European critics-usually defending the Common Agricultural Policy and other European featherbedding measures-can never resist taking a pop at United States dairy market supports, consumer subsidies, etc. If you are a free market evangelist, both systems are indefensible-although privately, Europeans are jealous as hell over what you've got and what they've lost, and the amazing level of political support the industry has in the U.S., compared with virtually zero in Europe these days. But if you are an unprejudiced analyst, the interesting thing is how these very different systems impact on the actual milk processing industries themselves.
During the researches involved in the production of our new, independent analysis of the U.S. dairy sector-which mainly comprises editorial profiles of the top 200 U.S. dairy companies-we came to one conclusion that most U.S. dairy companies, with the exceptions of Dean Foods and Kraft lack the critical mass of their European counterparts. There are few national brands in the U.S., where the European dairy processors have Danone and Yoplait yogurts, Kerrygold and Lurpak butter, Président/Lactalis and Bel cheeses. European dairy giants Nestlé, Danone, Lactalis, Arla, Friesland, Campina and Bongrain are now nearly everywhere in Europe-and in the rest of the world too (it is maybe sacrilege to point out that the two biggest ice cream companies in North America are now European controlled). From a globalization perspective, this is no doubt an extremely good thing. But is it good for the soul-or for the consumer?
We concluded that U.S. dairy markets are more competitive than markets in Europe, many processors are on a smaller scale, and there are many more regional players. The apparent dead weight of the Federal Milk Marketing Orders may have had a positive effect in keeping many smaller operators in business. In many regions of Scandinavia and the Netherlands, there is only one supplying dairy, and this is a gathering trend in Europe.
In the U.S., there are many more composite sites than in Europe, many of which make a mix of fluid milk, juice, cottage cheese and yogurt. In Europe it's usually either cheese or fluid milk or yogurt. In the U.S. many cheese plants turn out a variety of cheeses. In Holland, one giant plant will produce nothing but Gouda.
In the U.S. there are still many more family firms-many of them from European origins. This type of producer is now rapidly disappearing in Europe, except maybe in Italy; as in many things, they are law unto themselves.
Compare Holland with Wisconsin, not unreasonably. Both produce similar volumes of milk with similar dairy herd sizes; in Wisconsin small continues to be beautiful. Let us remind ourselves that just under 400 individual dairy plants in this state currently produce little more than 10,000 tons (22 million lbs) each. In Holland, there are only 55 dairy production plants and leaders Friesland make 500,000 tonnes (1.1 billion lbs) of cheese a year.
Of course this is all now changing rapidly in the western United States-as many others, including Ireland's Glanbia, follow the Hilmar lead to gigantism in cheesemaking-and Europe has nothing like what is going on here, which scares the living daylights out of them. The latest Hoard's Dairyman survey (2005) showed that 2,450 dairy farms in 15 co-ops in the western states averaged 15.6 million lbs of milk per farm (nearly 7m litres). Europe can never compete with this level of farm size. But Europeans might also note that the obvious potential of this scope of milk production is being held back by industries in the Upper Midwest and East who are successfully clinging on to the heavy trade protection of the past which will continue to inhibit the country's global ambitions. To paraphrase what IDFA chief Connie Tipton said at the IDF conference in Vancouver a year ago, Europe is addressing painful sector reform that the United States is still resisting-God help Europe if the U.S. ever gets the politics right!
Another surprise to Europeans is that the states appear unable to exploit advantages in near neighbors. In Europe, major strides have been made to exploit economic advantages in Poland, and the Ukraine looks likely to be next. Old and new Europe are making efforts to break out of their featherbedded pasts, even into very foreign territories; maybe the former Eastern Europe is the EU's New Mexico, Idaho and Oregon.
One way in which the United States does appear to be going down the European route is the growing popularity of organic and the rising hostility to RbST.
The most complicated question is how these diverse trends on opposite sides of the Atlantic have developed: is it consumer-driven, supply side-driven, or primarily a product of government policy choices? We might opt for the latter, but this is now clearly a wasting asset. In the future, the American and European dairy industries will have much to learn from one another, and inevitably much more corporate interlocking.