Despite a tumultuous 2009, the potential for growth in the dairy industry remains in foreign markets. Those are the findings of a study released by the National Milk Producers Federation.
Overcapacity and federal bailouts came into play last year. And while some see that as a signal to retreat or focus on supply management, industry leaders say that is not a long-term solution.
"It’s our future," said Connie Tipton, CEO of the International Dairy Foods Association.
The study, conducted by Bain & Company, "called for the industry to focus on the needs of foreign customers and start a collective effort to reform the milk marketing order and price support systems to address volatility in prices."
According to published reports:
The U.S. dairy industry’s market remains largely domestic, but exports have been rising in recent years. In 2008, dairy prices soared while the amount of U.S. milk production exported rose to a record 10.8 percent, according to the U.S. Dairy Export Council.
But in 2009 exports "dropped like a rock," as Tipton put it, and prices plummeted. The federal government intervened in an attempt to stave off dairy farm bankruptcies. Since then, some dairy farm leaders have said dependence on exports led to greater instability for the industry and should not be encouraged.
Clinton Anderson, who conducted the study, said domestic consumption "will always be the most important part of our business," but noted that dairy demand per person is not growing in the United States, and the only potential for growth appears to be abroad.
Anderson said demand for dairy products will grow more quickly than supply as developing countries become richer. The U.S. dairy industry has the potential to increase sales in China and South Asia in particular, he added, but probably not in India because the industry there is so localized.
The traditional exporters — the European Union, Australia and New Zealand — will not be able to satisfy the growing demand, which gives the United States the opportunity in the next 15 years to gain a bigger share of the growing export market, he said. He also urged the industry to move quickly because Brazil, Ukraine and Belarus are likely to become highly competitive due to their low-cost suppliers.
The industry should be applauded for this forward-thinking approach. Ignoring the global marketplace and concentrating only on the needs of today will not, no matter the type of business, be a formula for success.