Home Industry News Economics U.S. Dairy Satisfies Mexico’s Increasing Hunger for Dairy Products

U.S. Dairy Satisfies Mexico’s Increasing Hunger for Dairy Products

Mexico’s milk, cheese, and butter production are forecast year on year growth of two percent in 2024. Dairy farmers are expected to mitigate the impacts of prolonged drought and heat conditions with previously stored forage, increased feed grain imports, and water storage mechanisms. Cheese and butter imports are forecast to increase based on more domestic demand. Overall, milk powder imports are forecast to increase driven by demand from the dairy processing industry and for reconstitution into fluid milk for social programs.

Fluid Milk. The production forecast for 2024 is 13.6 million metric tons (MMT), a growth of two percent compared to 2023. Production results from top milk producing states, an overall healthy herd, and drought mitigation measures are expected to support increased production. The imports forecast for 2024 is 15,000 metric tons (MT), a 12 percent decrease from 2023, as Mexico’s increased production of fluid milk will fulfill a bigger share of domestic demand in 2024. The consumption forecast for 2024 is 13.8 MMT, a growth of two percent compared to 2023.

Cheese. The production forecast for 2024 is 474,000 MT, a two percent increase compared to 2023. A good milk and dairy ingredient supply and strong domestic and export growth demand is expected to spur cheese production. The import forecast for 2024 is 185,000 MT, a two percent increase compared to 2023, based on increased demand for foreign product, especially industrialized cheese. The export forecast for 2024 is 15,000 MT, a 25 percent increase compared to 2023. The consumption forecast for 2024 is 644,000 MT, a two percent increase compared to 2023.

Butter. The production forecast for 2024 is 250,000 MT, a two percent increase compared to 2023. The import forecast for 2024 is 20,000 MT, a 33 percent increase compared to 2023. Demand from the hotel, restaurant and institutional (HRI) sectors, especially bakeries, is expected to drive butter production and imports. The 2024 and 2023 exports are forecast to remain flat. The consumption forecast for 2024 is 270,000 MT, a four percent increase compared to 2023.

Skimmed Milk Powder (SMP). The import forecast for 2024 is 390,000 MT, a 15 percent increase compared to 2023. Competitive international prices for SMP are expected to incentive more imports. The consumption forecast for 2024 is 438,000 MT, a 13 percent increase compared to 2023.

Whole Milk Powder (WMP). The import forecast for 2024 is 4,000 MT, unchanged from 2023 and 2022. WMP imports are expected to remain flat due to more processing demand and imports of SMP. The consumption forecast for 2024 is 127,000 MT, unchanged compared to consumption in 2023, and a marginal increase compared to 2022.

Fluid Milk

Production

2024

The production forecast for 2024 is 13.6 million metric tons (MMT), a growth of two percent compared to 2023. Early 2024 production results indicate the top milk production states of Jalisco, Coahuila, and Durango increased production over three percent, boosting overall national production of milk by two percent. Despite prolonged drought and heat, forage availability from the previous year, imported grain, and irrigated water are expected to limit impacts of climate on Mexico’s dairy herd. In the first five months of 2024, Mexico’s Peso (MXN) continued to maintain strength against the United States Dollar (USD). The strength of the MXN/USD exchange rate continues to keep feed and dairy ingredient prices relatively lower and provides some relief to the extra costs associated with drought mitigation.

In April 2024, to reduce impacts of disease on the dairy cattle herd, and the local dairy industry agreed to work in lock-step to monitor and maintain biosecurity measures to the Secretariat of Agriculture and Rural Development (SADER), National Service of Agrifood Health, Safety and Quality (SENASICA), prevent the spread of Highly Pathogenic Avian Influenza H5NI (HPAI) to the Mexican cattle herd. Mexico reiterated its messaging about avoiding the consumption of unpasteurized products, maintaining awareness in cattle operations for respiratory illnesses, and continued monitoring of imports for any clinical signs of HPAI. Mexico continues to conduct disease surveillance for HPAI through the United States-Mexico Commission for the Prevention of Foot and Mouth Disease and other Exotic Animal Diseases (CPA).

Following the report of the presence of the New World Screwworm (Cochliomyia hominivorax) (NWS)in southern Nicaragua, approximately 400 miles from Mexico’s border, SENASICA issued a health alert and held an emergency stakeholder meeting. SENASICA reinforced animal health inspections for NWS at critical inspection points and ports.

Meanwhile, in 2023 Jalisco gained improved health status recognition by SENASICA for brucellosis and tuberculosis. This recognition incentivized increased milk production in Jalisco, the leading production state, due to more sales and marketing opportunities.

According to analysts, Mexico’s economy is expected to grow two percent in 2024. Albeit slower growth than previous years, demand from processing and the HRI sectors is expected to increase demand for milk in Mexico.

In 2024, the Government of Mexico (GOM) social supply program Liconsa is projected to collect 618 million liters of fluid milk, seven percent more than in 2023, and is currently increasing the list of beneficiaries. The increase in collections by the government also incentivizes more milk production. Liconsa also depends heavily on milk powder to reconstitute into fluid milk.

2023

Production for 2023 is estimated at 13.3 MMT, a three percent increase compared to 2022. According to SADER, 2023 milk production reached 99 percent of the production projected at the beginning of the year.

Due to a combination of stable feed prices, strong domestic demand, and no major animal health issues affecting the overall dairy herd, 2023 was a year where producers were able to obtain bigger profits from their assets and meet production goals.

Pasture and Weather Conditions

Despite persistent dry conditions throughout Mexico, grazing conditions for dairy production remains overall stable. Industry sources also report that the amount of hay and silage produced from late rainfalls in September and October 2023, will sustain dairy production during the first half of 2024.

Despite prolonged drought conditions throughout Mexico, milk production is divided across climatic regions which reduces risks to the dairy industry. National milk production is spread as follows: northern region (32 percent), western region (29 percent), central-eastern (23 percent), tropics (11 percent), and five percent distributed among the rest of the states. Additionally, there are a wide range of dairy production systems in Mexico— from entirely pasture based small producers to highly intensive dairy barns.

In general, dairy farmers produce nearly 65 percent of their balanced feed, hay, and silage. This creates a high dependance on wells and man-made reservoirs for water supplies.

Looking forward to the second quarter of 2024, the Service for Agricultural and Fisheries Information (SIAP) outlook for maximum temperatures nationwide are expected to be close to normal climatological conditions. However, the central region is forecasted to have higher temperatures above normal climatological temperatures. If reached, elevated temperatures could impact milk yields in Coahuila and Jalisco. If there is transition from “El Niño” to “La Niña” for the months of June to August as predicted by some analysts, possible rains could further alleviate drought pressures experienced in the first quarter of the year.

Mexico’s National Organization of Feed Producers and Animal Nutrition (CONAFAB) reports dairy cattle feed production in 2023 grew nearly two percent. Less elevated feed prices compared to recent years, and sufficient availability of silage, grain, and meal by-products are expected to support milk production in 2023 and 2024.

Trade

Imports

The imports forecast for 2024 is 15,000 MT, a 12 percent decrease from 2023. Mexico’s increased production of fluid milk is expected to satisfy a bigger share of domestic demand in 2024. Additionally, increased milk powder imports will play a greater role than fluid milk imports this year due to competitive prices and lower logistics and freight costs.

The imports estimate for 2023 is 17,000 MT, a 13 percent increase from 2022. As imports became more appealing in 2023 due to a strong peso and international commodity prices decreased, fluid milk imports to Mexico increased, especially to satisfy retail demand in the northern states of Mexico.

Imports of fluid milk represent only one percent of Mexico’s dairy product imports. However, in 2023 fluid milk imports from the United States for distribution in northern Mexico became less expensive and safer to transport than bringing fluid milk from the middle states of Mexico. Thus, fluid milk imports played a greater role in Mexico’s milk supply.

In May 2024, dairy industry groups from the United States and Mexico held a forum in Chihuahua and released a joint statement. The statement included an agreement to defend common food names, particularly cheese names, to allow their free use in North America. Industry also agreed to preserve, facilitate, and improve trade between the countries. United States and Mexico industry commitments to advocate on mutually beneficial dairy policies are expected to help maintain the competitiveness and trade interests of both countries.

Exports

The exports forecast for 2024 is flat compared to 2023 at 10,000 MT. Exports are forecast to remain flat to meet domestic demand for fresh milk for dairy processing. Exports for 2023 are estimated at 10,000 MT, a 23 percent decrease compared to 2022. In 2023, exports are estimated lower year on year due to the exchange rate which made Mexico’s exports more expensive and therefore milk export sales shifted to domestic industrial processing.

Consumption

The consumption forecast for 2024 is 13.8 MMT, a growth of two percent compared to 2023. Although the pace of consumption is slower in households, rural areas tend to drive more fluid milk consumption compared to urban areas. However, industrial consumption continues to be the main driver for Mexico’s milk use for processing into dairy products such as cheese and yogurt. Read the full USDA Foreign Ag Service Report HERE.

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