Global Mindset No Longer Optional, Dairy Exporting Expert Says

Subtracting foreign demand would stunt growth, quickly build large dairy inventories and send U.S. prices reeling.

The U.S. dairy industry can no longer simply consider pursuing global opportunities—it must pursue them and protect volume and market share gains, says Marc A.H. Beck of the U.S. Dairy Export Council (USDEC).

Writing in USDEC’s May 13, 2011, Cheese Market News, Beck says the U.S. dairy industry must be a consistent supplier to global markets.

“U.S. industry expansion is being led by rising dairy appetites in China, Mexico, the Middle East, Southeast Asia and elsewhere,” says Beck, USDEC’s senior vice president for export marketing. “Subtracting foreign demand would stunt growth, quickly build large cheese, butter and powder stockpiles, and send U.S. prices reeling.”

In previous years, the U.S. dairy industry pulled back from world markets, directed product to domestic needs, displaced imports if possible, or put “surplus” in Commodity Credit Corp. warehouses. “Now, as imports have increasingly dwindled and exports steadily grown, it would be difficult and damaging to the industry to find a local home for all the product we manufacture or to accumulate unsold product in warehouses,” he adds.

Beck cited Rabobank dairy analyst Tim Hunt’s recent observation to USDEC’s board of directors and membership: The U.S. is more “exposed” to the level of dairy exports than it has been in the past, and specifically more exposed than the “boom” of 2007-2008. It is now imperative to protect volume and market share gains.

Dairy export numbers attest to market importance

In 2010, the U.S. shipped a record 13% of U.S.-produced milk solids overseas, notes Beck. Sixty-eight percent of U.S. lactose, 55% of U.S. whey proteins, 47% of U.S. nonfat dry milk/skim milk powder (NDM/SMP), 8% of our butterfat and nearly 4% of U.S. cheese went to buyers beyond our borders, Beck notes. Through the last six months of 2010, nearly 60% of U.S. NDM/SMP was sold outside the U.S.

“Commitment to policies and corporate practices that help us become consistent global suppliers is more important than ever,” Beck says. “And, fortunately, the industry has a roadmap on how to build global dairy market share and take advantage of rising world demand, much of it laid out by the Innovation Center for U.S. Dairy in its 2009 globalization report.”

That report is now undergoing a “refresh,” due out in about six weeks to see if and how any key factor or conclusion requires revision.

Changes needed

Commitment by U.S. suppliers is key, Beck says, but the industry also needs the tools to compete and a level playing field on which to utilize them. Among the efforts that will help create such conditions:

• Pursuing beneficial trade treaties, such as the pending deals with Colombia, Panama and South Korea, which after long delay, are moving tantalizingly close to a congressional vote.
• Reducing interference from non-scientific non-tariff trade barriers by creating a better U.S. system to address such issues and pursuing tougher international guidelines to minimize instances before they occur.
• Improving forward contracts, futures markets and risk management tools to allow the U.S. industry cope with the rising volatility that is inherent with a fine balance in global demand and supply.
• Reforming Federal Orders and price support programs to remove internal constraints to pursue global markets and position the U.S. industry to be as nimble and flexible as it needs to be to succeed.

“Global markets are an integral part of the business and to keep them growing, the industry must continue to adapt, which is not always an easy or smooth process,” says Beck. “But the stakes are high and the prize worth the effort.”