increased 24 percent by volume and 59 percent by value over 2006 with approximately 1.4 million metric tons valued at $2.9 billion being exported in 2007. Mexico, Southeast Asia and Canada account for the three largest destinations for U.S. dairy exports in 2007 making up about 60 percent of the export market.
"If production growth continues to exceed that of domestic consumption, as is forecast for 2008, exports are going to become increasingly important to the ongoing profitability of the U.S. dairy sector," said Perkins. "The share of production being exported has increased from 5 percent in 2002 to approximately 11 percent in 2007. Historically, exports have been assisted by government support, but the recent growth has been based on commercial merits."
Since 2002, global demand for dairy products has been increasing nearly 3 percent annually compared to a production increase of less than 2 percent. This imbalance of supply and demand resulted in a drawdown of stocks. However, it wasn't until early 2007 that stocks were depleted, and by later that year, prices had increased by up to 150 percent year-over-year depending on the product.
"The prices of all products were trading at record levels, some by a considerable margin, enabling the United States to be competitive on the world market in products such as butter, skim milk powder and whey," said Perkins.
However, international prices began to come down falling between 3 and 15 percent from their peak in November 2007 to February 2008. In the medium term, there could be further moderation in prices depending on domestic demand in key import regions. "Even so, international prices are expected to remain above their traditional trading levels with volatility in prices being more pronounced," said Perkins.
One of the reasons that the U.S. dairy sector has looked at increasing its dairy exports, is a surplus of milk. For the last three years, milk production has grown more than 2 percent annually, but demand has grown less than 1.5 percent. In the coming year, production is forecast to increase by at least 2 percent again - due, in part, to additional cows and increased production per cow.
"To counter the difference between supply and demand, the dairy sector should take a two-fold approach," Perkins said. "To address weakness in domestic demand, the dairy sector should continue educating consumers that dairy is an important component of a healthy lifestyle. Additionally, in terms of exports, the industry needs to change its view from simply a convenient way to dispose of surplus to a more focused portion of business operations in order to be successful in the long term."
