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Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

U.S. Dairy’s Future Starts Now

Oct 02, 2009

By Jim Dickrell

The U.S. dairy industry has come to the proverbial fork in the road, and as the New York Yankee’s most quotable catcher Yogi Berra says, we’ll have to take it.

Bain and Co., a global management consulting firm, is in the process of completing a massive study of the globalization of dairy supply and demand. As the U.S. industry struggles to recover from its worst price year since the Great Depression, it is also facing major decisions on what it wants to be as the global market grows and matures.

By 2013, the Bain study suggests there will be a “latent demand gap” of 7 billion lb. of milk worldwide. In other words, as economies around the world recover, demand will resume its long-term trend of growing faster than milk supply.

The U.S. could be well positioned to take advantage of that demand gap, as it did in 2007 and 2008, if the carnage of the past nine months can be repaired quickly. Longer term, however, the U.S. will have to make a strategic decision on whether it wants to compete globally for these growing markets.

As the Bain authors see it, the U.S. industry has a range of options. It could become an insular industry, much like Canada. Or it could go the New Zealand route, which is almost exclusively export focused. Or it could maintain the status quo.

Simply doing nothing, however, doesn’t mean the industry won’t face change. Some of the major challenges:

  • Severe price volatility.
  • Market distorting pricing mechanisms, such as the dairy price support program.
  • Insufficient customer focus which leads to narrow product diversity, inconsistent customer service and variable product quality.

If the U.S. doesn’t change, it likely will give up potential export markets to emerging dairy powers such as the Ukraine and Brazil, both of which will become far more competitive as they develop their dairy infrastructure. The right kind of change could also allow U.S. companies to displace some of current U.S. imports, currently valued at $2.3 billion. “If U.S. suppliers improve capabilities to displace 70% of imported milk protein concentrates, 50% of imported casein and 10% of imported cheese, it will deliver about $600 million back to the U.S. industry,” concludes the study.

U.S. dairy producers may have little current interest in worrying about dairy export opportunities three and five and 10 years down the road. But the decisions made over the next few months, as the National Milk Producers Federation refines its strategic dairy policy objectives, are critical. In fact, what’s decided in the next six months could go a long way in trying to avoid the debacle of the last nine.

The Bain study was funded by the Innovation Center for U.S. Dairy, which is funded by the 32 companies within the U.S. Dairy Export Council (USDEC) and the National Milk Producers Federation. The study was assisted by staff from USDEC and Dairy Management, Inc., who manage a major portion of the dairy checkoff program.

 

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COMMENTS (36 Comments)

Anonymous
Frosty is a beauty. And so is Rose. Love those 2 cows. Rose was milking 18 months and her udder was still arguably the best in the ring. Frosty was clearly dairier, taller, and straighter. The Holstein show was very strong. I thought maybe snickerdoodle would get Supreme though - 11 yrs old, and still looks amazing.
12:17 PM Oct 4th
 
JR Burdick
Great show! My family and I really enjoyed ourselves. Standing next to frosty was awesome! Pierre boulea(sp) has the real deal. vendors were informative and not pushy you guys will be rewarded thanks for hanging in there with us. I thought trafic was down a little. JIm you left to early maybe next year you and I can hook up. I thought most of the dairy coops were a little gun shy. AMPI didn't even try to engage us though 3 fieldmen were sitting there when I walked up. I just said high and realized what an impotent group these coops are. again great time hope others got a chance to go. JR
10:44 AM Oct 4th
 
 
 
 
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