By Tom Suber, CEO, U.S. Dairy Export Council
It has been 20 years since Dairy Management Inc. (DMI)founded the U.S. Dairy Export Council on the strength of a basic premise: The combination of growth, both in global population and disposable income, would fuel global dairy consumption at a far faster pace than inside our domestic market. That would create dairy opportunities for nations with the capacity and wherewithal to serve the global market.
The factors seemed immutable to those dairy farmer leaders, but the exact path and timeline could not be clearly identified. Consequently, a number of doubters existed then, saying global dairy prices would never rise sufficiently to pay an attractive price for U.S. suppliers.
Few skeptics exist now, even under today’s challenging global market conditions.
That steadfast belief in exports is, in itself, a sign of how the U.S. industry has evolved into a world player.
Global dairy markets are in a down cycle. But the U.S. dairy industry is, so far, holding up as well or better than most other major producers.
To cite two examples, our sizable NFDM/SMP exports are steady and high-value whey protein isolate shipments are well on their way to a new record, as the latest monthly market data report shows.
Even though we have lost some export share, our customers and competitors know that the U.S. industry is here to stay and not simply dumping surplus production.
Forged by two decades of experience, we have good reasons for our persistent attitude:
- Population and income growth forecasts continue to drive long-term global supply and demand projections of a bias towards tightness, resulting in favorable prices over time.
- We stack up well against most milk producers in the world in our resources, capabilities, expertise and efficiency—in short, an underlying, relatively attractive cost of production.
- With an expanded product portfolio, investment in facilities and equipment, and a shift into a global mind-set, U.S. supplier capabilities are light years ahead of 20 years ago.
As the chart below shows, U.S. exports in 2014 finished higher for a fifth straight year. Barring an unlikely turnaround in the next five months, our 2015 numbers will be less impressive. But even in a difficult year, we remain optimistic.
Why do remain upbeat during the down cycles of global dairy markets? Because we have the knowledge of the past two decades and are cognizant of the changing needs of U.S. suppliers and global customers. With all this in mind, our members look to USDEC for strategies to help them grow.
These strategies mesh member input, the shifting demands of global markets and competitive pressures to develop focused, increasingly refined initiatives to raise the volume and value of U.S. dairy exports and solidify and expand the U.S. standing in the global marketplace.
Sustainable growth depends on responding to a series of market challenges, including these significant six:
- Trade barriers. Non-tariff barriers to trade continue in many markets with low tariffs. USDEC seeks to sustain and maximize our members’ business by improving market access and rules of trade. That includes close participation in all stages of free trade negotiations to further lower tariffs; managing Consortium for Common Food Names efforts to halt European Union attempts to restrict common cheese names; working hand-in-hand with foreign and U.S. governments to overcome regulatory hurdles (such as continuing revisions to Chinese food safety regulations); and collaborating with international groups to boost harmonization of test methods to facilitate transit through overseas customs authorities.
- Lingering Misperceptions. Despite the industry’s hard work to reposition itself as a consistent, customer-centric, global business partner, negative perceptions still linger. With the new ThinkUSAdairy.org global website, we are presenting a unified, consistent message that showcases U.S. strengths and capabilities, distinguishes U.S. products from those of competitors and demonstrates that we are the dairy partner of choice.
- Product Development. Overseas food manufacturers are increasingly sophisticated in new product development and processing. Working with the National Dairy Council, we develop applications for new and underutilized products like permeates and micellar casein concentrate, and we transfer that knowledge to end-users in a way that brings sales openings to U.S. suppliers. We also look to help U.S. suppliers address quality and performance issues associated with U.S. dairy ingredients that limit overseas use.
- Evolving Taste Preferences and Nutrition. Consumers are increasingly sophisticated in taste preferences and nutritional knowledge. We want to boost the U.S. capacity to seize emerging cheese opportunities in foodservice, while also advancing nutritional research to address societal needs, such as dairy protein’s ability to alleviate global health issues stemming from aging and malnourishment.
- Information Flow. This is a new age of global dairy and it is fast paced—more volatile than ever. This blog and an entirely redesigned usdec.org, both launched in February, give us digital platforms to communicate with the speed of business. We seek to provide information (proprietary market analysis and research) and tools (supporting the awareness and usage of dairy futures and options through the Innovation Center for U.S. Dairy) to prepare for rapid market shifts. We try to determine which way the wind will blow before it changes direction.
- Food Safety Issues. Despite stellar advances in processing technology, consumers remain highly sensitive to any hint of food safety threats. That's why we are closely involved with industry programs to improve vital core competencies in food safety,traceability and quality. We are also preparing for the inevitable, occasional food safety incident by continuing to ramp up our crisis management program.
In 20 years we have seen multiple up and down cycles in the global dairy sector, and USDEC programs can’t change the underlying market conditions.
Yet, in meeting members’ requests, we aim to minimize the impact of down cycles and maximize the up cycles that have proven to sustain and enable our industry’s growth over time.
Today’s challenges are far less intimidating than those we’ve faced over the last 20 years.
Consistent strategies and persistent, unified effort will continue to pave the way for another 20 years of global U.S. dairy growth.
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