Mexico Is Keeping U.S. Powder Market Afloat

By Ronald K. O'Brien II, President of Nui Markets North America

Milk powder, in its various forms, is one of the most heavily traded dairy products globally. The U.S. is one of the top exporters of milk powder, producing about 1.2 million tons of nonfat dry milk (NFDM) and skim milk powder (SMP) annually. The U.S. exports about 70% of that volume, accounting for just under half of all U.S. dairy exports.  The destination of these exports is crucial for understanding market fundamentals and price discovery.

On the demand side, the primary buyers of U.S. NFDM/SMP milk powders are Southeast Asia and Mexico. The graph reflects the percentage of U.S. exports of NFDM and SMP to Mexico and Southeast Asia since 2020. It’s clear that Mexico has taken over the position of leading importer of U.S. milk powder.

This is important because of what is happening in other major export markets. In the first half of 2023, SMP exports out of the European Union are up 28% vs. last year.  SMP exports out of New Zealand during the first seven months of 2023 are up 37.9% over last year.  Because of this fierce competition from Europe and New Zealand for forward SMP sales contracts, U.S. exporters are being forced to rely more on domestic and Central American markets.

U.S. NFDM/SMP exports to Mexico have held up their end of the bargain, increasing 39% during the first half compared to last year, while U.S. exports to Southeast Asia fell 33.2%. Mexican NFDM/SMP demand will continue to impress, with record-breaking US-Mexico July NFDM imports expected.

On the supply side, U.S. NFDM production in July was reported to be down 18.6% compared to last year. This decrease can be tied to both nationwide and regional milk production declines.  During July, California, the largest NFDM/SMP-producing state, experienced a 5.1% decrease in milk production. At the end of July, U.S. NFDM inventory was reported to be 128,493 tons, down 15% year over year.

With the fast pace of market changes, buyers and sellers need access to data in real-time to make faster and more accurate transaction decisions. For this reason, key end users of Dairy products are gathering at Nui Marketplace North America and regularly scheduling tenders, aka reverse auctions, specifically for their NFDM procurement.

Nui implemented its procurement tender function earlier this year, and it has been well received by our importers, specifically south of the border.  All share the common objective of achieving fair market value as effectively and efficiently as possible.

Karla Fernandez with ILCHISA, our first Nui NA procurement customer, has shared some feedback on how using Nui procurement tenders works for them.

"I love the simplicity and efficiency of procuring products with Nui's technology. As a buyer, it helps me obtain real market prices. It was very user-friendly to set up, and within minutes, I had achieved multiple offers under the maximum price I was willing to transact at. I particularly liked that it created a real-time competitive environment and introduced me to a different market with new participants. I'll definitely be procuring additional products on Nui's Marketplace in the near future."

While our buy-side clients use the real-time functionality of Nui Marketplace to create competition to arrive at the best price, the platform attracts all dairy industry participants seeking new sales channels or those wanting real-time market intelligence, resulting in an active and up-to-the-minute marketplace.

Why not register for Nui Marketplace North America and see what it’s all about – the first month is on us! https://www.nuimarkets.com/register/