Have we been too optimistic about dairy exports?

I, for one, have always been skeptical about exports and their potential to significantly boost milk prices. Yet, much of that skepticism vanished last December while attending the joint annual meeting of the National Milk Producers Council and Dairy Management Inc. Sponsors of the meeting painted a very optimistic picture. One of the speakers, Ross Christieson, of the British consulting firm Landell-Mills, said China and other importing nations would need an extra 1.075 million metric tons of dairy products per year by 2010. He said the U.S. is better suited than any other country in the world to meet this surging global demand.

We reported the comments without a great deal of fanfare.

Then last month, I ran into someone at the Florida Dairy Business Conference who made an interesting comment. He said he had been at the same NMPF/DMI meeting and experienced the same sense of optimism. In fact, he came away thinking that he and other producers would need to gear up production in order to feed the world. But, he pointed out, that may not be the proper message to send in light of higher milk production and lower prices this year.  

His comments made an impression on me.

When reporting industry events, the media has a responsibility to put things in proper context. Yes, some things, like China’s economic growth, suggest there could be an up-tick in exports. But other things, like the breakdown of the World Trade Organization talks this summer, suggest there is still a lot of work ahead. Everything is conditional.

You can get optimistic about exports, but it has to be tempered with reality.

Even under an optimistic scenario, the domestic market — not the foreign market — will remain the biggest outlet for milk produced in the U.S., points out Scott Brown, dairy economist at the University of Missouri who works with the Food and Agricultural Policy Research Institute (FAPRI). If the domestic market is over-supplied, it will result in lower prices, he adds.

FAPRI developed its own export projections and announced them last January at the International Dairy Foods Association annual meeting. The projections show an increase in skim milk powder exports over the next 10 years, going from an actual 635 million pounds in 2005 to approximately 772 million pounds in 2015. While a nice increase — 22 percent — it is not exactly the type of groundswell one would expect after listening to the speakers at last December’s NMPF/DMI meeting.

Depending on the information source, the message portrayed by the media can be overly optimistic, overly pessimistic or right down the middle.  

“There are opportunities for U.S. milk products in world markets, but one should not equate that to ‘we can produce as much as we want’ — that is sending the wrong message to producers,” Brown says.     

So many variables come into play. Suspension of the Doha Round of the World Trade Organization talks this summer — some would say the talks are now on “life support” — will hurt the prospects for increased exports. “We won’t have the opportunities we would have had with the Doha Round,” Brown says. On the other hand, foreign exchange rates for U.S. currency remain favorable for exports.

Milk production shot up this year because of favorable prices in 2004 and 2005; it didn’t have to do with producers anticipating a surge in exports by the year 2010. But, the comments made to me by an astute dairy producer in Florida were telling, nonetheless.

We will always endeavor to put the news in proper context.