Overview
The volume of dairy products exported by the six major exporters (the EU, US, New Zealand, Australia, Argentina and Uruguay) increased by 2% over the 12 months to October 2017, while the value of global exports was up 13.7% on the same period 12 months ago, with strong growth in the value of cheese, SMP and WMP exported.
The volume of Australian dairy exports to the rest of the world over this period fell by 2.4%, totalling 720,000 tonnes, with butter and WMP categories weighing most heavily on Australian export volumes. Australian butter exports fell to only 12,400 tonnes, the lowest volume recorded since at least 1990. WMP exports fell from 63,800 tonnes to 55,200 tonnes, a decline of 13.4%.
In spite of lower export volumes, the value of Australian exports grew by 7.1% to US$2,052 million. The value of Australia’s SMP exports rose by 11.5% to US$377 million compared to US$338 million in 2015/16 and US$560 million in 2014/15. Australian cheese exports declined slightly by volume however they increased in value, with the majority of Australian cheese exports going to Japan. The decline in export volumes and value in other product categories was largely offset by extraordinarily strong growth in infant formula, export volumes of which increased by 25%. The value of Australian infant formula exports in 2016/17 totalled US$334 million, compared to US$296 million in 2015/16 and US$85 million in 2014/15.
Greater China
Exports to Greater China (PRC, Macau and Hong Kong) from major exporters grew by 11.7% in volume over 2016/17, while the value of world dairy exports to China grew by 25.4% to US$7,970 million, with the value of WMP (+42%) and infant formula (+16%) exports up, to US$1,622 million and US$2,543 million respectively.
Increased exports of whey powder, cream and SMP have also contributed to the strong growth of the Chinese market. This is consistent with industry commentary pointing to lower domestic production in China and the continued cost competitiveness of imported product, particularly from Australia and New Zealand. Imports of liquid milk from major exporters have fallen considerably over the same period, easing 12% from 620,000 tonnes to around 546,000 tonnes, with much of this decrease appearing to have come from the European Union, and Germany in particular.
Australian export volumes grew by 12.4%, from around 179,000 tonnes to almost 202,000 tonnes, while the value of Australian exports increased by 17.7% year-on-year, from US$594 million to almost US$700 million in the 12 months to Q1 2017/18. The largest single increase came from the value of Australian exports of infant formula, which grew from US$267 million to US$308 million, while SMP, WMP and cheese largely accounted for the remaining increase in Australian exports.
Japan
Direct dairy exports from major dairy producers (not including re-exports via Southeast Asia) to Japan grew by 15.1%, from 407,000 tonnes to 467,000 tonnes. The largest single increase occurred in lactose, growing 31.1% to 93,000 tonnes, with SMP and cheese also seeing significant increases. The value of dairy exports to Japan increased by 25%, from US$1,212 million to US$1,515 million. Over the course of 2017/18 the European Union has increased its share of the Japanese market amongst major exporters, from around 25.3% of Japanese imports to over 31.3%, by volume. The increased presence of EU exports is particularly noticeable in the cheese category, where it has successfully increased its market share to around 27%, whilst Australia’s share of cheese exports to Japan has retreated to around 33%.
Over 12 months to Q1 2017/18 the volume of Australian exports to Japan eased slightly, down 0.5%, to 95,000 tonnes, while the value of Australian exports grew by 8%, reflecting higher world prices. The largest volume decline was in the cheese category which fell by 4% to 81,000 tonnes. Over the same period, the value of Australian cheese exports increased by 6.7% to US$292 million. Australian SMP and whey powder export volumes grew strongly, partially offsetting the decline in cheese volumes.
Southeast Asia
Dairy trade volumes to southeast Asia have remained largely flat with the US, EU, Argentina, Uruguay, Australia and New Zealand exporting around 1,961,000 tonnes over the 12 months to the end of Q1 2017/18. The largest changes were in powders, with volumes of SMP exported to the region up 7.2% to 658,000 tonnes, with Malaysia (+13.6%) and the Philippines (+13.8%) accounting for the largest increases. This increase in SMP volumes was offset by smaller declines in whey powder and WMP, down 8.4% and 3.7% respectively. The total value of exports to the region increased by 21.1% to US$4,415, with SMP exports up by 18.6% to US$1,390 million, making it the single most valuable export category in the region. The value of whey powder and WMP were up by 15% and 30% respectively despite the lower export volumes, reflecting the improvement in global dairy prices compared to the previous 12 month period.
Exports to Malaysia grew by 4%, with increases in SMP, cheese and lactose serving to offset declines in imports of whey powder. Dairy exports to Singapore fell by 4.9% to 262,000 tonnes, with falls in exports of whey powder accounting for the largest declines. The Philippines continues to be a robustly growing market, with export volumes increasing by 6.8%, from 393,000 to 420,000 tonnes, lifted by growth in exports of whey powder and SMP. Exports to Indonesia from major dairy exporters were largely flat, with major export categories such as whey powder, SMP, WMP and lactose moving only slightly.
EU SMP exports to the region have increased significantly over the 12 months to October 2017, from 148,000 tonnes to 215,000 tonnes, an increase of 45%. The EU has also increased its export volumes of lactose (from 21,000 to 28,000 tonnes), which has come at the expense of US lactose exports. US dairy export volumes to the region have otherwise been largely flat, whilst New Zealand’s exports to southeast Asia have fallen by 7.2% over the same period, to around 640,000 tonnes. Australian export volumes to southeast Asia have eased slightly, down 1% over the period, with increased volumes of liquid milk (+7.9% to 81,000 tonnes) unable to offset declines in whey powder and smaller decreases in SMP and butter fat volumes.
Australian export volumes grew most strongly in Malaysia with export volumes up 6% and values up 8%. Singapore remains Australia’s largest export market in southeast Asia, however Australian export volumes to Singapore have fallen by 8% to around 77,000 tonnes, worth US$141 million. Australia has increased its exports to Indonesia and Malaysia quite successfully over the same period, with export volumes to both markets now around 55,000 tonnes each, worth US$131 million and US$124 million, respectively. The total value of Australian exports to southeast Asia grew by 11% to US$567 million.
Mexico
Dairy exports to Mexico over the 12 months to October 2017 were largely flat, up just 1% to 680,000 tonnes, with continued growth in US exports of SMP/NFDM and cheese and lower export volumes of liquid milk and AMF. Despite continued uncertainty over the future of NAFTA, US exports continue to make up over 80% of Mexico’s dairy imports. The EU and New Zealand are competing for second place in market share, with exports from both up significantly over the last five years. Whilst Australia’s current trade with Mexico is negligible, the apparent success of the modified Trans-Pacific Partnership may yet see growth in Australian dairy exports to this market, which since the trade embargoes on Russia has become the second largest single country dairy export market in the world after China, worth US$1,772 million over the 12 months to October 2017.
Middle East and North Africa
Dairy trade with the Middle East and North Africa (MENA) region from the major exporters remains depressed, with total export volumes down 6.7% to 1,827,000 tonnes and big falls in exports of butter (-36%) and WMP (-19%). The decline in volumes appears to be mostly confined to New Zealand, where volumes have fallen from 630,000 tonnes to around 524,000 tonnes. The total value of exports has grown 3.6%, pulled up by higher global dairy prices, compared to the previous 12 month period.
Export volumes to Algeria were up 6.4% to 381,000 tonnes, reflecting large increases in SMP buying by Algeria’s state procurement agency ONIL. Export volumes to Egypt remain heavily down (-40%), while total exports to Saudi Arabia were down around 18% to 285,000 tonnes.
The United Arab Emirates saw modest growth, with increased imports of SMP and condensed milk. Australia’s dairy export volumes to the Middle East and North Africa continue to fall, down 46% to 25,000 tonnes. Australian exports to the region have come under tremendous pressure both from the EU and New Zealand, which has meant that the region now accounts for around 3% of Australian exports, compared to 12% six years ago. The value of Australian exports fell 34%, down to US$76 million.
Russia
Dairy exports to Russia from major dairy exporters have grown strongly (+34%), however the total trade volume of around 142,000 tonnes remains at about less than a third of the pre-trade embargo level. These Russian trade embargoes remain in place for dairy imports from the United States, the European Union, Australia, Canada and Norway, although the EU still remains the largest exporter to Russia. New Zealand was not subject to the trade embargoes, and while its exports to Russia did decline immediately after the imposition of trade sanctions on Russia, New Zealand’s dairy trade with Russia in the latest 12 month period now exceeds its pre-embargo volumes considerably. South American exporters, such as Uruguay and Argentina, have also been beneficiaries of the trade embargoes, at the expense of the EU.
Article sourced from the Dairy Australia – February Dairy Situation and Outlook Report.
