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Checkoff Watch: Getting to the next 5 percent and what it means to dairy farmers

Contributed by Tom Vilsack Published on 06 November 2017

Nearly half of all “new” milk produced in this country over the last 13 years has gone to markets beyond our borders. Since 2004, the expansion in U.S. dairy exports alone added an average of $1.25 per hundredweight per year to U.S. farm milk prices. That has meant an additional $36 billion in milk revenues since 2004.

In an industry where a few percentage points can make the difference between breaking even and going broke, that is a very big deal. Export gains have lent critical support to U.S. milk production growth and the expansion of the entire U.S. dairy industry over the past decade-plus.

If U.S. dairy exports had remained locked at their 2003-2004 level, we would be looking at a much more fragile industry today with far dimmer prospects. Similarly, if U.S. dairy exports remain locked at their current level moving forward, there is little question it would stunt growth and erode the health and vitality of the U.S. dairy industry.

That is why the U.S. Dairy Export Council (USDEC) recently announced an ambitious goal to expand U.S. dairy exports from the equivalent of about 14 to 15 percent of the U.S. milk supply (where we currently stand) to 20 percent of the U.S. milk supply.

It is an initiative we have dubbed “the next 5 percent.” While expressed in volume terms, it is really a dual-track goal to concurrently expand volume and value.

At its base is the universal expectation of continued worldwide dairy demand growth. Population gains and middle-class expansion will continue to drive global dairy consumption in emerging markets at a faster pace than domestic dairy industries can match.

Over the next 15 years, Asia’s middle class alone will grow by 2.7 billion people, from about 525 million today to 3.2 billion, which is about 10 times the total current population of the U.S.

There is incredible opportunity for U.S. dairy with those middle-class consumers. Global dairy demand will continue to take off – but that is no secret.

The EU, New Zealand and others are equally well versed on the opportunity. The EU, in particular, no longer limited by milk production quotas, has aggressive plans to capitalize on world dairy demand gains.

Through trade agreements and other measures, it is not only seeking to gain better market access terms than U.S. suppliers, it is seeking to restrict U.S. opportunity through measures like geographical indications, which limit U.S. access to cheese markets.

The U.S. will need to intensify its activity to meet the heightened competition. U.S. suppliers have demonstrated escalating export desire and expertise by growing U.S. dairy exports from less than 5 percent of the U.S. milk supply to today’s level of 14 to 15 percent. The next 5 percent will require a new level of commitment and new strategies, and it will not materialize without a broad industry-wide push.

That is where the USDEC comes in. The USDEC’s new three-year business plan strengthens long-running core programs while focusing on three areas to help deliver the next 5 percent: facilitating sales, increasing demand and securing market access. Key actions include:

  • Supporting research into dairy nutrition and communicating positive health links to consumers, governments and aid organizations to buttress global consumption.

  • Collecting and disseminating the technical requirements of exporting – from labeling to testing to certification.

  • Conducting research to help U.S. suppliers better address the unique requirements of individual cultures, consumers and end users.

  • Pursuing measures to remove or prevent non-tariff trade barriers, such as Canada’s actions to block U.S. dairy exports and the EU’s geographical indication scheme.

  • Preserving the trade framework with Mexico that has delivered tremendous U.S. dairy export growth, and fostering new trade agreements with significant dairy importing nations.

  • Building relationships with foreign governments, international standard-setting bodies and foreign regulatory bodies to proactively address potential barriers to trade and facilitate the resolution of disagreements.

A perfect example of the benefit of that last bullet point is the June signing of a memorandum of understanding with China. The memorandum of understanding – the culmination of two years of extensive effort by the USDEC in close cooperation with the National Milk Producers Federation and the U.S. and Chinese governments – is an accord that resolves a plant certification issue hindering U.S. dairy access to China.

The resolution process not only led to a tangible victory in the world’s largest dairy importer but cultivated relationships that will continue to provide benefits down the road.

To get to the next 5 percent, the industry needs to continue to foster cooperation, work together and speak with a single voice.

Together, we can create more global demand for what you produce, more open markets, more sales, more income for everyone in the dairy supply chain, more jobs and a stronger industry, which ultimately makes a stronger country.  end mark

Your Dairy Checkoff in Action – The following update is provided by Dairy Management Inc. (DMI), which manages the national dairy checkoff program on behalf of America’s dairy farmers and dairy importers. DMI is the domestic and international planning and management organization responsible for increasing sales of and demand for dairy products and ingredients.

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