Strong customer and consumer demand for U.S. cheeses and dairy ingredients drove U.S. dairy exports to record heights in 2022, setting new volume and value records. It was the third straight record year for volume and the second for value, with new annual export records set for cheese, whey and lactose. 

Export volume on a milk solids equivalent (MSE) basis increased 5% to 2.4 million metric tons (MT). Export volume in 2022 was equivalent to 18% of U.S. milk produced last year, also an all-time high. Export value increased 25% to $9.6 billion—the first time it has ever crossed the $9-billion mark.

The United States’ share of global dairy trade is also climbing, reflecting U.S. suppliers’ long-term commitment to building meaningful relationships with customers worldwide. Through 11 months of 2022, the United States accounted for a 25% share of global dairy trade (full-year results are unavailable until the European Union reports December data). In the last 12 months, the European Union’s market share of global dairy trade fell by 2%, with the United States rising by an equal amount.

Mexico was the top export market for U.S. dairy in volume and value terms in 2022, becoming the first $2-billion U.S. dairy export market as sales rose 37% to $2.5 billion. With an export value of $1.7 billion, Southeast Asia was the second-largest market in value and volume terms, accounting for 19% of U.S. dairy export volume. U.S. cheese, whey, MPC and lactose shipments to the region impressively grew collectively by more than 12,000 MT. 

Here are some of 2022’s highlights:

• Cheese: U.S. cheese shipments overseas rose 12% to 451,370 MT in 2022 over 2021. Mexico was the top destination accounting for 27% of total U.S. cheese exports. Growth highlights include: Mexico +18%; Middle East/North Africa (MENA) +41%; Japan +17%; Central America +17%; Caribbean +25%; South Korea +9%; Australia +14%; and Colombia +28%.
  
  
• Whey Ingredients: U.S. exports of high value whey protein ingredients with 80% protein or higher (WPC80+ and WPI) reached 64,294 MT, up 0.4% from 2021. Shipments were flat primarily due to muted demand from China (which accounted for nearly a quarter of U.S. WPC80+ volume in 2021). Japan took over as the top market with U.S. shipments up 33% (+3,370 MT), fueled by rising demand for mainstream health and wellness food and beverage applications. Sales to Brazil (+58%, +1,459 MT) and Southeast Asia (+34%, +1,445 MT) also shined.
  
  Exports of remaining whey ingredients such as permeate, sweet whey and WPC34 grew 10% over the prior year to reach a new record of 602,907 MT. U.S. whey exports to China – the largest shipment destination accounting for 30% of total shipments - ended the year up 10% (+26,406 MT). U.S. whey exports to Southeast Asia, the second largest destination, grew 6% (+7,713 MT) in 2022 while South America shipments rose 56% (+8,833 MT).
  
  
• Nonfat Dry Milk (NDM) / Skim Milk Powder (SMP): After two years of record volumes, U.S. NDM/SMP exports declined 6% in 2022 to 827,313 MT. While falling short of 2021, it was still the second highest volume ever shipped in a single year by the United States. Besides posting a record year in Mexico in which NDM/SMP sales to Mexico jumped 6% to 359,433 MT and accounted for 43% of total export sales, U.S. suppliers also recorded strong gains to Malaysia (+8,499 MT) and Central America (+8,305 MT).
  
  
• Lactose: 2022 U.S. lactose exports reached all-time record levels, growing 16% over 2021 to 452,438 MT. China was the largest export market, accounting for 26% of U.S. lactose sales.
  
  
• Milk Protein Concentrate: U.S. milk protein concentrate (MPC) exports increased 16% to 47,434 MT, led by growth to Mexico (+2,902 MT), Southeast Asia (+2,746 MT) and Egypt (+2,644 MT).

What's in Store for 2023?

2022 was an outstanding year for U.S. dairy exports overall, but can we expect the same this year? Here are three signposts to watch that could impact U.S. dairy exports in 2023.

• Economic headwinds: Inflation and consumer purchasing power
  High inflation rates driven by supply constraints, strong demand, and Russia’s invasion of Ukraine challenged consumer incomes in 2022, forcing them to make tough spending decisions. In 2023, purchasing power in both the United States and the rest of the world will likely improve as inflation pressure eases, but that pressure will be felt differently depending on the region and country. Additionally, while the forecast 2023 levels show a decrease, these numbers are still well above pre-pandemic levels. So, while the projected easing is positive, consumers worldwide will still be battling elevated prices in 2023.
  
  
• China's import demand
  A precipitous drop-off in Chinese purchases in 2022 due to COVID-related travel restrictions and strong inventory stock levels (from 2021 purchases) had a significant pullback effect on global dairy trade volumes last year. Though plenty of uncertainty remains, with the country now reopened and inventory stocks drawn down, dairy demand (and prices) could lift as China re-enters the market for ingredients such as SMP and whey. At the same time, Chinese consumers are also likely to feel the impacts of inflationary pressures that could also constrain demand and economic growth.
  
  
• European Union 27 + United Kingdom (EU27+UK) milk production
  After running below 2021 levels for most of 2022, EU27+UK milk production began picking up in the final third of 2022 after dramatically higher farmer payouts incentivized increased output. Current indications are that EU27+UK milk production is also looking up for the first half of this year. Yet, the structural limitations on European farmers and an anticipated decline in Europe’s dairy herd size of a further 10% (more than 2 million head) over the next decade suggests the potential for rising milk production for the first half of 2023 is likely to be fleeting. 

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