Region/Countries: Mexico, North America Industry: Agriculture / Timber, Food and Beverage Date: June 2017

Why this is important to Wisconsin businesses: Mexico does not produce enough milk to meet domestic demand, leading it to import powdered milk to bridge the gap; demand is also strong for other types of dairy products.

Mexico’s dairy industry does not produce sufficient milk to meet domestic demand. According to the Secretariat of Agriculture (SAGARPA), the production of drinking milk reached 11.6 billion liters in 2016, representing an 8.7 percent increase during the 2010-2016 period. This increase has fallen short of covering increasing demand caused by population growth and increasing per capita consumption, as well as a deficit carried forward from previous years. According to SAGARPA, per capita consumption of milk in Mexico has grown from 109.5 liters per year in 2011 to 118.1 liters by 2016, meaning a 7.9 percent increase in just five years. Per capita consumption is still well below the 150 liters per year recommended by the UN Food and Agriculture Organization.  Mexico imports an estimated 21 percent of its dairy products of all types to meet domestic demand, thus severely limiting exports and prioritizing the import of powdered milk (mostly from the U.S. and New Zealand): Mexico was as of 2014 the third largest importer of powdered milk in the world, just behind China and Algeria. One of the reasons for this deficit is that the 6.5 million head of dairy cattle in Mexico have a low rate of production, estimated at only 20 percent of that in countries with more efficient production and technical methods. Another reason is that the Mexican government, through its Liconsa office, has imposed a cap on the milk they buy from small and midsize milk producers (of which Mexico has an estimated at 12,000) for the benefit of the low-income population, severely discouraging domestic production. In 2017, domestic production of milk is forecast to increase by only 1.7 percent, while consumption is forecast to rise by 2.8 percent and imports to grow by over 6 percent. The Mexican dairy industryand the government have known for a number of years that they depend on powdered milk from abroad to meet domestic demand. A new trend has arisen recently of increasing production of higher value-added milk derivatives:

  • Yogurt production has grown to 101,600 metric tons, an increase of 36 percent from 2010 to 2016 period. Exports of yogurt increased by an estimated 272 percent, reaching 12,600 metric tons, while imports increased by 317 percent.
  • Cream production reached 138,800 metric tons in 2016, an increase of 33 percent, while cream exports increased by 65 percent to 5,700 metric tons, and imports decreased by 33 percent during the same period.
  • Production of cheese of all types increased by a remarkable 24 percent between 2010 and 2016, reaching 342,200 metric tons, while cheese exports decreased by 23 percent and imports increased by 57 percent.
  • Butter production reached 23,000 metric tons in 2016—an increase of 59 percent between 2010 and 2016—while exports reached 2,200 metric tons (an increase of 45 percent) and imports decreased by 28 percent.
  • As discussed above, production of powdered milk production barely changed, registering a weak increase of just 1 percent between 2010 and 2016 and reaching 238,400 metric tons in 2016, while imports increased by a whopping 76 percent during that period, and exports remained negligible.

The trend during the current decade is clear in milk derivative products: while imports and exports may have increased or decreased, production of all types (with the exception of powdered milk) increased at double-digit rates. Production figures analyzed alongside external trade and consumption figures point to the same conclusion: as Mexico relies heavily on imports of powdered milk to cover its own consumption, the country’s dairy industry is increasingly producing milk derivative products (cheese, butter, yogurt, cream) that yield larger margins. Thus, Wisconsin producers of powdered milk and specialty dairy products alike can find export opportunities in this market.