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|Running out of time: U.S. must become a global dairy supplier|
|Dairy basics - Management|
|Written by PD Editor Walt Cooley|
|Tuesday, 16 March 2010 04:13|
This article was #13 in PDmag's Top 25 most-well read articles in 2010. Jump to the article here.
Because this article was so popular, we asked a follow-up question to Alan Levitt, a dairy marketing analyst:
Q. Is the U.S. making progress toward being a 'consistent exporter'?
Editor’s note: The following is the first in a three-part editorial commentary series by Progressive Dairyman Editor Walt Cooley about his observations traveling with members of the U.S. Dairy Export Council on a trade mission to the Middle East.
When I started out to learn more about export markets for U.S. dairy products overseas, I began in the dark. And I mean that quite literally.
Having just arrived groggy after a 12-hour midnight flight, I shut myself into a completely dark 23rd-floor hotel room and stumbled over my luggage looking for a light switch.After bumping around for several minutes, I finally found a telephone and connected with a front desk clerk. I was embarrassed to admit it, but I couldn’t get the lights in my room to turn on. The switches, which I had finally found, clicked but nothing happened. I wondered: Would a hotel really check someone into a room with a burned-out fuse? Perhaps there was a master switch I couldn’t see or feel that needed flipped? So I asked, “How do you turn the lights on?”
“Insert your room key into the slot next to the switch by the door,” the young hotel employee on the line said.
Sure enough, with the card inserted, the lights turned on. It turns out that the switching was European-style.
Much of what I learned about selling U.S. dairy to global consumers with the U.S. Dairy Export Council in Dubai was as revealing as flipping on the lights in my dark hotel room. Yes, we can compete as a global dairy exporter, but we must know what we’re getting into and not stumble over ourselves. Here and in upcoming issues I’ll describe what I saw and heard are the pitfalls and opportunities.
Exports: What we should already know
Every producer should read the white paper summarizing the findings. Click here to read the study.
Increased global demand for dairy products is being influenced by two factors – population growth and changes in affluence. Neither trend will be changing anytime soon.
“Driven by population growth and dramatic improvements in living standards, the number of middle- class consumers in emerging markets will triple, reaching over 1 billion people by 2030. As this population’s discretionary income increases, they will consume more animal protein in their diets, including more dairy products.”
How the Middle East typifies globalization
For example, although Westerners often consider the Gulf Peninsula as a desert region that is sparsely populated with nomads, the population of the Gulf Cooperation Council (GCC), which includes almost all of the nations on the Gulf Peninsula, is more than 38 million, or more than the current population of California. The population there is growing at an annual rate of 4.8 percent. Compare this with a U.S. population that is just over 307 million and growing at a rate of .8 percent per year.
Evidence of the region’s growth can be seen in Dubai’s skyline and growing suburbs. Dubai has been called “the fastest-growing city on Earth.” As evidenced by recent news coverage of Dubai’s financial troubles, many have tried to discount Dubai’s growth as unsustainable. However, it’s a short-term attempt to refute what is an irrefutable long-term trend – the Middle East will continue to grow.
Remember that projected global growth will occur in economies just now in their infancy. Not long ago, Dubai was known only as a fishing and pearl-trading port. Using oil revenues from the Abu Dhabi emirate, Dubai is building a new economy based in finance, global trade and tourism. All three of these economic sectors have been hard hit by the recent global recession. Yet Dubai still builds.
Superlative descriptions about buildings abound in Dubai. It’s built the tallest building in the world. It’s building the world’s third-largest airport. The concentration of construction cranes in Dubai may only be rivaled by China.
Projected overall growth in the Middle East is astounding. The United Nations estimates that the Middle East and North Africa or MENA region, which currently has a combined population of more than 430 million, will grow to 692 million in the next 40 years. That’s a total growth of 61 percent. During the same timeframe, the U.S. is anticipated to grow 27 percent.
Why is global growth important?
Per-capita income in the United Arab Emirates is about $64,000, compared to $45,000 in the U.S. These people can afford to eat better than many Americans. Limited arable land in the Middle East means that Gulf Peninsula countries import between 75 and 90 percent of their food supply. With regards to milk production, nearly all local production is used to supply fluid milk markets. Even the local fluid milk is often not enough to supply demand. Particularly in this region, as incomes grow and consumers buy more animal proteins, they will be buying them from sources abroad. Currently New Zealand and the European Union are their top suppliers for most dairy needs. While these current market suppliers, with their customer relationships and contracts, will be in a position to supply the market first, will they have sufficient milk supply available to do so? The Globalization Report suggests this is where the U.S. opportunity lies.
“In the short-term, the U.S. has the ability to expand production to meet world demand at lower cost than Oceania, but in the long-term, it will face significant competition from emerging producers [such as Brazil and Ukraine].”
— Globalization Study
The report estimates that the window of opportunity to emerge as a global dairy supplier will be brief, as short as 10 years. What will the U.S. need to do in that timeframe to consistently supply these growing dairy markets? What can we learn from our international dairy competitors about how they have solidified themselves as global dairy suppliers, globally and in the Middle East?
These questions will be addressed in the next two issues of Progressive Dairyman. PD
PHOTO: Emeel Moukarzel, a food trader in Dubai, tells U.S. dairy industry representatives traveling with the U.S. Dairy Export Council on a trade mission to the United Arab Emirates that the U.S. could have a greater share of the dairy imports into the Middle East. Photo by Walt Cooleyback to top