No Time for Complacency

April 1, 2014 09:29 PM

Export momentum only as good as last sale

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"We have a very good food safety reputation, but we can never fail. We’re only as good as our next problem,"
says Tom Suber, U.S. Dairy Export Council.

In 2013, U.S. dairy exports reached the unprecedented heights of 15.5% of national milk production.

That’s astounding, given the fact that just a decade ago, U.S. exports barely offset the cheese, milk protein concentrate and other dairy ingredients that were being brought into this country. Tom Suber, president of the U.S. Dairy Export Council, shares these numbers:

  • Among the world’s top nine exporters, the U.S. share, by volume, of milk powder, cheese, butterfat and whey products was 19% in 2013.
  • The U.S. share of nonfat dry milk and skim milk powder climbed to 31.5%.
  • Cheese share increased to 16.6%.

Among the key reasons for this growth are an expanding global economy and a rising middle class who are demanding more dairy in their diets. The U.S. is also cost competitive. As U.S. corn prices decline, the cost of producing milk here will be highly competitive with New Zealand, says Tim Hunt, an economist with Rabobank International.

Despite this incredible growth and ability to compete globally, however, now is not the time for complacency. New Zealand learned that hard lesson last summer when a botulism scare (which was later proved false) disrupted its sales for months.

"New Zealand’s quality halo has been tarnished," Hunt says.

So where does the U.S. stand moving forward? We sit down with Suber to get his take.

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Strengths. "Global buyers and investors see the U.S. as a favorable platform to meet growing global demand," he says. "European, Canadian and, to some lim­ited extent so far, Chinese investors see the U.S. as a place from which to grow."

The other main U.S. strength, often taken for granted, is our food safety and regulatory environment. "We have a very good food safety reputation, but we can never fail. We’re only as good as our next problem," Suber says.

Weaknesses. There is still the perception that the U.S. does not take care of its customers as well as our competitors. "It’s not nearly as bad as it was, but we continually need to work in this area. Relationship building is critical," Suber says.

Another weakness is risk management. If dairy farmers can hedge their prices confidently, it allows manufacturers to offer longer term prices to foreign buyers. Offering three- and even six-month pricing terms is helpful in securing contracts, he says.

Opportunities. The biggest opportunity shared by all exporting countries is that global dairy consumption is growing faster than supply. The U.S., among all the major dairy exporters, is in a unique position to take advantage of this growth, Suber says.

The U.S. is also negotiating a number of trade agreements that hold the promise of greater market access while equalizing trade and phytosanitary requirements.

Threats. Globally high milk prices mean some food manufacturers are substituting plant proteins for milk components. "Soy protein is taking the senior, or only, position in foods such as power protein bars because whey protein is getting too pricey," Suber says.

The exclusive use of common food names, where only certain countries or regions within countries can market a particular type of cheese, is also a threat. "The Europeans haven’t won yet, but they are winning some small battles—and they’re not stopping," Suber says.

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