Braving and Building on the Challenges of 2007

June 1, 2007
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PROCESSOR OUTLOOK
Braving and Building on the Challenges of 2007

Connie Tipton

IDFA is proud to have the opportunity, once again, to salute the large and small companies — listed and unlisted — that comprise the dynamic U.S. dairy industry. As always, each new year brings change and opportunity, and certainly 2007 is a challenging year in which to do business.
There are this year’s milk prices, first of all, which in terms of government-announced prices are breaking all previous records. That price pressure has put renewed drive into fixing some of our outdated dairy policies, which don’t always allow businesses the flexibility to thrive in a difficult market.
Meanwhile, in Washington, the political agenda is chockfull of other tough issues affecting business, like immigration, minimum wage and health care. Then there’s the “inconvenient truth” of environmental change. Global warming is already getting more attention, and that plays right down to the local dairy plant or farm. There’s no question that the environment will be a central issue in the years ahead.
And, of course, the Farm Bill reauthorization is in full swing. It comes amidst ongoing federal deficits, so agricultural subsidies are under intense scrutiny. In fact, economics and the environment have already been a central part of the Farm Bill debate.
Trade is another big issue. Despite the difficulties of achieving a multilateral trade agreement and concerns voiced by the new leadership in Congress regarding recent trade agreements, I think we all know that trade won’t stop for dairy — and hurray for that!  Trade offers a real growth opportunity for the U.S. dairy industry and will only become more important to us.
Meanwhile, around the country, one thing we’re seeing firsthand is that people are paying more attention to where their food comes from and how it’s produced. The recent food-safety scares in spinach and peanut butter — and even melamine in pet food — have further spurred this trend. For some consumers, going organic is one reaction, while others just want more assurance as to the wholesomeness of their food. Certainly, we’ve seen enormous growth of organic in retail outlets like Whole Foods and Trader Joe’s, all the way down to the neighborhood Safeway, Kroger or Publix — even Wal-Mart is going organic. These stores are also promoting foods that are locally grown, and produced with sustainability in mind.
Responding to local trends is essential, but U.S. dairy companies also continue to be more global in scope. I’m encouraged that more and more global dairy companies are investing in facilities here in the United States, using more of our domestic milk supply and taking pressure off of government programs as the only answer for balancing supply. Strong exports help, too, as there are fewer subsidies in Europe, growing market access in some countries, and the advantages of the value of the dollar, our production capacity and demand for innovative dairy ingredients.
And here’s an important point: The government is taking a back seat in this growth.
Last year, nearly 100 percent of U.S. dairy exports were unsubsidized. The year before, 90 percent of dairy exports were unsubsidized. Last year, we exported about 600 million pounds of milk powder — a feat thought unimaginable a few years ago. This growth in exports must be nurtured, not ignored.  We should change or eliminate government programs that sidetrack us or stunt our growth.  
In short, we’re looking at a highly dynamic market that’s evolving at a dizzying rate.
It seems clear that if we want to continue to succeed, dairy companies must be agile, innovative and responsive to the market, as well as price-competitive.
The dairy policies we forge in Washington make a huge difference in how successful our companies are in meeting these goals. More than ever, U.S. dairy companies need flexibility in formulating their products, pricing formulas that make sense and are more market-oriented, and energy and environmental policies that allow us to grow.  
IDFA continues to battle for just such policies, and for the continued growth and prosperity of U.S. dairy companies. We do our best to navigate the challenges of 2007, while looking ahead to the rapids ahead in 2008 and beyond.
Connie Tipton is president and chief executive officer of the International Dairy Foods Association.

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