Selling Coal to Newcastle
Made-in-the-USA Swiss cheese being exported to Switzerland is the modern-day version of the old story about shipping coal to Newcastle.
Other export destinations may not be as dramatic, but the point should be well taken: The United States is a significant exporter of milk and dairy products. In fact, U.S. dairy exports totaled about $1.3 billion through the first 11 months of 2004 (the latest data available at press time).
Given the pace set during the year, exports almost certainly surpassed the billion-and-a-half dollar mark. U.S. dairy export values have totaled more than $1 billion during each of the past five years.
Given the volatility of dairy prices, I prefer to focus on the volumes of various dairy products moving to offshore customers, especially when looking for year-to-year trends. Last year was a very good year and the future looks even brighter.
Cheese, whey, skim milk powder, yogurt, lactose, condensed milk, infant formula, pizza, quiche and casein exports all chalked up significant gains in volume vs. previous-year levels. Exports of numerous other products at least match previousyear levels.
Every naysayer is quick to point out that bad weather in Oceania and reduced subsidies in Europe tightened the world supply. Rising consumption in Mexico, Japan, China and Southeast Asia drove demand higher and, thus, world prices higher. Despite record-shattering domestic milk and dairy product prices, the weak dollar helped make our products more attractive to overseas customers.
Being an optimist and a long-time supporter of export development, I see it a little differently. Mother Nature may be nicer to Oceania next year and the year after, but reduced European subsidies are part of a new reality gripping the policy makers in the European Community.
Rising worldwide consumption is here to stay as disposable incomes grow throughout much of Asia, the Middle East and Central and South America. Just one example: Milk production was up 25% in China last year; yet the Chinese say they'll need to increase skim milk powder and whole milk powder imports by a similar percentage this year.
Citing the Bush Administration's non-intervention policy, economists say the weak dollar is here to stay for at least four more years. Domestic prices will likely zig and zag this year, but be higher than the five-year average. The point is: U.S. milk producers can compete in the world market without having U.S. prices sag to the previous world price. Instead, the world price is moving upward.