US Nonfat Dry Milk Exports Likely To Remain Strong In 2006 

Volume 130, No. 41, Friday, April 14, 2006

Some of the pent-up demand for imported dry milk in countries of the Middle East and Africa may mean a stronger showing for 2006 US exports of nonfat dry milk than some USDA economists recently estimated. 

US exports of NDM increased 12.6 percent in 2005 to 286,786 metric tons, and higher prices lifted the value 17 percent to $569.7 million. The average price for exports in 2006 may drop below the average of $1,986.52 per ton for shipments in 2005, as the recent slip in wholesale prices would indicate. 
Declining prices should make US NDM more competitive with supplies from New Zealand, Australia, and Europe.

The FAS/USDA estimate for US exports in calendar 2006 published in the December 2005 issue of Dairy World Markets and Trade was 250,000 tons, indicating a decline of 13 percent. That estimate may have been influenced by expectations of smaller shipments to Southeast Asia. The impact of higher petroleum export revenues appears to have bolstered dry milk imports into a number of countries in Africa, including Algeria, Angola, Congo Democratic Republic, Nigeria, and Libya.

Some interesting events occurred for US exports of NDM in 2005 as newer markets were important customers, including Cuba, Kazakhstan, and Angola. Larger shipments than earlier expected went to Bangladesh and Algeria in 2005. Substantially greater demand for imported NDM than actual 2005 imports may show up in 2006 for Iraq and some countries in Africa. 

Strong Imports To Southeast Asia
Relatively high growth in gross domestic product and per capita income for countries in Southeast Asia may contribute to large imports in 2006. Concern that the spike for imports related to less food aid than during 2005 may have contributed to an idea that US exports of NDM to countries suffering from the tsunami would decline. 

A review of the trade trends for countries in Asia and the Middle East reveals a favorable balance of trade and improved ability to make payments for necessary imports.

US exports of NDM to Southeast Asia more than tripled in 2004 to 74,325 tons, and advanced another 20.9 percent in 2005. Indonesia accounted for a third of US exports of 89,853 tons of NDM to Southeast Asia in 2005, as shipments rose a fifth to 23,130 tons. 

The Philippines was close behind Indonesia as the second leading customer in Southeast Asia , as deliveries flattened out at 22,523 tons. Exports to Malaysia increased about a fourth in 2005 to 14,179 tons.

Hong Kong was a rapid growth market in 2005, partly related to distribution to other markets. US exports of NDM to Hong Kong increased 75 percent in 2005 to 1,836 tons. Exports to Singapore made a sevenfold climb in 2004 to 4,766 tons, followed by a 15.4 percent increase in 2005.

Japan was a market for 3,468 tons of US NDM in 2004, but deliveries tumbled 70 percent in 2005 to 1,038 tons. US NDM exports to South Korea declined from a peak of 6,211 tons in 2003 to a third that level in 2004, and to only 762 tons in 2005. 

Food aid shipments to North Korea exceeded 1,000 tons annually during 2002-04, but were missing in 2005. US exports of NDM to China nearly tripled in 2004, but then dropped 37 percent in 2005 to 2,828 tons.

A substantial share of the growth in exports during 2005 was to markets outside Southeast Asia. This includes remarkable gains for exports in 2005 to Mexico, Algeria, Egypt, and Kazakhstan. 

The average price for US NDM exports increased 22.5 percent to $1,910 per ton in 2004, when the value was up 141 percent to $486.6 million. The average price for exports nudged up 4 percent in 2005 to $1,986.52 per ton, and the value climbed 17 percent to $569.7 million.

Top Export Market Remains Mexico
Mexico remained the leading destination for US exports of NDM in 2005, as shipments increased 18 percent to 109,817 tons in 2005, and the average export price advanced 9 
percent to $2,109 per ton.

A renewed market for US nonfat dry milk emerged in Cuba during 2004 with shipments of 13,335 tons, valued at $26.7 million. US NDM exports to Cuba remained nearly the same in 2005 at 13,277 tons.

Cuba is also importing more cheese from Europe. A shortage of protein in the average diet has received more focus recently. Cuba has become a new market for a wider range of US commodities, including wheat, corn, vegetable oils, rice, apples, and edible beans.

Exports To Iraq Fluctuate
Iraq has an import demand for over 65,000 tons of dry milk. During the more normal times of 1985-89, Iraqi dry milk imports averaged 45,000 tons annually, when the population 
was a third less than the recent estimate of 26 million. 

US exports of 5,014 tons of NDM to Iraq in 2003 valued at $9.1 million were helpful in providing more reconstituted milk for consumers in Iraq. 
Output of milk from dairies in Iraq declined sharply after the Gulf War in 1991, and continued to lag during the following decade. That was because imports of animal feed ingredients were not resumed to a significant degree after 1991. 

Imports of feed grains used mostly for animal feed fell from a peak of about two million tons in 1989 to only about a tenth that level during 2001-03. 
Some help came forth with the import of about 200,000 tons of dairy feed from Syria in 2003, but that was only a tenth the amount of feed needed. A rebound for barley yields in 2003 did provide some help, but greater imports of corn and soybean are needed to allow a new expansion of commercial dairies.

Exports To EU Drop
US exports of NDM to the 25 countries of the European Union declined 83.7 percent in 2005 to 1,576 tons. Some firms providing deliveries of dry milk for food aid contracts in developing countries have their distribution headquarters in Germany, Netherlands, and some other countries of the EU. 

Arrangements for the food aid shipments to countries in Africa and the Middle East may involve donations from both the US and EU. This means that some dry milk may be exported to European destinations for storage of arrangements of transit traders before shipments move to their final destination in Africa. Also, there may be some replacement of European dry milk supplies from imports, following large exports.

US exports of nonfat dry milk to the Netherlands spiked to 4,516 tons in 2004, before dropping to only 37 tons in 2005. Apparently, transit shipments contributed to the unusual exports in 2004. Germany was a market for 649 tons of US nonfat dry milk in 2004, and 565 tons in 2005. 

China was a market for 2,828 tons of US NDM, valued at $5.3 million in 2005, compared with the peak of 4,494 tons in 2004. China’s demand for milk is increasing, and more reconstituted milk is distributed to customers in urban areas. Suppliers from New Zealand, Australia, and Europe provide most of China’s milk imports.

US exports of nonfat dry milk to Central American zoomed from 1,238 tons in 2003 to a peak of 16,860 tons in 2004, before falling 42.6 percent to 9,388 tons in 2005. US NDM exports to El Salvador skyrocketed from 233 tons in 2003 to 6,132 tons in 2004, but then tumbled 91.4 percent in 2005.
Guatemala was the leading Central American destination for US NDM in 2005, although shipments declined 7.8 percent to 6,965 tons.

A rebound for output of dairy products in some countries of the former Soviet Union meant that shipments from Russia and Ukraine tended to replace those made by the US to Central Asia in 2003. No US shipments of NDM were reported to Kazakhstan in 2004, but a rebound to 13,743 tons occurred in 2005. 

US exports of NDM to Tajikistan doubled in 2003, reaching 1,880 tons. Then, no shipments of US NDM were reported afterwards, apparently because of competition from Ukraine. No US exports of NDM milk went to Uzbekistan, compared with peak shipment of 3,265 tons in 2003.
US exports of NDM to Canada galloped from 1,003 tons in 2003 to 2,516 tons in 2004, followed by another leap to 3,602 tons in 2005. 

Increased revenues from petroleum exports accounted for most of the upward thrust of US exports of dairy products to Africa in 2005. Exporters from the EU, New Zealand, and Australia provide most of the dry milk imported by countries in Africa. 

US exports of NDM to Africa increased a third in 2004 and the pace accelerated in 2005 to a gain of 48 percent.

US exports of NDM to Africa reached 13,287 tons in 2005, exceeding the previous peak of 11,285 tons in 1999. US NDM exports to Algeria rose 241 percent in 2005 to 9,460 tons, valued at $20.4 million. 

Egypt resumed purchases of US NDM in 2004 when deliveries peaked at 3,475 tons, before falling 2.4 percent in 2005. •

John B. Parker was formerly an international economist with the Economic Research Service of the US Department of Agriculture

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