Strong Dairy Export Market Means Strong Jobs Outlook for 2012
According to Bill Schiek, chief economist for the Dairy Institute of California, China, South Asia, East Asia and the surrounding Pacific Rim markets are going to be the guiding light for dairy expansion in the coming years.
“In the past few years, a switch has flipped,” Schiek says. “The international price point for many dairy products has finally reached a level where U.S. distributors are competitive in up-and-coming markets abroad, such as China, South Korea, the Philippines and Malaysia. These markets have experienced increases in consumer income and at least one foreign government has made dairy product consumption a higher nutritional priority.”
Now that costs are finally low enough for us to access these new markets, the United States is growing its share of the global dairy trade. However since consumer incomes in some of these international markets are not yet high enough to support broad valued-added product demand at retail, exports of more expensive products are limited to American-style foodservice outlets and higher-end retail markets. At the same time, we are seeing an influx in foreign investment in the form of manufacturing plants and their subsequent supporting operations. These investments, in many cases by European-based companies, are being established to take advantage of growth opportunities in the U.S. domestic market, but in the future they will likely be used as a platform to increase production and take advantage of the growing international dairy trade.
In line with the OECD-FAO Agricultural Outlook, the United States can expect to see many new jobs opening up as companies like Agro-Farma and Alpina (who broke ground on new facilities in 4Q 2011) take advantage of shifting tastes in the U.S. dairy market, an example of which is the new consumer preference for Greek-style yogurt products.
However, not every segment of the U.S. dairy export market will be experiencing the same benefits and job growth. Manufacturers of products that are easily transported and can sustain longer shelf-life are also breaking ground on new plants aimed at future trade expansion. While products like nonfat dry milk powder and dried whey products — commodities that require little or no refrigeration — are benefiting from the new markets opening in Asia, other products like fluid milk, butter and cheese are growing more slowly because of more primitive distribution chains in many of the key developing markets. As a result, job growth in these value-added sectors is likely to be slower.
Geographically, the West Coast will likely attract more jobs over the long-term as exports to Asia and South Pacific markets continue to grow. At the moment, fluid and cultured product manufacturers are sprouting up in these countries to be consumed “in-house.” However, overall dairy demand in these markets is too great to be met with their domestic production. We will continue to see export growth in countries like the United States, and therefore job growth in companies that have the ability to fill this gap.