Southeast Asia emerges as the largest destination for US milk as exports jump 15.8%

US – Southeast Asia is emerging as the largest destination of US milk products accounting for 28% of total U.S. exports in 2020 on a milk solids basis or about 4.5% of total U.S. milk production.

This is according to data from the US Dairy Export Council (USDC) which also noted that U.S. milk exports for the first 9 months of the year jumped 15.8% to hit 1.7 million metric tonnes (MT).

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This growth trajectory puts US dairy producers on the path of exceeding 2018’s record year when the U.S. exported 2.2 million MT.

For the month of September, USDEC noted that U.S. dairy export volume in milk solids equivalent (MSE) rose 5% in September, marking the 13th straight month of year-over-year increases.

September’s export expansion was attributed to a strong year-over-year growth in whey products, primarily destined for China, and better than expected cheese exports to Asia-Pacific markets.

Southeast Asia as a top destination for US milk exports

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Source:USDEC

Accounting for 28% of total U.S. exports in 2020, South East Asia is cementing its place as the top destination of milk exports from the United States.

According to USDEC, this trend has been primarily driven by US SMP shipments to Southeast Asia’s six main markets (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam).

For the month of September, Shipments to these regions went up 23%—a gain of 4,887 MT with the Philippines leading buyers in September, with sales going up up 219%.

Although September whey shipments to Southeast Asia declined 6%, cheese sales for the month jumped 76%. to 2,432 MT.

Particularly encouraging were shipments to Indonesia, the second-largest cheese buyer in the region, which more than doubled to over 1,000 MT in September, compared to the previous year.

While only a single month of data, the increase may be a sign of increased U.S. supplier focus on winning share in a promising growth market as well as Indonesia’s ongoing effort to diversify its dairy sourcing—both of which bode well for the future.

Recovering of export volumes to China.

source:USDEC

With the Phase I agreement in place, growing Chinese demand and resurgent demand for whey, U.S. dairy export volumes to China are recovering to pre-retaliatory tariffs, pre-African Swine Fever levels.

USDEC notes that this recovery has been primarily driven by whey products, where 2020 exports through September nearly doubled compared 2019 levels to reach 149,094 MT.

USDEC notes that expansion in China is crucial to growing U.S. whey exports overall as China has accounted for 35% of total whey traded internationally in 2020.

A smoother and more secure trading environment for U.S. dairy in China, through measures such as extending retaliatory tariff exemptions for SMP and cheese, would help ensure this growth.

Exports to Mexico decline

U.S. dairy shipments to Mexico lagged in September, particularly in the key categories of NFDM/SMP and cheese.

Ongoing economic troubles, accentuated by the COVID-19 pandemic, have reduced demand from the US’s largest market and southern neighbor.

NFDM/SMP shipments to Mexico fell 33% in September to 22,789 MT, while cheese sales declined 21% to 6,125 MT.

More positively though, Mexico’s economy rose sharply (+12%) in the third quarter as businesses began reopening after COVID-19 shutdowns.

USDEC notes that if the country can continue to rebound from the first half an improved economic situation could help reinvigorate demand moving forward.

Parting shot

The emergence of Southeast Asia as a top destination for US exports presents new possibilities for the US Dairy sector. This would particularly help offset the slump in demand for US products in Mexico.

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