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Overseas trade up as US dairy becomes ‘more export-savvy’: USDEC

By Mark Astley+

18-Oct-2013
Last updated the 18-Oct-2013 at 13:16 GMT

Overseas trade up as US dairy becomes ‘more export-savvy’: USDEC

US dairy exports could hit $6.5bn (€4.75bn) in 2013 on the back of efforts by the the increasingly "export-savvy" US dairy industry to capitalize on "favorable" market conditions, the US Dairy Export Council (USDEC) has claimed.

USDEC, which represents the global trade interests of the US dairy industry, predicted earlier this week that by the end of this year the value of US dairy exports will total $6.5bn – a 25% increase on the $5.2bn traded in 2012.

Speaking with DairyReporter.com, USDEC vice president of communications, Alan Levitt, pinpointed the increasing maturity of US dairy suppliers in overseas markets is a key driver of this growth.

“This year, conditions have been favorable for US suppliers,” he said. “The world has been undersupplied. Milk production from all our major competitors was down, leaving less exportable supply on the world market.”

Milk production in the 27 European Union (EU) Member States, New Zealand, Australia and Argentina was down 2.3% in the first half of 2013, according to USDEC.

“Meanwhile, dairy import demand has been solid, led by China and Russia. Benchmark world prices have been higher than US prices throughout the year, making US dairy products a relatively ‘good deal’ to importers. And just as important, US suppliers continue to mature, increasing their engagement and commitment to serving overseas markets.”

“As they've become more export-savvy, they’ve been better able to capitalize these favorable conditions,” said Levitt.

Fonterra issues “not played a role”

Levitt rubbished suggestions, however, that the recent food safety issues experienced by Fonterra - the world's largest dairy exporter - played any role in its export increase.

In August, Fonterra issued a food safety alert over concerns that three batches of whey protein concentrate (WPC), feared to be contaminated with botulism causing Clostridium botulinum, had entered the supply chain. Tests later determined that the alert, which led to product recalls across Asia, Australasia, and the Middle East, was a false alarm. Prior to that, several countries, including China and Malaysia, stepped up their checks on Fonterra products after tests revealed low levels of agricultural chemical, dicyandiamide (DCD), in samples of milk powder.

“Product safety issues are never good for anyone," said Levitt.

"In fact, they’re often a burden because consumers may have greater anxiety about the category as a whole. Fortunately in this case most of the concern seems to be alleviated.”

“That said, China and other importers have been looking to diversify their supply chains for some time now because they recognize that it’s just good business practice.”

“Already challenging” NZ, Australia, EU

Looking ahead, Levitt believes that the US dairy industry has a lot to be optimistic about in terms of exports.

“We are already challenging NZ, Australia and Europe – we are the world’s largest single-country exporter of skim milk powder, whey and lactose. This year we may surpass New Zealand as the world’s largest single-country exporter of cheese,” he said.

“US suppliers have made changes in the way they approach the export market. They have become more customer-centric in recent years, broadening their portfolios to make the right products at the right specifications desired by overseas buyers. We expect this will help them protect share, even as conditions cyclically become less favorable.”

“The United States cost of production is lower than it is in most of Europe, and it’s about the same or lower than the marginal cost of increased production in Oceania. Therefore as other suppliers seek to boost production to meet growing world demand, the US cost of production position should ensure we remain a very competitive supplier," Levitt added.

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