Dairy exports hit the floor during the dark days of the global recession.
Peaking at 68,287 metric tons in May 2008, exports of milk powder, cheese and butterfat fell to 23,229 metric tons per month in the depths of the recession last February.
“As bad as it was, it could have been worse” Tom Suber, president of the U.S. Dairy Export Council, told those attending the National Milk Producers/Dairy Management Inc. annual meeting last week. Things have started to rebound since February, and it looks like exports will account for 8.6 percent to 8.7 percent of U.S. milk production (on a milk-solids basis) this year — down just two percentage points from last year’s 10.8 percent. Earlier this year, some analysts predicted that it would be lower — somewhere in the 7 percent to 8 percent range.
A drop-off in exports is one of the reasons why milk prices tanked this year. And, it has some asking what the U.S. can do to better position itself in the future so these type of drop-offs don’t happen again — or at least with less severity.
Clinton Anderson, of Bain & Co., which is partnering with the Innovation Center for U.S. Dairy, to study this issue, says globalization is here to stay and will affect the dairy industry even more profoundly in the years ahead. That will bring both risks and opportunities.
On the opportunity side, Anderson said global demand for dairy products will grow faster than available supply.
There could be 800 million more middle-class consumers, worldwide, by the year 2030, he said. “As people become wealthier, their diets change… they begin to increase the quality of their diets by increasing the consumption of animal proteins,” he adds.
The real opportunity for increased demand isn’t necessarily in the United States; rather, it is in places like China, India and Mexico, he said.
But it will require some changes. People who supply foreign markets need to develop a consumer-focused mentality, identifying and delivering upon the exact specifications of foreign buyers rather than simply trying to satisfy those buyers with bulk commodities.
Traditional dairy exporters New Zealand and Australia are already seen as higher-quality suppliers than the U.S. because they have adopted this consumer-focused mentality. It’s not that the raw milk in one country is better than other; rather it’s taking the raw milk and developing it into value-added products that meet the customer’s exact specifications.
Government policies may be getting in the way, as well. “Government is the fall-back customer (for surplus dairy products),” he pointed out. Under those circumstances, “you don’t develop the commercial focus you need.”