Exports to Southeast Asia Look Promising
Exports are becoming more vital to the success of the U.S. dairy industry. With market pricing instability and declining domestic per capita fluid milk consumption, growing international economies might be a home for U.S. milk.
A panel hosted at this year’s Western Dairy Management Conference in March discussed the importance of exports to the dairy industry. The panel was comprised of several CEOs from companies that focus on exports.
For many years, China has been discussed as a major destination for exports, but Southeast Asia could be just as important, says Wilfred Uytengsu, president and CEO of Alaska Milk Corp. Uytengsu has hands-on experience in Southeast Asia with his family’s company, a milk leader in the Philippines for 40 years.
“Today, we import about 35,000 tons of skim milk powder, a lot of that from the U.S.,” Uytengsu says. “I’m really quite pleased to see how the U.S. has grown and taken a large position in Southeast Asia.”
China’s influence on global demand cannot be dismissed as the country is the leading buyer of milk, he notes. Nevertheless, Southeast Asia could play a major role for companies looking to diversify their export portfolio.
“By 2020, the ASEAN 6, the Association of Southeast Asian Nations, will consume 3 billion more liters of milk than a year ago,” Uytengsu says.
Currently, the populations of Vietnam, Indonesia, Myanmar, Thailand and the Philippines total more than 620 million people—double the U.S. population. In the next decade, those countries are projected to grow at an annual birth rate in excess of 1.2%.
“Milk will continue to be the primary form of nutrition for countries with young populations,” Uytengsu adds.
In the U.S., companies such as Hilmar Cheese Co. are trying to meet the demand of emerging economies like Southeast Asia by exporting dry milk powder. By 2016, they will have a new powder plant in Turlock, Calif.
“Our exports—performance and volume—have gone up dramatically—to levels that none of us probably thought were possible,” says John Jeter, CEO and president of Hilmar.
This past year, Hilmar exported 8% of their cheese. That’s up significantly from seven years ago when less than 1% left the country. This year, the goal is to export 100 million pounds of cheese.
The company got its start in the global market back in 1992 with whey powder. Now, it’s a majority of its lactose business that goes to export. Last year, Hilmar sent nearly 150 million pounds of lactose overseas.
“That’s why we’re feeling good about this next step into milk powders. Obviously, we’re the new people on the block, and we have a lot to learn. We will learn and grow in that,” Jeter says.
Powder has been an important part of the export markets for Darigold, Inc. as well. In 2014, milk powder was 40% of the ingredients business, while cheese and fluid milk each took 30%. Every day, 1 million pounds of powder are produced by the Pacific Northwest cooperative, with two-thirds of that exported.
Jim Wegner, CEO of Darigold, believes emerging Asian markets could be a boon for business.The U.S. is home to 4% of the world’s population, while Asia has 50%.
“For every consumer you have in the U.S., around the world, there are 24 more,” Wegner adds. “In the western U.S., we have good access to those Asian markets. We’re in good position to address that.”
It presents an opportunity to supply high-quality nutrition through milk protein to people across the world.
“When we look at where the opportunity is for growth, it really is in those countries in Southeast Asia,” he says.
This all comes at a time when New Zealand appears to be maxed-out in terms of dairy expansion, and the U.S. still has room to grow.
In the past 10 years, exports have grown 9%. Just from 2013 to 2014, there was a 1% increase.
Approximately 15% of milk is exported out of the U.S. as milk solids. That equates to one day of milk production per week going out of the country. That 15% export mark puts the U.S. in an interesting position, says Tom Suber, president of the U.S. Dairy Export Council.
“It is too small to be unconcerned with, but it is also not large enough to command the attention of a national economy,” Suber says. He adds New Zealand has been heavily dependent on exports, at 95%.When a major importer like China makes a play like they did in 2014, it impacts export-reliant countries.
“At the peak, China was probably buying a quarter of the world’s trade in dairy products and then promptly stopped. Whole milk powder trade dropped 71%, and skim milk powder trade dropped 40%,” Suber says.
