While domestic markets account for about 90 percent of dairy product sales, the industry is looking more to exports as a source of revenue. The potential for domestic sales growth is likely limited by modest increases in per capita consumption and slow population growth. Consequently, exports are a portal for more significant growth in sales. For many years, export sales accounted for 3-4 percent of our total milk supply—and less in value than our imports of dairy products. In 2007 and 2008, for several reasons, our exports surged to more than 10 percent of our milk production and the value of U.S. dairy exports was substantially greater than imports.
Exports collapsed in 2009. The soft economies in other countries would not allow them the luxury of importing as much dairy product and tight credit made banks hesitant to issue letters of credit to importers. But, exports remained high by historical standards at nearly 9 percent of milk production. The economies of many of our foreign customers have rebounded more rapidly than our own, and in 2010, exports were comparable to the high levels of 2008. Compared to a year earlier, 2010 January–October exports were up 67 percent for nonfat dry milk/skim milk powder, 26 percent for whey proteins, 63 percent for cheese, 27 percent for lactose and 112 percent for butterfat. For the year, USDA estimates dairy exports will be up 82 percent on a fat equivalent basis and up 40 percent on a skim-solids equivalent basis.
Commercial stocks of butter in 2010 dipped to some of the lowest levels since 2001, while natural cheese stocks were among the highest levels since the mid-1980s. October 31 butter stocks were down 43 percent from 2009 levels, while American cheese stocks were up 10 percent and total cheese stocks were up 7 percent. Several factors account for this big difference in inventory changes for butter and cheese.
Butterfat production was depressed in this country and across the globe. Feed quality was probably a factor, but so were unusually high global temperatures. January through September, 2010 was tied with the same period in 1988 as the warmest on record. September also marked the first time in modern history that the Northwest Passage and the Northern Sea route were ice free. In the United States, several summer months that were the hottest on record for states east of the Continental Divide. Excessive heat in Eastern Europe and Russia caused widespread drought and crop failure, and milk production in those regions suffered as well. Russia imported a significant amount of butter—much of it from the United States—to make up for a shortfall in their production. The combination of less butterfat being produced and greater export demand increased the price of butter dramatically. As for cheese, heading into 2010, milk production levels were strong but domestic and export demand was down from previous years. Much of the extra milk production found its way into cheese vats, causing the largest expansion in cheese production since 2006. as the year progressed, a significant amount of cheese was exported, but not enough to keep stocks at a comfortable level. But in spite of record stocks, cheese prices remained strong for much of 2010. They peaked early in October but fell off sharply in November with further declines through the end of the year.
Source: University of Wisconsin Cooperative Extension