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Home > Industry News & Events from HART > News > USDA Report Looks at World’s Cheese Supply
August 10, 2016

USDA Report Looks at World’s Cheese Supply

News cheese, dairy industry, industry news, usda

How are countries outside of the US progressing with their dairy and cheese exports? The USDA recently reported on the world’s cheese supply. We see some growth of milk production from the European Union, New Zealand cheese production has also continued to rise, and Russia’s cheese output is expected to hold steady. 

 European Union (EU) milk producers, freed from quota constraints, grew their milk deliveries by nearly 6 percent in the January-April 2016 period (unadjusted for leap year), according to USDA’s semiannual “Dairy: World Markets and Trade” report released this month.

The increases in milk output in some countries such as Ireland, Belgium and the Netherlands exceeded expectations and grew by 10-15 percent in the first quarter year-over-year, the report further notes. However, for the balance of this year, the pace of milk production is expected to slow significantly as the average weighed farmgate prices have dropped by approximately 13 percent from January through June 2016.

While this will undoubtedly squeeze margins, EU dairy farmers operate under a complex regime where additional aid payments can to some extent mitigate low milk prices. Consequently, the milk production forecast is expected to be 151.6 million metric tons, 1 percent over 2015, USDA says.

Given the expected strength of EU milk production, it is anticipated that most of this additional milk will flow into cheese vats. As a result, the cheese production forecast is raised to nearly 9.8 million metric tons. Despite the loss of the Russian market, EU exports of cheese have become more competitive as a result of the strengthening U.S. dollar. Shipments of cheese through April are up an impressive 14 percent in comparison to the same period last year and as a result the export forecast is revised up by 12 percent to a record 790,000 metric tons. The United States is by far the leading destination for EU cheese. Other leading destinations are Japan, Switzerland and Saudi Arabia.

Although exports are slated to rise substantially, EU domestic consumption is anticipated to be relatively stagnant. Consequently, some 30,000 metric tons in year-end stocks are expected to be held under the EU’s Private Storage Aid (PSA).

Meanwhile, New Zealand cheese shipments for 2016 through May are running 6 percent ahead of last year and are now expected to total 330,000 metric tons or 16 percent higher than earlier anticipated, USDA says. The bulk of the exports have been destined for Japan, Australia and China. Global cheese prices for cheese relative to whole milk powder have encouraged the flow of milk towards the production of cheese. Consequently, the cheese production forecast has been revised up by 13 percent.

While Russia’s cheese output for 2016 is expected to hold steady over last year, there is concern over the increasing use of palm oil as a fat substitute in cheese vats, USDA further notes. It is estimated that dairy processors use approximately 25-30 percent of palm oil imports in the production of dairy products with a large portion used to produce cheese. In 2015, the National Union of Milk Producers determined that there was a gap of 9-10 percent between the milkfat supplied and the declared milkfat content of dairy products produced, USDA adds.

Although Russia’s cheese output has grown by an annual average of 4 percent since 2011 through 2015, it remains heavily dependent on imports, primarily from Belarus. For 2016, Russia’s imports of cheese are expected to remain relatively strong and the import forecast has been revised up to 235,000 metric tons; 10 percent over 2015.

U.S. Cheese Exports in Comparison

U.S. cheese exports continue to struggle due to increased competition and lackluster global demand. The United States faces particularly intense competition in Asia from Australia, New Zealand and the EU. For example, sales of U.S. cheese in such key markets as South Korea and Japan through May are down 48 percent and 30 percent year-over-year, respectively. Not surprisingly, total shipments of U.S. cheese through May are down 22 percent in comparison to last year and the annual forecast has been cut to 275,000 metric tons, down sharply from last year, the report notes. Nevertheless, U.S. consumption remains robust, lending support to dairy prices.

Although year-end stocks are slated to grow over last year, prices are likely to remain at relatively strong levels, USDA says. However, this also will render U.S. cheese less competitive.

Source: Cheese Market News

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