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Dairy Talk: Opportunity Lost?

November 28, 2011
By: Jim Dickrell, Dairy Today Editor
 
 

Jim DickrellIn 2009, Bain & Company issued a report projecting a 7 billion pound gap between world milk production and demand by mid-decade.

A lot has happened since then: a global recession, a tepid recovery and fear that the world will slip back into recession if Europe and the U.S. don’t clean up the fiscal fiascoes now facing them.

Which begs the question: Does that 7 billion pound supply-demand gap still exist? And if it does, can the U.S. reform domestic dairy policy to take advantage of it?

The U.S. Dairy Export Council (USDEC) and the Innovation Center for U.S. Dairy wondered the same thing, and asked Bain to revisit its 2009 work. The re-analysis, released this past fall, is good news.

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"Import demand for dairy products will remain strong, driven by emerging markets," says Brett Burgess, a manager with Bain in Dallas. "The world supply-demand gap is wider than we originally anticipated, with the U.S. a likely source to fill it."

China, the Middle East, India, Southeast Asia and Russia are expected to increase dairy imports over the next few years. All but India, with its borders closed to U.S. dairy products, are potential U.S. markets.

None of this is a gimme, however. The U.S. has done little to make itself export friendly and demand driven. Yes, the Dairy Security Act of 2011 would eliminate the Dairy Price Support program. But there’s growing opposition, led by processors, to even this modest package due to fear of supply controls (see "Dairy Reform Laid Bare"). The National Milk Producers Federation has backed away from meaningful Federal Order reforms and has opposed liberalizing rigid dairy standards of identity.

In the meantime, the U.S. is still considered a seller of last resort by many importers. "If we need something difficult, we don’t go to the U.S.," says one buyer in a USDEC survey.

So here’s the frustrating reality: While there’s a world of growing opportunity out there, the U.S. dairy industry seems content to let it slip away. Dumb. Really dumb.
 

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FEATURED IN: Dairy Today - December 2011

 
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