Mexico’s economy has grown for eight straight quarters, but a slowdown could be in the making. How that will impact dairy demand in 2025 and beyond is unknown, but for now demand has been strong and is expected to expand again next year, which should help boost U.S. exports.
Betty Berning, analyst with the Daily Dairy Report, said, “The Mexican peso has strengthened against the U.S. dollar for most of 2023, with a slight setback this fall. Currently, the peso is on an upswing, and its value relative to the greenback now sits 14% higher than year-ago levels. Strong demand from the United States’ top dairy export market will help keep dairy products moving and provide support to prices.”
According to a recent USDA Global Agricultural Information Network (GAIN) report, Mexico’s year-over-year milk production in 2024 is expected to increase 2% to slightly more than 30.4 billion pounds. An additional 50,000 cows, compared to this year, will push Mexico’s milk herd to 6.7 million head. Growth in cow numbers combined with a modest 1% gain in milk per cow will drive 2024’s output gain.
“Lower farm input costs and rising domestic demand have been pushing the growth in milk volumes. Slightly more than half of the milk produced in Mexico is processed, with the remainder used for drinking milk,” Berning said.
Despite the anticipated growth in milk production, Mexico remains a milk-deficit market, and Mexicans are big fans of dairy products, according to Berning. For example, Queso Fresco, a traditional Mexican cheese, is popular, but some consumers are now seeking out new varieties, she said, and while Mexico is fifth in global butter consumption, it ranks 43rd in butter production.
Cheese and butter manufacturing in Mexico are slated to grow by 2% in 2024 compared to this year, but Mexico will still need to import about 27% of its cheese and 5% of its butter needs, according to USDA. Cheese consumption, which has been growing for years, will increase 2% from this year, as both purchasing power increases and the population grows.
“Skim milk powder in Mexico is used heavily by the hotel, restaurant, and institutions sectors, and skim milk powder is also the main U.S. dairy product exported south of the border,” Berning said. “And that bodes well for exports as the sectors continue to improve post-Covid.”
According to USDA, consumption of skim milk powder next year is forecast to grow a strong 11% to 498,000 MT compared to 2023, but Mexico’s milk driers are forecast to only expand throughput by a modest 1,000 MT to 49,000 MT next year, according to the report. That means imports, which make up 90% of total consumption, will need to increase about 13%, according to USDA.
