Where to From Here?

April 1, 2014 09:13 PM
Where to From Here?

Strengths, weaknesses, opportunities and threats are all before us

The passage of the farm bill in February marks the largest shift in U.S. dairy policy in the last 70 years.

Most notably, dairy price supports are gone imme­diately, and Milk Income Loss Contracts will end on Aug. 31, 2014. In their place, USDA will provide one-size-fits-all dairy margin insurance for any and all producers, regardless of size. Or dairy farmers can purchase more personalized Livestock Gross Margin (LGM)—dairy insurance (for as long as LGM subsidies last).

As farmers contemplate whether to sign up for either program, they are enjoying record milk prices, soaring dairy exports and the promise of lower feed costs as new crops are harvested this year.

However, they still face plenty of uncertainty­—weather, regulations, immigration issues, infrastructure and even rebounding interest rates as the U.S. economy slowly recovers from recession.

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In all, 2014 could prove to be a watershed year as the industry moves into the future. That’s why Dairy Today editors embarked on this national SWOT analysis.

We queried dairy thought leaders throughout the country on what the U.S. dairy industry’s strengths, weak­nesses, opportunities and threats (SWOT) are as we move forward. This first article taps Jim Mulhern, president and CEO of the National Milk Producers Federation, and Connie Tipton, president and CEO of the International Dairy Foods Association, for their thoughts.

Next is a SWOT analysis of U.S. dairy export pros­pects with Tom Suber, president of the U.S. Dairy Export Council. Finally, freelance dairy reporter Shirley Chapman talks to leaders in the Top 10 dairy states to get a localized perspective on the state of the industry.

What are the U.S. dairy industry’s strengths?

Mulhern: "At the farm level, our greatest strengths include access to technology; academic institutions that help foster continuous improvement; use of world-class cattle genetics; multiple milksheds across the country; access to roads and ports that facilitate rapid, year-round movement of milk; a well-established role for dairy foods in the school lunch program; a public and private health inspection program that ensures a safe, high-quality milk supply; and cooperative marketing organizations to help establish brands and direct political participation.

"Most of all, our greatest strength is people: The farmers who love what they do and work hard daily to provide a nutritious product for people around the world."

Tipton: "The U.S. dairy industry has great productive capacity with the capital and infrastructure to grow and meet increasing global market demands. Also, Americans are well educated and have an ability to think and do things smarter—with technology and innovation to back them up. Our collaborative industry approach to problem solving and our all-American ‘we can do it’ attitude are strong drivers for success."

What are the dairy industry’s weaknesses?

Mulhern: "A lack of forward-thinking immigration policy to ensure an adequate workforce; volatility in both milk and feed prices; regulatory and political barriers that hamper our ability to reach our full potential to export and inadequate engagement with consumers through social and traditional media about where food comes from."

Tipton: "Many want the government to solve problems for us instead of working together to remove market impediments. Intra-industry conflict about policy directions is counterproductive; I believe it’s important to gain consensus on policy directions that allow market growth for all segments of the industry.

"We have an outdated milk pricing system that doesn’t allow milk to move to its highest value use. Pricing milk for domestic fluid use, off of product values that are driven by export demand, makes no sense. This system must be reformed to allow markets to work better.

What are the U.S. dairy industry’s opportunities?

Mulhern: Creating a thriving, diverse marketplace that allows producers to explore varying farming business models for the future—from artisanal product manufacture, to pasture-based grazing, to large-scale production; use of the Cooperatives Working Together export program to grow U.S. export positions; and leveraging our leadership in agricultural stewardship and sustainability.

Tipton: "Global demand in developing markets is a great opportunity for market growth. Consumers at home and abroad are clamoring for new beverages and foods, paving the way for more and more product innovation.

"We’re embracing new technology at the farm, in processing and manufacturing, product development and packaging. Companies are finding creative, cost-saving ways to make operations more energy and water efficient."

What are the U.S. dairy industry’s threats?

Mulhern: "Decline in farm numbers; age of farm operators; non-governmental activist groups; drops in fluid milk consumption; effectively managing manure to mitigate environmental impacts; fear-based food marketing themes that demonize conventional dairy in order to extract premium prices for niche products; and a fading understanding of dairy’s significant nutritional benefits."

Tipton: "The decline in fluid milk consumption remains one of the biggest threats to the health of the U.S. dairy industry. Other threats include regulatory burdens; traceability and food safety; shortages of water and workers and anti-everything activists.

"Each one of these threats is made more dangerous by complacency. Here’s where our famous ‘can-do’ attitude can really pay off."

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