U.S. dairy exports were filled with mixed signals in February. U.S. dairy exports fell 5% (-9,587 MT milk solids equivalent, or MSE) compared to a year ago after adjusting for leap day despite cheese setting an all-time record for the month of February.
The main culprit behind the decline was U.S. nonfat dry milk/skim milk powder (NFDM/SMP), which declined by 26% (-16,737 MT). NFDM/SMP volumes to Southeast Asia fell by an astonishing 53% (-12,282 MT), likely caused by U.S. milk powder prices sharply diverging from global levels late last year and into 2025. With February’s decline, U.S. NFDM/SMP exports are the lowest since 2019 on an annualized basis, even as it remains the United States’ No. 1 dairy product exported.
In contrast to milk powder’s sluggish performance, U.S. cheese exports maintained their growth trajectory, improving 7% year-over-year (+3,054 MT), led by a surge in volumes to Korea (+50%, +2,090 MT), Australia (+67%, +1,105 MT), MENA (+26%, +695 MT) and the Caribbean (+31%, +599 MT). Weaker sales to China (-58%,-806 MT), Japan (-28%,-1,155 MT) and Mexico (-6%,-952 MT) did little to dampen overall volumes.
The rest of the dairy complex saw similarly mixed results. Total whey exports declined by 5% (-2,364 MT), primarily driven by softer sales of protein (see deep dive below). However, dry whey and modified whey (primarily whey permeate) both saw modest gains for the month, though lactose sales softened. Additionally, in a welcome development for cream markets, butter and AMF exports soared (+236%, +6,071 MT) with U.S. butterfat at a significant discount to product from Europe and Oceania.
Looking ahead, the outlook for U.S. exports remains murky given the uncertain policy environment. Yet despite the uncertainty, the U.S. still has significant opportunities to grow its exports abroad.
Already surging butterfat exports accelerate in February
We highlighted butterfat in last month’s U.S. Trade Data Release due to the huge export growth in January (+145%, +4,201 MT), and here we are again … with even larger growth in February – up 236% (+6,071 MT).
Canada and Mexico were the primary destinations for butterfat growth in February, but for different products. U.S. exports of butter primarily grew to Canada (+105%, +1,615 MT) while AMF exports surged to Mexico (+9,500%, +2,610 MT). The United States’ closest neighbors were far from the only countries that improved. Butter exports to MENA (+4,160%, +484 MT), Japan (+164 MT from zero in Feb 2024), Central America and the Caribbean (+60%, +234 MT), and Europe (+85,647%, +405 MT) all saw rapid growth albeit against small volumes. Several factors are driving the U.S. export expansion into butter, but the two primary factors are a well-supplied domestic market and a large global price gap.
The U.S. domestic market continues to be well supplied – both butter production and cold storage are up, and cream remains plentiful. Retail butter demand is strong, but weakness in foodservice is dragging down overall disappearance with January domestic use down 3.3%. Readily available butter supplies and ample cream supplies paired with softer total domestic use are pushing down prices. At the same time U.S. prices are easing, European and New Zealand prices are rising – mostly from tighter supplies. As a result, U.S. butter is at a significant price discount to the average global price (-34%, -$1.20/lb.) and that large price gap is attracting interest in U.S.-origin butter – as evidenced by the widespread growth in February.
Most factors suggest the large U.S.-global price spread will continue in the coming months. Under normal circumstances, this should spur additional U.S. butter exports, but the announcement of widespread U.S. tariffs is throwing a large amount of uncertainty into the equation. As of writing, few countries have placed retaliatory tariffs on U.S. dairy products, but this may change in the coming weeks which could potentially lower demand as the effective cost to the importer of U.S. butter rises. Yet even with plenty of uncertainty, as long as the large price spread remains, expect more U.S. butter to be found on international shelves.
U.S. dairy protein exports come under pressure
While overall U.S. export performance was mixed in February, protein was one category that moved decisively lower. Shipments of high-protein whey protein buckled, posting the weakest February figure since 2022. Except for an unexpected bump in January, exports of WPC80+ have trailed prior-year levels since August of last year. However, the 17% decline seen for the month accelerated the decline and dropped exports below the 5,300 MT threshold for the first time in over two years.
Dramatically lower demand from China (-53%, -840 MT) and South America (-58%, -538 MT) weighed on the overall WPC80+ figure. (Exports for both high- and low-protein whey to China have been adjusted due to suspected misclassification.) However, an unexpected increase in demand came from Southeast Asia, where exports soared to 709 MT, more than five times the volume that was exported in the same month last year.
Consumers worldwide continue to demonstrate enthusiasm for protein-rich products, but rising prices have made buyers cautious. The average value of WPC80+ exports rose to $12,892/MT in February, marking the highest price since August 2022. The last time prices rallied to these levels, it caused a significant retrenchment in demand, and U.S. exports fell precipitously. Anecdotal information from market stakeholders suggests that for now buyers are remaining loyal to whey proteins, failing to find acceptable reformulation alternatives. But the longer prices stay at these levels, the more severe the impact on demand is likely to be.
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