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Dairy Export Opportunities Grow

August 3, 2011

In a two-year review of the Bain Report, first published in 2009, it appears that dairy export opportunities for U.S. producers not only remains open but may be growing.

In a webinar hosted by the Innovation Center for U.S. Dairy this afternoon, Brent Burgess reported that China, Russia and India will likely remain huge demand drivers for dairy products over the next five to seven years. Burgess is an analyst with Bain & Company.
Many importing countries, from China to India to Mexico, are seeing domestic dairy demand growing 5% to 7% annually. “Annual growth like that over five years adds up to significant demand growth,” says Burgess.
In 2009, the Bain Report pointed to a “latent demand gap” of 6 ½ to 7 billion lb. of fluid milk globally, which is the amount of global demand for which current global production cannot meet. This is equivalent to the total annual milk output of Arizona and Colorado combined.
Two years later, Bain analysts say the latent demand gap is as least this much, if not more. And the U.S. is ideally positioned to take advantage of this gap if it can get dairy policies realigned to be focused on the export market.
Dairy Today asked whether components of Foundation for the Future (FFTF), the National Milk Producer Federation’s dairy reform plan, goes far enough to meet those goals. The Bain analysts suggest FFTF is a mixed bag. Anything that restricts producers’ ability to grow milk supply isn’t a good thing, says Clinton Anderson, a Bain & Company Partner.
At the same time, elimination of the U.S. dairy price support program was one of the recommendations of the original Bain study. “U.S. dairy price supports are ineffective because they are below any real commodity prices today, and the products they support don’t meet specifications domestic or overseas markets,” he says.
The updated Bain Report repeats a warning from 2009: The global demand gap won’t remain open forever. Competitors in eastern Europe and South America will eventually fill the need for dairy products if the United States doesn’t. But, if the U.S. can correct domestic policies to make it more export competitive, it should be able to fill the current gap and even compete for other markets currently held by higher cost producers in the European Union.

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