America’s largest dairy export customer is our neighbor to the south. Mexico imported nearly $1.5 billion of U.S. dairy products in 2019. The new U.S.-Mexico-Canada Agreement (USMCA) is aiming to protect those advancements, more so than trying to open the country up even further, said Ted Jacoby on the July 22 episode of Hoard’s Dairyman DairyLivestream. Jacoby is the CEO of T.C. Jacoby & Company and has been involved in getting dairy products to Mexico for decades.

When it comes to trade, the ease of getting product from buyer to seller can make a significant impact on the value of the relationship in terms of time, cost, and customer service. That’s what makes the U.S. a prime partner for Mexico.

Orders from Europe or New Zealand would take a month or two to arrive, whereas the U.S. can deliver within a few days, Jacoby explained. “Our advantage with Mexico is first and foremost logistics,” he added.

A weakened economy
This strong relationship has helped U.S. dairy exports to that country begin to slowly climb back up after significant slides this spring. In April, Mexican imports of dairy products such as skim milk powder were off as much as 30%, Jacoby said. The effects of the pandemic and a devalued peso are hitting the country’s economy hard.

Exports of key products to Mexico remain below last year’s levels, though. More U.S. traders are looking to Mexico because markets in Southeastern Asia are very competitive right now, but challenges remain there, as well.

“Overall, I would say Mexico is improving. They’re starting to move in the right direction, but it’s an uphill battle,” noted Jacoby. “They’re facing some of the same struggles the U.S. is in terms of dealing with COVID-19 and the pandemic.”

“The good news is everybody needs to eat. Mexico is a regular food importer, and when it comes to dairy, the U.S. is their number one export partner,” he added.

There is demand
Among the U.S.’s biggest product advantages in Mexico is nonfat dry milk. While well over 90% of both the butter and cheese produced in America is consumed domestically, only about 40% to 50% of nonfat dry milk is used here — the rest is exported. Nearly all of the nonfat dry milk Mexico imports is from the U.S.

Certain cheeses produced in the U.S. are also valuable for Mexican imports, particularly mozzarella for pizzas. The country’s dairy industry is growing, and at the same time, so does consumer demand for dairy products. “We’re in a good position to be the major beneficiary of that growth,” Jacoby predicted.

An ongoing series of events
DairyLivestream will air twice each month for the remainder of this year. The next broadcast will be on Wednesday, August 5 at 11 a.m. CST. Each episode is designed for panelists to answer over 30 minutes of audience questions. If you haven’t joined a DairyLivestream broadcast yet, register here. Registering once registers you for all future events.

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(c) Hoard's Dairyman Intel 2020
July 23, 2020
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