Key Takeaways:
- CoBank shows that Mexico remains the leading market for U.S. dairy exports, accounting for over one-fourth of U.S. international sales and 4.5% of total U.S. milk production.
- Dairy consumption in Mexico has increased by 50 pounds per capita since 2011, while local production has not kept pace with demand.
- U.S. dairy exports to Mexico grew to 1.38 billion pounds in 2023, with a 10-year growth rate of 42%, according to USDA data.
- Broader market opportunities, coupled with $8 billion in new processing investments, position the U.S. dairy industry for long-term export growth.
Growth in U.S. Dairy Exports According To CoBank
The U.S. dairy industry is witnessing significant export growth, driven by increasing demand for dairy products in Mexico, its largest international market. Despite annual growth in Mexican milk production since 2011, the country faces a dairy deficit of 25-30%, much of which is filled by U.S. exports.
Corey Geiger, lead dairy economist at CoBank, highlighted the strong growth potential: “Dairy product sales to Mexico have the potential for continued growth as more consumers enter the middle class and seek higher quality proteins and fats. Mexico faces an annual dairy product deficit ranging between 25-30%, and the U.S. supplies over 80% of that shortfall. Beyond Mexico, the U.S. has strong growth prospects in the wider dairy export market that will be increasingly important as new dairy processing capacity comes online.”
U.S. Position in Global Dairy Exports
The European Union and New Zealand are the top global dairy exporters, but production constraints, including greenhouse gas reduction policies in the EU and land limitations in New Zealand, have slowed growth. This positions the U.S. to expand its market share in global dairy exports.
Investments of $8 billion in new U.S. dairy processing plants, expected to become fully operational by mid-2025, will bring an additional 20 million pounds of milk into production daily. The resulting increase in cheese, whey, and other dairy proteins will drive the need for expanded export markets, with Mexico serving as a key destination.
Role of Trade Agreements
Free trade agreements have played a pivotal role in the growth of U.S. dairy exports. Under the North American Free Trade Agreement (NAFTA) and later the United States-Mexico-Canada Agreement (USMCA), exports to Mexico have surged. In 1994, U.S. dairy exports to Mexico totaled just $211 million. By 2011, Mexico became the first $1 billion market, and in 2022, U.S. dairy exports to Mexico exceeded $2 billion.
Outlook for U.S. Dairy Exports According To CoBank
The U.S. dairy industry has transformed from a primarily domestic market to a significant global player. Currently, one in six tanker trucks of milk produced in the U.S. is processed into dairy products and ingredients for export.
With a strong 42% growth rate over the past decade in exports to Mexico, the industry is optimistic about future demand. Geiger noted: “As the industry prepares for future demand, producers and processors hope Mexico will one day purchase a significant portion of America’s milk production in the form of dairy products and ingredients.”
Read the complete CoBank report here.