By Sean Ellis
Idaho Farm Bureau Federation
BOISE – During Dairy West’s annual meeting in Boise Nov. 7, former U.S. Agriculture Secretary Tom Vilsack applauded Idaho dairy producers for being the impetus behind a plan to grow U.S. dairy exports substantially over the next three to five years.
Idaho dairy producers, through their checkoff dollars, will contribute $1 million per year for three years toward the effort, which is known as “The Next 5%” plan and seeks to expand U.S. dairy exports from the equivalent of 15 percent of annual U.S. milk solids to 20 percent.
Vilsack, president and CEO of the U.S. Dairy Export Council, which is leading the effort, said the plan was not going anywhere until Idaho stepped up, both financially and by encouraging other state and regional dairy checkoff organizations to help as well.
Idaho dairy operators, as a group, are the single largest financial contributor to the plan.
“It started with the folks in this room,” Vilsack said during the annual meeting of Dairy West, which represents Idaho’s 490 dairy operations. “You led the effort and encouraged other state and regional (checkoff organizations) to step up.”
U.S. dairy exports have grown from $1 billion annually to $5 billion over the past two decades, but U.S. dairy export volume has plateaued in recent years at roughly 15 percent of the domestic milk supply.
Dairy West CEO Karianne Fallow said exports are critical to the Idaho and U.S. dairy industry and achieving that Next 5% goal would be a big win for the industry.
“Our industry’s challenges are great when it comes to achieving that next 5 percent but I’m confident that if anybody can achieve that goal, it’s Secretary Vilsack and his team at the U.S. Dairy Export Council,” she said.
Idaho dairy exports totaled $356 million in 2017, up from $320 million in 2016, according to USDA data.
The Idaho dairy industry, which is fourth in the nation in total milk production, depends on exports to achieve its growth plans, said Idaho Dairymen’s Association Executive Director Rick Naerebout.
“All of our incremental growth is going to exports,” he said. “We have the domestic market fully saturated.”
He said achieving the Next 5% goal would be a huge victory for the industry.
According to USDEC, the world will need an additional 1.3 million metric tons of dairy products over the next three to five years. The Next 5% plan calls for increasing U.S. cheese exports by 200,000 metric tons and dairy ingredient exports by 450,000 metric tons over that period.
Vilsack said U.S. dairy exports are up both in volume and value this year and although dairy operators are facing a tough pricing situation right now, “Things would be even more difficult if we were not … seeing a record year in exports.”
The Next 5% plan, which kicked off last fall, has enabled USDEC to put more boots on the ground in prime growth markets, including in China, Japan, Southeast Asia and the Middle East and North Africa.
Vilsack said USDEC has also been able to form partnerships with important academic and culinary institutions in China and Singapore, with more to come. He said this allows the U.S. dairy industry to stay on top of market trends and elevate its presence in those areas.
The additional funding provided for the plan is also allowing USDEC to complement and strengthen its promotions programs and align with like-minded foreign organizations that amplify the voice of the U.S. industry.
The U.S. dairy industry will export about $5.5 billion worth of products this year.
If the Next 5% goal were realized today, it would mean an additional $2.2 billion in sales and income opportunity for U.S. producers, Vilsack said.
Demand for dairy products in emerging markets is growing faster than production in those markets, creating opportunities for the U.S. industry, Vilsack said.
“As global population continues to grow, we are going to continue to have export opportunities,” he said. “I think we will see tremendous opportunities long-term.”
There are currently 530 million middle-class consumers in Asia and that number will increase to 2.7 billion in the next 10-15 years, an amount that will be equal to almost 10 times the population of the United States, Vilsack said.
“You have tremendous opportunities there” and that’s why it’s important to continue to invest in those markets to be able to adjust rapidly to changing market conditions and tastes, he said.
U.S. milk production is growing faster than U.S. demand and USDEC estimates that by 2022, domestic production could outpace domestic consumption by 14 million metric tons.
That makes export markets critically important for U.S. dairy producers, Vilsack said.
“If production is going to continue to outstrip consumption, you have to have some place else to sell the milk and that’s where exports come in,” he said. “It’s important for us to accelerate our efforts in the export space because when we do, we eat into that production gain and we stabilize prices.”