Guest Editorial
Think growth, not restrictions

by Connie Tipton

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

Just when we thought our markets were relatively mature and not much growth was possible, the U.S. dairy industry has begun to experience something akin to an adolescent growth spurt. We’re getting bigger and more mature but experiencing all of the attendant awkwardness and difficulties that can accompany unexpected changes.

We all remember those teenage years when we yearned for — and gradually earned more — freedom, but at the same time we were still saddled with limitations and restrictions. Just as teenagers are allowed and, indeed, encouraged to grow, mature and learn to handle more freedoms, so must our U.S. dairy industry be allowed and encouraged to take advantage of burgeoning market opportunities, both at home and abroad.

Today’s global market for dairy products offers a great case in point. During the last three to five years, we’ve witnessed explosive market expansion for a variety of dairy exports. In fact, just last year the export of U.S. dairy products reached an all-time high and — for the first time in more than a decade — the value of U.S. dairy exports exceeded the value of dairy imports.

This marks the fourth consecutive year that dairy exports have posted record highs, according to USDA’s Foreign Agricultural Service. And as a result, the Dairy Export Incentive Program, a subsidizing staple of the dairy industry since 1985, has virtually disappeared from view; it was last used in January 2004.

This truly is good news; it means that both domestic and international market forces are working, that our free trade agreements are working and that producers, suppliers, processors and, yes, even consumers are reaping the benefits provided by broader markets and improved access to dairy products.

Before we get too giddy, however, it’s important to recognize that these consecutive years of uninterrupted growth could come to a crashing halt without appropriate and non-restrictive programs in place to support the industry’s continued development and progress. Our milk pricing policies, for example, sorely need updating to make sure everyone has equal opportunity for growth. Other examples that come to mind are the proposed expansions of the Class I definition in the federal milk marketing order program and of products regulated as Grade A in the Pasteurized Milk Ordinance (PMO).

In 2006, USDA issued a recommended decision to amend the Class I fluid milk product definition for all federal milk marketing orders. IDFA was disappointed in the decision because the proposed new criteria have the potential to make milk ingredients less desirable in the formulation of new beverage products. Because the dairy ingredients used to make beverages often are more expensive than other sources of protein, like soy, this proposed definition certainly could restrict our growth and competitive position.

Another effort underway seeks to broaden the PMO to include non-standard milk products, such as “milk beverages” or “smoothies.” This expansion would limit the types of dairy ingredients that could be used to formulate these products to Grade A sources only, thus eliminating ingredients, such as sodium caseinate or whey protein isolate, that are not currently available as Grade A. If enacted, this change could raise processing costs and stifle development of innovative products that offer enhanced nutrition and convenience when compared to other competitive beverages.

Using these programs to limit product innovation based on irrational fears about competition to milk or ingredients from non-domestic sources is foolhardy, especially at a time when innovation, new products and new markets should be our focus. We need to change our views on these and other regulatory programs to ensure that our new focus on growth is appropriate to the changes taking place. If all we do is support programs that restrict competition, in the end they will only serve to stifle our own growth.

Look at what Canada has done with its recent change in cheese standards, which prohibits the use of concentrated or dried milk. Just in the last few weeks, two of the top cheese companies in Canada have announced plans to buy processing facilities in the United States. The new facilities will offer much more product flexibility — and growth potential — than the companies now have in Canada, which makes the acquisitions all the more attractive.

Thinking about growth, not restrictions, is definitely the best solution. Let’s recognize that it’s time to grow up, take a mature perspective and work together to get all of our programs working toward market expansion. With our collective future before us, I truly believe that the best is yet to be.

CMN

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