European Union Captures Dairy Market Share from U.S.

Following 2014’s record-large year-over-year increase in milk production, the European Union is expected to add an additional 1.1 percent in total output this year, according to USDA. The trading bloc’s extra milk has come at a time when the world’s largest producer of cheese has been locked out of its biggest market—Russia.

Europe as well as Canada, Australia, Norway, and the United States lost access to the Russian market in August 2014 when Russia imposed an import ban on most food products, including dairy, from these key-milk producing regions. However, the European Union has aggressively marketed its cheese to other regions, at the expense of the United States.

“Since the embargo, the European Union has successfully expanded sales to its existing customers and aggressively pursued new markets,” says Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill. “The United States has traditionally ranked a distant second behind Russia in EU cheese imports, but it is now the largest importer of EU cheeses.”

Before the Russian ban, more than half of Russia’s cheese imports originated in the European Union and more than one-third of Europe’s 1.7 billion pounds of cheese exports were shipped to Russia. 

Through September of this year, the United States has imported a total of 101,405 metric ton (MT), or 223.6 million pounds, of cheese from the European Union. This large 21 percent year-over-year increase in cheese imports has been due in large part to lower prices for EU product caused by Europe’s surplus milk supply that was sparked by the anticipation of the elimination of quota in March 2015.  

“Through much of this year, U.S. domestic cheese prices have been trading at more than a 60-cent per pound premium to European cheese prices,” says Ledman. “As a result, the European Union has gained market share in key U.S. cheese markets such as Japan and South Korea.”

EU cheese exports to Japan for the January through September 2015 period, totaled 50,475 MT, or 111 million pounds, up an incredible 44 percent compared to the comparable period a year earlier. Likewise, EU sales of cheese to South Korea at 24,754 MT (55 million pounds) are nearly double, or 95 percent, higher than last year, according to USDA. In contrast, year-over-year U.S. cheese exports to Japan have fallen by 38.8 million pounds, and U.S. exports to South Korea are down 17.3 million pounds for the January through September period.

“The United States is unlikely to recapture market share losses to the European Union—at least not until U.S. cheese prices are more on par with global prices,” Ledman adds.           

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