Vilsack Discusses USMCA, Trade in China and Opportunities in Japan
U.S. Dairy Export Council CEO and former Secretary of Agriculture, Tom Vilsack, recently returned to the U.S. after a trip to China and Japan. During that trip Vilsack met with the key players in the Chinese dairy industry and Chinese officials at the ministry of Finance and Commerce. He also visited several potential customers in Japan. This week on “AgriTalk,” Vilsack shared details of his trip with Clinton Griffiths.
CG: How did you find the mood of those conversations? We’ll start with China.
TV: Well, China, obviously, this is a stressful period of time, I had a chance to visit with the Chinese officials in the Chinese dairy industry to try to convey the message that the relationship between the U.S. dairy industry in the U.S. and the China dairy industry is one that is important and one that we want to maintain. As everyone knows, they're having a very difficult time with their hog industry. Because of African swine fever, I suggested that that potentially the U.S. dairy industry could be helpful to help them rebuild that industry more quickly. The use of permeate and whey protein can accelerate growth in piglets and can increase the number of litters per sow, that would allow them to reclaim their industry more rapidly, to provide help and assistance. They've lost nearly 50% of their herd and that's a that's a pretty significant blow.
CG: Were they receptive?
TV: They were receptive. I think they were surprised by the message. The Chinese officials wondered why I didn't mention anything about tariffs. They waited for that conversation. I wanted to convey the message that their relationship has to survive these difficult periods, a relationship has to be about trying to provide help and assistance, sort of a win, win for everyone. At some point in time, hopefully this situation with China gets resolved. And when it does, we want to make sure that those relationships that we had before the tensions occurred are resumed, and that we get the advantage of that growing and expanding market.
CG: You talk about the size of that market, and that is a massive, massive opportunity for American dairy producers, who, frankly, need a spot to send milk and milk products.
TV: Absolutely. We were on record pace the first part of 2018 in China, and we've seen a precipitous drop off of activity, obviously, selling less cheese and selling less ingredients. And you know, that has had an impact. We would have had an incredible year last year, if we had not had the interference in China. And this year, we would certainly need the volume that they would have taken our powder sales are down a little bit. And certainly, China's is one of the principal reasons.
CG: Are they able to find other sources? I mean, that's always the question, right? Whenever you're a supplier, are there other places for our customers to go? And we've seen that obviously in grains, but on the dairy side, are they able to get what they need other places?
TV: Well, I was actually thanked by representatives for the EU dairy industry for the activities that are taking place in China because they get the best of both worlds. They get an expanded market opportunity taking market share away from the U.S. and if the Trump administration is successful in changing China's way of doing business and getting a fairer system, European companies will also benefit from that negotiation. So yeah, they're able to get alternative sources from the EU and from New Zealand who have existing relationships over there. They're seeing expanded opportunities: more cheese being sold and more ingredients being sold. And certainly, Europe has been sitting on a stockpile of powder for some time. So that it's beneficial to them. On the other hand, that [presents] us with the challenge of what do we do with what we would have sold to China? Well, Japan comes into play, Korea comes into play, Southeast Asia, the Middle East, and North Africa become places where we have to really put a lot of time and effort.
CG: Let's switch gears and talk a little bit about Japan. How was that meeting and meeting with those folks, those relationships? What are the opportunities look like they're going forward?
TV: Well, I think things are hopeful in Japan. I think that there's a belief that our leaders, President Trump and the Prime Minister will get together at the end of this month and hopefully announce a deal that will open up new opportunities for American agriculture and will level the playing field. We're at a disadvantage right now with Europe and New Zealand because they have free trade agreements with Japan. If that playing field gets leveled, there's no there's no end in sight to the opportunities there. We are currently seeing an increase in cheese sales. We've seen a 11% increase for the first six months of this year compared to last year in that Japanese market. That's a market that constantly and consistently is growing, expected to grow at 4% a year overall, in terms of cheese and dairy needs, they have a dairy industry that is aging, they're not going to be able to meet their needs for ingredients and cheese over the long haul. So, this is a really important opportunity for us. It's one of our top five markets continue to see growth there. Certainly, on the cheese side. The ingredients side, we need a little work. But there's real opportunity. We met with a fitness franchise called Curves. They have 800,000 members and 300,000 of those members receive a monthly supplement of whey protein, 50% of that protein that they receive comes from the U.S. They're looking at expanding that number by 80,000 additional subscribers per year. They're looking at about creating an opportunity for men. This is primarily for senior women. They're looking at chances of expanding in Taiwan and China, Vietnam, Indonesia, a variety of other locations around the world. So, this is a big opportunity for us and they're very encouraged by the work and assistance we've provided through USDEC to underscore the importance of whey protein, particularly for seniors.
CG: Given some of the trade headwinds that we've seen between Canada and Mexico and the USMCA and the issues going on with China, how hard is it been to maintain export levels and finding new opportunities for dairy?