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  November 3, 2010

Exerpts from articles by Sherry Bunting, Farmshine Oct. 29-Nov. 5, 2010

Experts who study U.S. dairy competitiveness in the global marketplace continue to warn that we are receiving prices below the world market for dairy commodities because the U.S. is not offering the product mix wanted by international buyers and multi-national customers here in the U.S.

In Reno, Nevada last week, CWT voted to end its herd retirement program, reduce the voluntary assessment to two cents, and use the money to enhance exports.

One thing is becoming clear: U.S. dairy producers need to become more aggressive marketers at home and abroad. Export enhancement funds help move product (occasionally product that would have moved anyway), but these enhancements don’t necessarily make the U.S. more competitive. There is a difference between marketing a product and moving a commodity. Other countries are figuring that out. The U.S. needs to figure it out also.

Toward that end, U.S. Dairy Export Council president Thomas Suber gave an enlightening report at the Western States Dairy Producers Trade Association meeting in Reno October 26. DPAC had two representatives at the meeting and this is what they learned:

One key aspect of dairy’s future is the undeniable effect of a global marketplace.

It is here. It’s not going away. But there are different ways to look at this fact. Consumers at home indicate they want to buy "local." They should know the source of their milk products so they can have a choice.

Import assessments, tariffs and other such proposals are getting no where. But sometimes the best defense is a really good offense.

Perhaps the thought that stood out to me during the WSPDA meetings this week was their discussions about increasing demand and producing what the market wants.

What people don’t always realize is that "producing for the world market" does not mean just the export side, but also the import side. We need to compete and produce the products the market wants both here and abroad.

During the WSPDTA meeting, Suber talked about recent trends and the near term outlook. He also touched on the Bain report, which was released a little more than a year ago.

He said the U.S. is in a positive trade balance on a milk solids basis this year, even though we are deficit on the value side, largely because the U.S. imports high value proteins and cheese while exporting lower value whey products. Still, cheese and other exports soared this year without much assistance.

Suber’s graphs showed how the U.S. supported the world price in 2009 (and other years) while diminishing its own ability to recover because of the buildup of government-purchased product in storage.

Exports this year continued the long term trend upward, which actually began in 2002-03. Before the collapse in late 2008, the U.S. exported almost 12% of its production on a milk solids basis. From January through August of 2010, that percentage increased to 14%, but not at 2008 price levels.

What seems clear is that demand is the issue to focus on, along with the idea of "producing for a market." The world market is getting back to where demand is growing to strain supply, and the product mix has changed as China has imported huge amounts of whole milk powder (WMP) from the world market, which pulls fat away along with the protein.

There is opportunity for the U.S. if dairy producers are ready to be a consistent supplier making the products manufacturers want both here and abroad.

The central question is: What is the cost of inaction? No matter where producers are on the spectrum of ideas, it is clear that maintaining the status quo is not an option. This collective discussion needs to continue between dairy producers across the United States.


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