As 2021 approaches, dairy farmers, processors, and customers attempt to estimate what the year could bring for dairy. A key component of demand for U.S. dairy will continue to be the export market.

Those opportunities, specifically in skim milk powder and whey, look promising to build upon the strong sales realized this year, predicted Mark Stephenson of the University of Wisconsin-Madison on the December 9 Hoard’s Dairyman DairyLivestream. Of course, the historically low cheese prices of this summer stimulated some interest. But powder and whey products have also been up in sales.

“Certainly, for skim milk powders, our sales have been well up. If you look at who those customers have been, Mexico has been a common big customer for us, and they’re actually down in their purchases of skim powder, but it’s been more than made up in sales to Southeast Asia,” the economist said. “So, our customer base is shifting a little bit. That probably has quite a bit to do with the valuation of the peso, but nevertheless, our opportunities for selling powder into world markets probably continue.”

Rising sales of whey protein products have “been almost exclusively because of China,” Stephenson said. “They’ve been rebuilding their swine herd; they’ve committed to the Phase One trade agreement . . . they’re purchasing quite a bit of whey product. I think we expect those prices to stay fairly firm on into the next part of the year.”

He added that although whey may seem like a minor component, it can contribute significantly to the other solids value of a milk check.

Growing global market
This outlook comes as milk production in the U.S. is up about 2.3%, Stephenson said. We’re not alone in that climb, either.

“When we think about our other export competitors around the world, we’re all feeling a little bit growthy right now,” he cautioned. “Other major exporters like the European Union and Oceania are up more than 1%. I hope that we can keep things together, especially as we begin to get more of this milk on the market.”

Staying relevant in that expanding global market requires a robust dairy system. In such a tumultuous year as this one, the support farmers have received in the forms of programs such as Farmers to Families Food Boxes and Coronavirus Food Assistance Programs (CFAP and CFAP 2) has not only benefitted the domestic industry but also our international presence.

Matt Gould, president of The Dairy Market Analyst, says he hears many farmers point out that the high level of government support this year is going to cause a hangover of sorts when the money dries up. While he believes that will be true, there is also the global benefit of these investments.

“What I say to that is different than 10 years ago, because I think our marketplace is different. Our industry isn’t just trying to compete amongst itself, we’re also trying to compete with New Zealand and Europe,” Gould said. “When you have these government interventions that keep our industry out of the ditch, it helps us build and grow and keep the infrastructure to remain and become increasingly competitive internationally. So, while there certainly is a hangover, it’s also important to see it as a little bit of an edge that the government gave us this year.”

An ongoing series of events
The next broadcast of DairyLivestream will be on Wednesday, January 6 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
December 17, 2020
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