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Guest Columns

Perspective:
Industry Issues

Dairy threats and opportunities

Connie Tipton

Connie Tipton is president and CEO of the International Dairy Foods Association. She contributes this column exclusively for Cheese Market News®.

We’ve all heard that proverb, “May you live in interesting times.” And, boy-oh-boy, do we!

I have been struggling to find the common denominator to all the issues that continue to come at us nonstop, and I guess it all boils down to markets. How do we keep the markets we have and gain entry into many more, rather than move in the opposite direction? Because these days it seems that for every opportunity we uncover, there’s an equal or worse threat staring us in the face.

There is a growing cast of characters, some in influential and high places, who are focused on things to eliminate from our diets. Unfortunately they are basing their decisions on personal opinions and beliefs, not necessarily on facts or science. Although we have some of these so-called “bad” things in our products — fat, sodium, sugar — the good news is we have a ton of “good” nutrients, too. The bad news, however, is that this “belief” crowd has created a growing distrust of our food production and processing systems, and of animal products altogether.

Meanwhile, the federal government is responding with ideas for new regulations and restrictions, all of which would add to our product costs and could go so far as to convince our customers to make non-dairy choices.

Taken as a whole, these actions add up to a whopping market threat for dairy. But let’s look at the flip side of this threat: opportunity.

Faced with all of these negative messages, consumers now are clamoring for better-for-you products, products that will provide the nutrients they need, help them maintain a healthy weight and ultimately improve their lifestyle. Fortunately, dairy companies are well positioned to respond with high-value dairy protein ingredients, probiotics, dairy with added fiber, reduced-sodium products and many more.

Our opportunities outside the United States are enormous and growing, too. Let’s not forget that 96 percent of the world’s consumers live beyond our borders and that we are uniquely positioned to capture a significant share of that market.

Consider, for example, that 300 million people in China are now moving to urban areas. They will have jobs, increased buying power and appetites for dairy protein. In fact, dairy trade with China has increased exponentially over the past few years, with exports increasing from $61.6 million in 2005 to over $180 million in 2008. Some very smart U.S. companies already have this opportunity more than on their radar screens; they are developing customers and making major investments to supply China and other emerging markets.

The opportunity for reaching new markets looms large for the U.S. dairy industry, but to realize our greatest potential, we must eliminate or change policies that threaten to impede market efficiency and growth. Dairy product price supports, for example, encourage production of commodities for government purchase instead of higher value products, such as whey proteins and milk protein concentrates, for new markets.

Another challenge to the industry’s growth is the federal milk marketing order system. It must be simplified to allow milk to move to its highest value use in our domestic markets.

Of course, these changes have to be accompanied by a better safety net for our producers to protect and grow our milk supply. One way to achieve this goal of providing more stability for our farmers would be the creation of a new government program that would protect dairy producers’ margins in all market conditions.

New tools to manage milk price volatility are necessary for the entire industry, but they must work with markets instead of against them. Attempts to reduce price volatility through policies that manage production will only end up with higher average prices, reduced exports and more imports; decreased competitiveness with other foods and sources of protein ingredients; limited product innovation; and reduced overall demand for dairy.

Why not provide price risk management tools to individual companies and farms so they can manage their own businesses? This happens in virtually every other commodity, where there is a contract with someone to provide a certain supply at a certain price. Coupled with a better form of farm revenue safety net, risk management tools can be a great engine for innovation and growth in the U.S. dairy industry.

Thomas Edison once said that opportunity is missed by most people because it is dressed in overalls and looks like work. We will all need to work together, using the best possible set of tools, to counter our threats and make the most of our opportunities.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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