Weak sales of low-protein whey to China’s hog industry offset other small positives. Saudi Arabia will be a big player in dairy heifer market.

Economic challenges in Asia combined with increased competition from Europe and New Zealand continued to limit U.S. dairy export growth in July. Monthly sales of dairy replacement heifers and hay were lower. Here’s a look at Progressive Dairy’s monthly ag trade summary.

Dairy products

The positives for the month, in most dairy products, are that declines seen in the second quarter did lessen or switch to growth, according to a monthly market update from the U.S. Dairy Export Council (USDEC):

• Exports of nonfat dry milk/skim milk powder were up slightly thanks to robust purchasing from Mexico.
• Cheese exports were roughly flat thanks to a rebound in sales to Japan and continued growth to Latin America but limited by challenges from demand and competitors selling at lower prices to South Korea and Southeast Asia. The only cheese category to show growth remains grated/powdered cheese (primarily mozzarella).
• In contrast, low-protein whey exports pulled back sharply, mainly attributed to weak demand from China’s feed sector, where weak pork markets diminished demand. Pork prices did increase in late July, which should incentivize pork production expansion and support low-protein whey export recovery toward the end of 2023 and into 2024.

Separately, the Department of Commerce/Bureau of the Census estimated U.S. dairy exports through the first 10 months of fiscal year 2023 (October 2022-July 2023) at about $7.27 billion, down 3% from the same period a year earlier. Fiscal year-to-date dairy imports were estimated at $4.61 billion, up 16%, with cheese imports up 10% at $124 billion.

The latest USDA quarterly Outlook for U.S. Agricultural Trade report, released Aug. 31, forecasts the value of U.S. dairy exports at about $8.6 billion in fiscal year 2023, below the nearly $9.1 billion in dairy product values exported fiscal year 2022. In the first forecast for fiscal year 2024 (Oct. 1, 2023-Sept. 30, 2024), USDA estimated dairy exports will fall to $7.4 billion.

U.S. dairy, beef genetics exports

The latest monthly export report from USDA’s Foreign Agricultural Service (FAS) estimated sales of U.S. dairy replacement heifers to foreign buyers continues on a roller coaster. After exporting 1,905 head in June, July sales fell to just 219. January-July exports now total 8,549, up about 2,200 head from sales during the same period a year ago.

Despite no sales in July, Turkey remains the leading market in 2023 at 4,534 head. That’s followed by Vietnam (1,964), Mexico (1,050) and Canada (958).

Looking into the last quarter of 2023, Saudi Arabia is likely to become the leading market for U.S. dairy replacements, according to Tony Clayton, Clayton Agri-Marketing Inc., Jefferson City, Missouri. He expects 8,000-10,000 head to move there in an effort to restock the world’s largest dairy farm, which was hit hard by foot-and-mouth disease (FMD).

“With the scope of those shipments to Saudi Arabia, many other countries will wait on the sideline to see what availability is left on the shelves and what price level buyers will have to work with to obtain [heifer] numbers,” Clayton said.

Besides live dairy replacements, exports of dairy embryos were estimated at 939 in July, bringing the year-to-date total to 7,204. China is the leading market with 3,626.

July beef cattle heifer exports were estimated at 378 head, a six-month low. Year-to-date exports total 5,505 head, with 80% sold to buyers in Canada. Beef cattle embryo exports for the month were estimated at just 98, bringing the year-to-date total to 2,729.

Hay exports weaker

U.S. hay product exports remain weaker through the first seven months of 2023.

July exports of alfalfa hay were estimated at 171,756 metric tons (MT), down more than 25,000 MT from June; January-July sales are the smallest to start a year since 2015. At 44,211 MT in July, sales to China were a 2023 low, while sales to Saudi Arabia hit 66,450 MT, a multiyear high.

July exports of other hay also remained slower at 77,501 MT. Year-to-date sales total 537,643 MT, the smallest five-month total to start a year in at least two decades.

Exports of alfalfa cubes and meal were also mostly lower.

Negative ag trade balance grows

The May-July 2023 U.S. ag trade balance has now likely turned in the largest three-month deficit in history. The U.S. Department of Commerce/Census Bureau estimated the value of July agricultural exports at $12.2 billion and the value of ag imports at $15.7 billion, yielding a trade balance of -$3 billion or more for a third straight month. The fiscal year agricultural trade deficit is about $13.5 billion.