The United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA), appears to be bolstering U.S. dairy products to Mexico, according to Betty Berning, analyst with the Daily Dairy Report. From 2014 to 2023, U.S. dairy exports to Mexico grew 59%, up from just under 1 billion pounds in 2014 to almost 1.6 billion pounds in 2023.
“Trade policies such as USMCA and NAFTA support U.S. dairy producers by developing new product markets, effectively increasing demand,” Berning said. “These agreements are an important reason why U.S. dairy exports to Mexico have grown rapidly over the past 10 years and help explain why U.S. dairy is faring better in these markets in 2024 than in Asian destinations.”
From 2014 to 2023, total U.S. dairy exports grew 19%, or 942 million pounds, which means that the increases in sales to Mexico drove much of the growth in U.S. exports over this time.
“While other key export markets will likely import less dairy from the United States in 2024, Mexico’s imports have been outpacing 2023 purchases, making the country a critical partner for U.S. dairy,” Berning said. She noted that from January through July 2024, dairy shipments to Mexico of more than 950 million pounds were up 2% from the first seven months of 2023.
“Favorable trade agreements and geographical proximity have made it easy for the trade relationship between Mexico and the United States to flourish,” Berning said. “Nonfat dry milk and skim milk powder have been top commodities moving from the United States to Mexico. Just 10 years ago, Mexico took about one-third of all U.S. nonfat and skim milk powder exports, but that number grew to about half in 2023, which is impressive when one considers that total U.S. powder shipments abroad have grown more than 50% during that period.”
According to USDA data, 35% of the total 2.56 billion pounds of nonfat dry milk and skim milk powder manufactured in the United States last year was exported to Mexico. There, it is used as an ingredient in various food applications, to fortify cheese vats, and sometimes to reconstitute into drinking milk, Berning noted.
Mexico is also the top international customer for U.S. cheese, according to USDA data. Between 2014 and 2023, cheese shipments to Mexico jumped nearly 80% to almost 327 million pounds last year. Last year, shipments to Mexico accounted for 35% of U.S. cheese exports, up from 20% in 2014. This year’s exports to Mexico have soared, Berning noted, with exports in five of the seven months ranking in the all-time top five for volume, and year-to-date through July, U.S. cheese exports to Mexico were nearly 40% ahead of the same period last year, according to USDA.
“While the same intensity of growth is not expected through the end of this year due to increased cheese prices from March onward, 2024 is on track to be another record year for exports to Mexico,” Berning said. “Even if cheese exports to Mexico slow, nonfat and skim milk powder sales will likely pick up, as Mexican dairy processors make cheese instead of importing it and fortify their vats with U.S.-made powder.”
After strengthening relative to the dollar for more than three years, the Mexican peso has been weak since the country’s June’s presidential elections. While many analysts had anticipated a drop in the peso’s value, most expected it would be short-lived, Berning said.
“Instead, the peso’s value has eroded to its lowest exchange rate in nearly two years,” Berning said. “This could also slow U.S. exports to Mexico, as a weak peso will make U.S. products more costly. However, with the preferential trade agreements, close location, and a solidified partnership, the future is bright for U.S. dairy exports to Mexico.”
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