U.S. Whey Exports
What is whey?
Whey is the liquid bi-product of cheese production. Every 10 units of full-fat milk will yield about 1 unit of cheese and 9 units of fluid whey. Fluid whey is more than 93 percent water but includes approximately half of the original nutrients of milk, including protein, calcium, and lactose. Depending on the type of cheese being manufactured, there are two types of liquid whey produced: sweet and acid. Acid whey comes mainly from cottage and ricotta cheeses. Sweet whey comes from manufacturing Cheddar, Swiss, Mozzarella and similar types of cheese. Sweet whey contains less acid and calcium, and more lactose than acid-type whey. Most U.S. whey products are derived from sweet whey.
Approximately half of the liquid whey produced in the United States is further processed. U.S. whey processors take the fluid, sweet whey created during cheese-making and further process it into whey powder, whey protein concentrate (WPC), whey protein isolate (WPI), reduced-lactose whey, and demineralized or reduced-mineral whey. During this further processing, lactose - a component of the whey - is extracted as well. Manufacturers employ a number of different techniques to separate out the different components of whey and create whey products to the exact specifications of the end user.
Whey manufacturers can produce many different whey products, with varying protein, mineral, and lactose levels, as well as various functional properties.
Whey protein concentrate is obtained by removing sufficient non-protein constituents from whey so that the finished product contains the protein level desired, ranging from 34 percent (WPC-34) to 80 percent (WPC-80). Whey protein isolate (WPI) has an even higher protein concentration, with 90 percent or more protein. The higher the protein concentration, the higher the products value. Whey fractions can also be produced from whey proteins, by breaking down the protein to obtain enzymes and other substances.
What is whey used for?
Whey products have many uses. Whey is used in animal feed, which include milk replacer for calves, feeds for cattle, swine, and poultry, and pet foods. Whey and its derivatives are also used in many food products, including dairy products, baked goods, candies, snack foods, dry mixes, processed meats, infant formulas, nutritional beverages, and in numerous other dried, frozen and prepared foods.
Whey products offer numerous functional and nutritional properties that are valued by food manufacturers. For example, in dairy products, whey can replace the fat in low-fat products. It improves slicing, spreading, and melting characteristics in processed cheeses. In baked goods, whey improves the crust color and enhances flavor. In processed meats, it improves moisture retention. Whey offers high-quality protein, calcium, and vitamins, which can be used to improve the nutritional content of many foods. In infant formula, whey creates a formula more similar to human milk and stimulates the growth of beneficial bacteria in the intestinal tract.
The type of whey product used in these foods depends on the specifications required by the manufacturer. Whey powder, WPC, and other modified whey products are all used in food products. Whey powder and the lower protein-level WPCs, such as WPC-34, tend to be used more in the lower value food products, such as dairy and bakery items. The higher concentrated WPCs, such as WPC-80, are generally used in higher value products, such as meat and seafood.
Whey products are increasingly being used in the production of nutraceuticals and pharmaceuticals. Research has shown that the ingredients in whey may be beneficial in preventing or treating many diseases, such as: HIV, cancer, hypertension, and osteoporosis. Whey ingredients have also proven to be anti-bacterial and cavity inhibiting. The more specialized whey proteins and fractions used in pharmaceuticals are very high-value items, sometimes commanding a price over $100/kg.
The U.S. Whey Industry
The United States is the worlds largest producer of whey products. In 1998, the U.S. manufactured over 700,000 tons of whey, which included 535,000 tons of whey powder, 130,000 tons of WPC, and 48,000 tons of other modified whey products, such as reduced lactose and demineralized whey. Processed whey production has been steadily increasing. The production of the modified whey products such as WPC, in particular, has been rapidly expanding. Between 1988 and 1998, U.S. WPC production more than doubled. WPCs share of total whey production has also increased.
U.S. Whey Exports
The United States is the worlds largest exporter of whey powder and whey protein concentrates. Between 1992 and 1998, U.S. whey exports increased substantially (up 56 percent), from 76,000 tons in 1992, valued at $59.7 million to 119,000 tons in 1998, valued at $110 million). Of these exports, the higher value WPC exports have tripled in the last 4 years. In addition, the WPC share of total whey exports has increased, from 6 percent in 1995 to 15 percent in 1998.
The top five export markets for U.S. whey products (whey powder and WPC) in 1998 were Japan, Mexico, Canada, China/Hong Kong, and Korea. Together, these five countries represented three-fourths of the 1998 whey export market. Taiwan, Thailand, and the Philippines are also important markets for U.S. whey. South America is growing in importance as well.
Japan: On a value basis, Japan is the most important market for U.S. whey exports, with 1998 exports totaling nearly 17,000 tons, valued at over $22 million. The United States has approximately a 40 percent market share of Japans whey imports.
Japan has established a quota system for importing whey products. Each category of whey product, depending on the type of whey and its intended use, has a different quota. For the category whey and modified whey for food applications, Japans Agriculture and Livestock Industries Corporation (ALIC) administers a simultaneous-buy-sell (SBS) tender system. Under the SBS system, ALIC accepts periodic tenders that simultaneously identify the price that ALIC can buy product from an importer and the price ALIC can sell product to an end user. Bids with the highest mark-up (difference between the price that ALIC will pay and the price ALIC will receive) receive preference.
Tenders are held twice each fiscal year, with one-half of the total quota amount purchased at each tender. The quota amount for food use whey was 4,200 tons in 1999, and will increase to 4,500 tons in 2000. This category includes whey powder as well as some WPCs, such as WPC-34. Japans increasing demand for these products is severely constrained by their quota system. For both tenders held in 1999, a much higher volume of bids were received than the allowed quota amount. (In the first tender, there were seven times as many bids as the tender volume. In the second tender, there were nine times as many bids.)
In contrast to the food use whey quota, the quota for feed applications is substantially under-utilized. In recent years, imports of whey for feed applications have amounted to only about half of the quota level, which was 45,000 tons in 1998.
The U.S. has about a 41 percent share in this market, which is largely price driven. Tariffs for both the food and feed use whey categories are 25 percent.
Japans quotas of whey for infant formula use and mineral concentrated whey are also greatly under-utilized. Japan imported only about 4,600 tons of infant formula use whey in 1998, out of a total quota of 25,000. The United States has a 31 percent share in this market. The tariff for infant formula use whey is 10 percent. For mineral concentrated whey, Japan used only about 5,000 tons of the total quota of 14,000. The tariff for this category is 25 percent. Quotas do not restrict the imports of WPC-80.
The U.S. dairy industry has been working with the Japanese government to have whey proteins classified under Japans functional food category, known as FOSHU. This process may take several years. Once approved, it would allow health claims to be made on the final product, which could lead to increased demand.
Mexicos total whey imports represent an estimated 65-70 percent of total whey products consumption and the United States has a dominant market share. In 1998, U.S. whey exports (whey powder and WPC) to Mexico exceeded 18,000 tons, valued at over $20 million. An estimated 30-35 percent of Mexicos whey imports are used in the production of animal feed. The remainder is used in products for human consumption. Much of the edible whey imported into Mexico recently has gone into the production of "milk-type drinks", which are milk substitutes targeted at the lower income population. This segment of Mexicos whey market has been growing steadily in recent years.
The U.S. dairy industry is also working with the Mexican confectionery, bakery, and processed-meat industries to increase the usage of U.S. whey products. The NAFTA tariff rate for whey powder was 4 percent in 1999, decreasing by 1 percent yearly to reach 0 percent in 2003. For WPC-34, the 1999 tariff rate was 8 percent, decreasing by 2 percent annually to reach 0 percent in 2003. There is no tariff on WPC-80 and WPI.
Canada: In 1998, U.S. whey exports to Canada, valued at over $16 million, represented nearly one-fifth of total U.S. exports. U.S. whey exports to Canada have increased substantially in the last five years, from about 9,000 tons in 1994 to over 23,000 tons in 1998.
China (including Hong Kong) is a large and growing market for whey imports. importing a total of about 86,000 tons in 1998. U.S. exports of whey to China tripled over the past five years, from about 6,000 tons in 1995 to nearly 18,000 in 1998, valued at over $13 million. U.S. exports of the higher value whey protein concentrates have from less than 100 tons in 1995 to over 3,500 tons in 1998. The import tariff for whey is currently 6 percent.
Imports represent virtually 100 percent of total whey consumption in China. Sixty percent of the imported whey is feed grade. Usage of whey and WPC has increased in the food sector, although WPC usage remains underdeveloped, with the dairy and beverage sectors being the biggest users to date. The U.S. dairy industry has projects a major Chinese dairy companies to further expand use of dry whey, WPC-34 and WPC-80.
Korea: In 1998, the U.S. exported whey products to Korea valued at nearly $9 million, capturing over half of Koreas whey import market, which totaled about 24,000 tons . About half of total whey imports are used in feed applications. Whey for infant formula accounts for about 25-30 percent of total whey usage. The remainder of the imported whey goes into food applications. Korea imports whey products under a quota system, which is divided nearly equally among food and feed uses. The 1999 quota was 32,352 tons, which will increase at an annual rate of 20 percent through 2004. The tariff rate is 40 percent unless a "special exemption" is issued by the Korean Dairy Industry, in which case a 20 percent rate applies. Imports of whey for feed applications generally equal the quota. On the other hand, the quota for food application whey is under-utilized. Many food processors associate whey with animal feed, rather than as a possible ingredient in the food industry. Since food use of whey products is underdeveloped, the U.S. dairy industry is concentrating market development efforts in this area, and in particular, in the bakery and yogurt sectors.
Philippines: The U.S. exported approximately 7,000 tons of whey to the Philippines in 1998, which represents over 30 percent of all whey imports into this country. Sixty-seven percent of these imports go into the production of animal feeds (mostly pig feed). The dairy sector is the second largest sector using whey. Although several large bakeries use whey powder, the bakery and confectionery sectors remain largely underdeveloped. Tariffs range from 3-10 percent.
Thailand: In the 1994-97 period, Thailands total whey imports nearly tripled to exceed 25,000 tons. Although the regional economic crisis adversely affected imports in 1998/1999, the market should rebound in 2000, reaching 20,000 tons. U.S. exports to Thailand increased more than fivefold from less than 1,000 tons in 1994 to over 5,000 tons in 1998. The whey market in Thailand is predominantly an animal feed market, with 81 percent of whey imports used in this sector. The food sector is largely underdeveloped. Good growth opportunities exist in the ice cream, bakery, confectionery, snacks, infant formula and canned milk products. The tariff for whey is 5 percent.
Taiwan: Total whey imports into Taiwan in 1998 exceeded 11,000 tons, representing 100 percent of total consumption. The U.S., whose whey exports in 1998 accounted for over half of total consumption, is Taiwans largest whey supplier, followed by Canada, and Australia. Fifty-five percent of whey imports go into the food sector, whereas 45 percent are used in the feed sector.
The best opportunities for whey usage in the food sector are in the yogurt and yogurt drinks, ice cream, and protein beverages. The tariff is 10 percent for whey powder, and 7.5 percent of WPC.
South America is also becoming a major export destination for U.S. whey products. Between 1994 and 1998, the value of U.S. whey exports to this region increased from $4 million to $6 million. The major importers in the region include Venezuela, Colombia, Brazil, Peru, and Argentina. (Debra Pfaff 202-720-4884)