Market Watch Diary: Coming of Age

03:17AM Feb 24, 2014
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Milk producers and dairy processors in the U.S. are coming of age, actively and aggressively participating in the world dairy markets.

You’ve seen all of the headlines and read a rash of stories about record-smashing increases in, and levels of, dairy product exports. Some 15.5% of your milk was shipped overseas during 2013.

"U.S. exporters were able to capitalize on favorable market conditions for most of the year," explains Tom Suber, president of the U.S. Dairy Export Council (USDEC). Spot on, Mr. Suber.

For about nine-tenths of 2013, U.S. dairy prices were well below world market prices. Meanwhile, a drought drastically trimmed the supply of milk coming out of New Zealand where Fonterra, the 800-lb. gorilla of international trade, resides. The other big exporter, the European Union, also saw their milk supplies running below year-earlier levels.

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Bonus Content

Dairy exports shatter records, Extended column

That was great for U.S. dairy producers, but what now? U.S. dairy prices have climbed sharply higher on the strength of exports. Prices at the Chicago Mercantile Exchange have been running neck-and-neck with world prices for nearly three months. Milk production in New Zealand and Europe has now recovered.

U.S. exporters have been paying "increasing attention to the needs of the global market," Suber continues.

Spot on, again.

USDEC, under Suber’s stewardship, has been at the forefront of the U.S. dairy business’ transformation. And Part 2 of his statement, "paying attention to the needs of the customer," is the future. Market conditions will ebb and flow, but the supplier that meets the customer’s needs day-in and-day-out will have staying power.

And U.S. dairy companies are doing just that--adding products and packaging that customers worldwide look forward to buying.

In 2013 alone, U.S. dairy companies and cooperatives invested, or made commitments to invest, hundreds of millions of dollars in new plants, new products, new packaging equipment, new processing equipment, new offices overseas, additional marketing and customer service staff.

A brand new whole milk powder plant is coming online in the first quarter. More companies have or are adding whole milk powder and skim milk powder to their existing plants’ capabilities.

State-of-the-art evaporators are being installed in front of dryers to produce value-added milk powders. Anhydrous milk fat and 82% butter are no longer a second-thought.

Sales offices and product development labs are being opened in the customers’ homelands. Sales and marketing staff are being added to payrolls here and abroad.

I’ve been in this business for 40 years, and I’ve seen more progress in the past five than the prior 35 years.

Talk about coming of age.

Jerry Dryer is the editor of Dairy & Food Market Analyst, You can contact him at [email protected].