June 21, 2017

The Next 5%: A Strategic Dairy Imperative

 |  By: Tom Vilsack

Consumer demand for dairy is growing, here and abroad. Positioning the U.S. Industry to consistently supply these demands is essential to maintain a strong and vital dairy farming sector. We need to expand export markets for U.S. milk.

We’ve crunched the numbers at USDEC, and come up with a plan we are calling, “The Next 5%.” Before I talk more about that, a quick recap on what exports have already brought to the table.

In the mid-1990s, the United States was exporting the equivalent of about 4-5% of the U.S. milk supply, much of it government-subsidized commodities. Now, we are shipping 14-15% of the U.S. milk supply overseas, unsubsidized, in the form of cheese, skim milk powder, infant formula, whey, high-value milk fractions and other products used by increasingly sophisticated global foodservice and food processing industries.

Since 2003, nearly half of the “new” milk produced in the U.S. has gone to export markets. Dairy exports have created up to 100,000 good-paying jobs in this country, many in rural regions with struggling economies. Dairy exports, in fact, contribute nearly $15 billion annually to the U.S. economy.

To protect the progress we have made and deliver further benefits, we need to protect export market share we currently hold and increase volumes as required by U.S. milk production growth.

The Next 5% seeks to lift U.S. export volume from around 15% of annual U.S. milk production to 20%. The goal was set in consultation with a broad representation of U.S. dairy cooperatives and processors and backed by USDEC research and analysis. USDEC will continue to meet with industry in the coming weeks to flesh out further details. But tactics are already falling into place.

Critical to growth is the need to continue to emphasize the importance of trade to the communities in which we all live and work and to government representatives making decisions about U.S. trade policy and trade agreements. It is essential to defend existing U.S. market access, improve access where it is lacking and ensure U.S. suppliers do not face restrictions through unfair sanitary and phytosanitary rules or other non-tariff trade barriers like the European Union’s geographic indications scheme to restrict the use of common food names.

Beyond setting a level playing field, getting The Next 5% involves elevating the in-country profile of U.S. suppliers, growing more customer-centric, adapting to local market structures, tastes and demands, and becoming better supply chain partners.

Despite all the progress we have made as a nation in the global dairy arena, the U.S. is still often viewed primarily as a supplier of commodity dairy products. The Next 5% strategy looks to shed that image and increase recognition as a supplier with a diverse portfolio of value-added products, willing and eager to work with overseas buyers to innovate and nurture a partnership.

It aims to better position the industry to take the lion’s share of projected growth.

And growth there will be.

By all accounts, global dairy demand will continue to expand well into the future. USDEC projects global dairy ingredient trade will rise by more than 2.4 billion lbs. and cheese by 1.1 billion lbs. from 2015-2021.

We believe The Next 5% is nothing short of a strategic imperative—the difference between continued industry growth and contraction.