PHOENIX -- The U.S. dairy industry should continue to become more export-oriented though a dramatic decline in foreign sales in 2009 led to overcapacity and federal bailouts of dairy farmers, officials of the International Dairy Foods Association, a processors' group, said at the group's annual Dairy Forum Jan. 18 in Phoenix.
"It's our future," IDFA CEO Connie Tipton said after a consultant presented a study on dairy globalization that concluded the U.S. dairy industry should focus on becoming a "consistent exporter" rather than turn to supply management or open the doors immediately to imports. The study, conducted by Bain & Co., called for an industry focus on the needs of foreign customers and a "collective effort" to reform the milk marketing order and price support systems to address volatility in prices. An official with the National Milk Producers Federation, which represents dairy farmers, said the dairy farmers' education and promotion fund had paid for the study.
Primarily domestic
The U.S. dairy industry's market has been and remains largely domestic, but exports have been rising in recent years. In 2008, the percent of U.S. milk production exported rose to a record 10.8 percent, according to the U.S. Dairy Export Council, and dairy prices soared. But in 2009, exports "dropped like a rock," as Tipton noted, and prices plummeted, resulting in federal intervention in an attempt to stave off dairy farm bankruptcies. Some dairy farm leaders have said that dependence on exports has led the industry into instability and should not be encouraged.
Clinton Anderson, who conducted the Bain globalization study, acknowledged that 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 that the only potential for industry growth appears to be in exports.
ADVERTISEMENT
Anderson said he thinks demand for dairy products will grow faster than supply as developing countries become richer. The U.S. dairy industry has the potential to increase sales in China and South Asia, he said, but probably not in India because the industry there is so localized.
Anderson also said he thinks the traditional exporters -- the European Union, Australia and New Zealand -- will not be able to satisfy the growing demand and that the United States has the opportunity in the next 15 years to gain a bigger share of the growing export market. But he also urged the industry to move quickly because Brazil, Ukraine and Belarus are likely to become highly competitive low-cost suppliers.
