“We’re not just marketing a dairy product or a block of cheese,” Tom Vilsack told Idaho dairy producers. “We’re selling a way of life, a way of doing business. It’s the American brand.”
With so much conflict in the world today, it’s important for the U.S. dairy industry to send a positive message, the president and CEO of the U.S. Dairy Export Council said. Vilsack used to think that once the Cold War was over democracy had won. But China has come up with an alternative story to democracy that some countries are taking to heart.
That troubles Vilsack, who served as the U.S. Agriculture Secretary under President Barack Obama and was governor of Iowa before that. He believes that telling the story of how U.S. dairy farmers care for their cows, produce milk and provide jobs in rural areas is critical for marketing dairy to overseas customers and building relationships in those countries. He spoke during the DairyWest annual convention last month.
According to the U.S. Dairy Export Council, exports were equivalent to 16.6 percent of U.S. milk production on a total milk solids basis during the first eight months of 2018. Five years ago, exports accounted for around 14.3 percent of total production.
“We must have exports to stabilize and increase prices,” Vilsack said.
But tariffs imposed by China are eating into that export growth. Lost sales in China are predicted to cost U.S. dairy farmers $12.2 billion by 2023 if retaliatory tariffs remain in place. In the short term, losses in 2018 due to lower exports to China are expected to tally $1.1 billion and could grow to $2.2 billion in 2019.
Vilsack assured producers that markets lost due to the tariffs will come back, but it will take time to rebuild damaged relations.
While USDEC waits for the tariffs to be lifted, the Council is moving forward with plans for a Dairy Center of Excellence in southern Asia, possibly Singapore. The Center will focus on showing the story of U.S. dairy to potential customers rather than merely telling it. Building relationships is critical because competitors have no problem coming to the U.S. and developing partnerships with domestic companies, Vilsack said.
He was questioned about the wisdom of putting so much emphasis in Southeast Asia given its reputation for lactose intolerance. But as income rise, adjustments to diets are gradually including more dairy. Plus not all Asians are the same. There were chuckles when he pointed out that many Americans confuse Iowa and Idaho, and then added that there are many differences between Vietnamese, Thai and Laotians.
One area the Center will work on is developing relationships with food service, food retail and food processing companies to increase use of dairy products. For example, if a customer goes to KFC, eats a biscuit dripping with butter and enjoys it; making sure there is butter in the grocery store so the experience can be replicated at home is critical. The next step is to brand the butter so that the customer chooses American butter.
Half of all new exports are headed to Africa, but shipping products other than cheese and powder has been difficult. The industry is exploring technology already used by orange juice processors to ship fluid milk to Africa, the Middle East and even Central America.
While dairy producers are sometimes skeptical of the logic behind building consumption in other countries, Vilsack said higher dairy consumption provides business for producers in the importing country as well as the U.S. That already happened in Mexico where production has increased 60-some percent in the last 10 years but all of that has been consumed and then some.
“As that business expands, some of our competitors will be constrained by resources — like the environment — that creates opportunities for us,” he said. “They can increase production but they can’t keep up with consumption.”