The amount of Nonfat Dry Milk (NDM)/ Skim Milk Powder  (SMP) produced is growing as fast or faster than yogurt or cheese.  The big difference is that the majority (52% YTD) is exported.  That means that the price is not determined domestically, but internationally.

In 2013, the U.S. became the world’s leading exporter of NDM/SMP. In the first four months of 2014, exports continue to be very strong reaching a monthly record export level of 60,358 metric tons in May. For the first five months of 2014, exports have averaged 48,011 metric tons per month, 10% above 2013 levels. It appears that the U.S. NDM/SMP exports will maintain a leadership position in 2014.

The majority is being exported to Asian countries, half way around the globe.  The big competitors to supply this market are Europe and New Zealand.  Obviously, New Zealand has a freight advantage when exporting to the Asian markets and Europe had the advantage of being the leading exporter in the market for the last three years.  In spite of these advantages for New Zealand and Europe, the U.S. significantly expanded exports of NDM/SMP to the Asian markets in 2013 and became the leading global supplier.

The total export market for NDM/SMP has increased steadily, growing by 50% over the last five years.  There is a significantly growing global market and the U.S. has become the leader. Can it continue?

The U.S. has a very diversified list of customers.  The sales to Mexico, the Caribbean, and South and Central America represent long-term customers who are not easily served by the EU or New Zealand.  However, the majority of exports go to the other side of the world where there can be significant competition from the EU and New Zealand.

Prices for NDM/SMP are determined globally, not domestically.  The chart below shows the comparative prices for U.S. west coast (where NDM/SMP is exported to Asian countries) vs. Oceania.  This essentially compares U.S. West coast export prices to New Zealand’s prices.  Both prices are FOB the export location.  This data shows that prices are falling and that the U.S. prices may be overpriced currently. It also shows that the U.S. West coast pricing is tied to the global markets.

Source: John Geuss for milkprice.blogspot.fr