Exports are becoming more vital to the success of the U.S. dairy industry. With market pricing instability and domestic per capita fluid milk consumption still sliding, more eyes have pointed toward growing international economies as 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 CEO’s from companies that focus on exports in their business models.
China for many years has been discussed as a major destination for exports, but Southeast Asia could be just as important says Wilfred Uytengsu, president & CEO of Alaska Milk Corp. Uytengsu has hands on experience in Southeast Asia with his family’s company that has been 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.”
He notes China’s influence on global demand cannot be discounted with the country being the leading buyer of milk. Nevertheless, Southeast Asia could play a major role for those 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 are above 620 million people—double that of the United States. In the next decade, those countries are projected to grow at an annual birth rate in excess of 1.2%.
“Milk will continue to play as the primary form of nutrition for these 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. At the end of this year a new powder plant in Turlock, Calif., will be up and running for just that reason.
“Our exports, performance and volume have gone up dramatically. Just to levels that none of us probably thought were possible,” says John Jeter, CEO and President of Hilmar.
Last year Hilmar exported 8% of their cheese that was produced. That’s up significantly from seven years ago when less than 1% left the country. The goal for this year is to export 100 million pounds of cheese out of the nearly 1 billion pounds that will be made.
Whey protein is where the company got its start in the global market back in 1992. Now, a majority of its lactose business goes to export. Last year, the 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. Last year milk powder was 40% of the ingredients business, while cheese and fluid milk each took 30%. Every day one million pounds of powder are produced by the Pacific Northwest cooperative with two thirds of that exported.
Jim Wegner, CEO of Darigold, believes the U.S. market is important, but emerging Asian markets could be a boon for business.
The U.S. is only home to 4% of the world’s population, while Asia has 50%.
“For every consumer you have in the United States, around the world there are 24 more,” Wegner adds. “In the western United States we have good access to those Asian markets. We’re in good position to address that.”
It presents an excellent opportunity to supply high quality nutrition through milk protein to people across the world.
The population of the U.S. is just over 300 million. China has nearly 1.4 billion people, or just under 20% of the world’s population.
“China has a larger middle class than the entire population of the United States,” Wegner says of China’s current middle class. He relates the middle class in China will continue to grow, while the U.S. will stagnate.
“When we look at where the opportunity is for growth, it really is in those countries in Southeast Asia,” Wegner adds.
This all comes at a time when New Zealand looks to be maxed out in terms of dairy expansion, while 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 dilemma says Tom Suber, president of the U.S. Dairy Export Council.
“It is too small to be unconcerned with or watch it go away, 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 export with 95% leaving the country, so has Ireland at 85% and Australia at 55%.
When a major importer like China makes a play like they did in 2014 it can have an impact for 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.