“We’re on the right track” when it comes to dairy exports.
That is the conclusion of a study released this week and described to the dairy trade media on Wednesday.
The U.S. is well-positioned to be a larger player in the dairy export market, said Brett Burgess, manager at Bain & Co., the company that conducted the study. In fact, the opportunities for the U.S. may even be greater today than what Bain & Co. identified in a previous study in 2009. Both studies identified a “latent demand gap” between what could be exported and what is currently being supplied.
“The demand gap that we identified in 2009 could actually be wider than we anticipated,” Burgess said.
He identified several reasons:
- China’s dairy consumption continues to show significant growth. And, even though there is investment — some of it foreign — in China’s dairy infrastructure, the demand gap is likely to grow as demand outpaces domestic production.
- New Zealand, one of the main players on the dairy export scene, is constrained by several factors. For one thing, there is an increasingly finite amount of land that can be devoted to dairy production in that country. There’s a correlation between total land and total production because most of the dairies in New Zealand are grazing operations. Land devoted to dairy will peak around the year 2020, Burgess said.
- Some of the countries in the European Union may increase milk production, while others decrease it. The aggregate EU production increase may only be 5 to 8 percent from 2010 to 2020.
- Brazil, identified in the 2009 report as a potential competitor of the U.S., had some setbacks in its production and became a net importer of dairy — and should remain a net importer for the next several years, Burgess said. It could become a net exporter again by 2015.
The report also looked at the potential impact of feed costs and currency values on U.S. competitiveness. In both cases, the study concluded, U.S. competitiveness should remain undeterred.
“The window of opportunity remains open and it actually could expand more than we thought,” Burgess said.
However, to make the most of that opportunity, the U.S. needs to take certain action, such as helping commercial dairy processors gear up for the export market. That includes product research and innovation, further development of quality and traceability systems, and improvement of the processors’ ability to deliver on customer product specifications.
The authors also call on the U.S. to pursue trade policies that promote exports. And, they call for reforms in the current milk-pricing system.
“Policy reforms, whatever their details, must encourage key outcomes: pricing and supply flexibility, customer focus and volatility management,” says Kevin Toland, chair of the Innovation Center for U.S. Dairy’s Globalization Operating Committee and CEO and president of Glanbia USA and Glanbia Nutritionals.
The “consistent supplier” strategy foreseen in the 2009 report is still sound and “we’re on the right track," Toland adds.