Tariff issues have affected the dairy industry just like the rest of agriculture.
Mark Stephenson, director of dairy policy analysis at the University of Wisconsin, says retaliatory tariffs from Mexico hurt cheese sales into that country.
“We are hopeful that we should see a boost soon when the steel and aluminum tariff situation is completely resolved,” he says.
While Mexico is the largest cheese customer, Stephenson says the U.S. dairy industry continues to look for other trade partners. Japan and South Korea have been steady customers, and marketing opportunities are developing with the Middle East and northern Africa.
India is another promising option.
“India has seen amazing economic growth,” Stephenson says. “It has a large emerging middle class, and they want to improve the quality of their diet.”
Alan Levitt, vice president of market analysis and communications for the U.S. Dairy Export Council, says record amounts of powdered milk were exported in 2018, but adds those numbers tailed off considerably over the second half of the year.
Exports over the first quarter of 2019 were down 12% from a year ago.
Levitt says the outlook with Mexico looks promising, adding exports are down 4%.
“The tariffs have affected value because we had to cut prices some,” Levitt says, adding ratification of the USMCA free-trade agreement (United States-
Mexico-Canada Agreement) would also stabilize prices and help increase exports.
Issues with China continue, and Levitt says he does not expect tariff issues to be resolved any time soon.
Milk prices have climbed recently, Stephenson says. Much of that can be attributed to little growth in milk production and increased domestic demand.
“We are finally starting to see stocks come down some,” he says, adding prices are about $1 higher than a year ago and more substantial growth is expected by the fourth quarter of 2019.
The popularity of cheese also figures heavily into increased domestic demand.
“In the 1970s, cheese consumption was about 14 pounds per person,” Stephenson says.
“Last year, that was 37 pounds per person. We continue to see a steady growth in per capita dairy consumption.”
Levitt says four years of huge milk supplies are finally starting to subside, adding the growth rate is at its lowest in three years.
“Cow numbers are down 100,000 since the production peak, and we could see flat milk production this year,” he says.
Levitt says barring some unforeseen situation, he expects 2019 to be a good year for the dairy industry.
“The rain we have been having could lower crop and hay yields, and that impacts feed costs,” he says.
“Demand has been good, and prices should be the best they have been in three or four years. The outlook is fairly positive at the moment.”