Guest Columns

CMN Guest Editorial
We all have role in the destiny of the U.S. dairy industry

Connie Tipton

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

Control your destiny or someone else will. — Jack Welch, former chairman and CEO of General Electric

You have read about the groundbreaking new research conducted for the dairy industry by global business consulting group Bain & Company. The initial analysis demonstrates that the U.S. dairy industry has some very clear choices to make in a growing global marketplace. For me, it is the single most exciting piece of work I have seen in my 28-year tenure with dairy.

Commissioned by the Innovation Center for U.S. Dairy, the study provides detailed analysis of the international dairy landscape and clearly lays out the challenges, opportunities and threats that the increasing global demand for dairy products provides to our industry. The choices we make in the coming years likely will determine our destiny as an industry.

In fact, according to Bain’s analysis of the research, we have a short window of opportunity, maybe five years, for the U.S. dairy industry to take advantage of emerging world markets before several other countries develop the capacity to meet expanding demand internationally. But to do so, we need to come together and decide what we want our future to be. We can stick with our current policies and decide — as Canada did — to serve only our domestic market. Bain calls this option “Fortress USA.” Or we can implement growth options, becoming a “Consistent Exporter,” by making some rather bold changes to our policies and becoming partners in the global expansion of the industry

If we take the “Fortress USA” option and remain focused on the domestic market, our industry will stagnant in the short term and decline long term. But if we decide to embrace the options that let us take advantage of international growth, we will have to make significant changes in how our industry does business. The growth options present more risk, but they also clearly offer more reward. Dairy producers will be able to produce and market more milk; processors will be able to innovate and sell more dairy products. To me, the choice is clear, but the path forward is far from simple.

It’s complicated because change is scary and difficult for everyone. But, after the past three years, it should be clear to everyone in this industry that change is needed if we are going to make our markets more rational.

Jerry Kozak, president of the National Milk Producers Federation, has laid out a draft plan for reformatting policies and programs; it deserves a very serious look by everyone in the U.S. dairy industry. The plan includes scrapping some of the programs that don’t work as farm safety nets — such as the Dairy Product Price Support Program and current payments, which don’t adequately address price pressures at the farm in today’s more global dairy economy — and putting in their place a program that can help farmers when income doesn’t keep pace with costs.

The proposed plan also calls for eliminating make allowances and some of the more cumbersome provisions of the federal milk marketing order program. This would allow the marketing order program to become a valuable source of more market information and market transparency, so farms and companies can better manage market changes. And better risk management tools would be helpful, too. The devil is always in the details, but the ideas in Mr. Kozak’s plan have real merit.

It will take strong leadership to try to forge a way to make these bold changes — by National Milk, by International Dairy Foods Association, and by farms and companies across our nation that want a brighter future for the U.S. dairy industry. But make no mistake, these changes are definitely worth working for; they are worth your support and your help.

Yes, they will have varying impacts on businesses depending on the size, type and location of each one, but they offer the brass ring of opportunity for the U.S. dairy industry, and we must reach for it together. Jack Welch had it right; if we don’t control our destiny, someone else will be glad to do it for us.
I highly recommend that everyone in the industry take a good look at the new research and analysis by Bain & Company. For a deeper dive into the data and what it means for dairy, join us next January at Dairy Forum 2010 for the Bain & Company presentation, “Dairy Globalization: Threats, Opportunities and Implications.” I’m sure the session will foster great discussions, as well as inspire some meaningful actions on dairy policies that will help us shape our destiny.

IDFA’s Dairy Forum 2010 will be held Jan. 17-20 at the Arizona Biltmore Resort & Spa in Phoenix. Registration is now open at www.idfa.org.

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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