Guest Editorial
Somebody moved my market and sales are up!

by Joseph O’Donnell

Joseph O’Donnell is executive director of the California Dairy Research Foundation. He contributes this column exclusively for Cheese Market News®.

In the good not-so-old days, the American dairy industry was able to focus all of its promotion, product development, advertising, communications and nutrition education on its well-regulated domestic market.

Things change. Lurking in the background of this idyllic world was a falling U.S. dollar and rising international economies. As populations around the world looked to increase animal products in their diets for better nutrition, they increasingly focused on milk, which can be converted to nutrition-dense lower moisture products such as cheese or very low moisture products such as milk or whey powders. There’s no argument that dairy has a significant edge over other animal products in markets far from production. So these growing economies focused on expanding the position of dairy foods in their diets. That’s not news.

What’s different today with foreign economies rising and the American dollar dropping is that these populations can now afford to buy dairy products from the world’s largest supplier, the United States. While this might imply rising prices paid by Americans for their dairy products, these new markets certainly help our trade balances and contribute to the overall U.S. economy, which is struggling.

The highly regulated American dairy industry produces most of its finished dairy products under strict standards. For example, everyone knows the specifications required to call a product nonfat dry milk (NDM) or Cheddar or ice cream, etc. Rising international markets will have their own national standards, which could be more or less stringent and altogether different from U.S. standards. If a U.S. plant is sitting here making standardized NDM originally intended for a domestic buyer and that buyer has his factory geared up for a consistent flow of raw material, then all is good. If, however, an international buyer comes along who wants dry milk of a different composition, that’s another story. The obvious example here is skim milk powder (SMP). It took significant coordination between researchers within the dairy checkoff-funded National Dairy Research Center system and U.S. manufacturers to come up with the modifications in processing to deliver the products needed by overseas buyers. That is just the beginning. Shipping SMP overseas for reconstitution to fluid milk represents the first step in designing powders for reconstitution into any number of products — and they might not be 100 percent dairy.

Each foreign country has specific taste/texture preferences. It’s natural that they also will prefer to do the finished product manufacturing at their end in order to create jobs and eliminate the cost of shipping water overseas. This is the real challenge and opportunity — the standards I refer to probably haven’t been created since we are talking about products that might not yet exist.

The field still is very green. We need to figure out how to ship specifically-designed, low-moisture dairy products overseas to a plant that is equipped to reprocess them into a finished product acceptable for the local market. That stands as a very exciting, dynamic challenge for everyone in the industry from product developers, marketers and operations personnel to promotions, advertising, dairy farmers and researchers, even transportation. We have the infrastructure to step up to this opportunity, and we have a milk supply unlike anyone else in the world.

This milk supply will grow given the impact the international demand already has had on milk prices. Our domestic market will not be shorted in this process. In fact, it’s likely that the technology and product development created for meeting the overseas market will find application in our domestic market as well, especially as milk production moves around the country and farther from the end user.

While we will see competition from overseas suppliers of milk, nobody can market the full package of consistent supply and technical and marketing support like the United States. Our future is bright. The better we do our jobs in seizing these emerging opportunities, the better will be the health of the world and of our industry.

CMN

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