FRANKENMUTH, Mich. — Preparing to speak to producers at the Great Lakes Regional Dairy Conference in Frankenmuth last week, Tom Vilsack said, “I’m looking forward to 2019 being a better year than 2018 and 2017.”
But why come to this state? “There is a lot of stress up here in Michigan, and I think it’s important for those of us in the dairy industry, that believe there is a better day coming, that we convey that message,” explained the CEO and president of the U.S. Dairy Export Council (USDEC).
“And just as importantly, the Michigan dairy producers have been supportive of the checkoff program which is allowing us to do more work in these export markets. This is a way of saying ‘thank you’ and that their support is paying off. We need to stick with it because we are seeing the right trajectory for exports.”
Vilsack offered several reasons for why he thought the dairy industry would turn the corner in 2019: “We continue to have strong exports. Our exports in 2018 are likely to be at record levels and imports of dairy products from other countries are down a bit, so that’s a positive sign.
“Part of the challenge of being in an industry where prices are globally set is that things that occur in other parts of the world can impact and affect what happens here,” he explained. “Europe, for many years, has had a surplus of powder. That surplus has been sold down, so that will take some of the pressure off powder prices, and that should reflect ultimately in the later part of this year in better prices for our dairy producers.”
The passing of the 2018 farm bill was also a positive for dairy producers because of the improved Margin Protection Program – now called Dairy Margin Coverage. Vilsack said, “I’m excited about the opportunities we are now going to have with the export assistance program that the department of agriculture announced.
“The dairy industry was successful in securing about $5.2 million in additional help, and that will allow us to do some things in foreign markets that we haven’t been able to do because of limited available resources.”
Vilsack, who served as USDA secretary under former President Obama, went on to mention the positive opportunity to continue to deepen U.S. presence in export markets. “One of the reasons we have seen increased exports is because we have more people, more partnerships and more promotions in some of these key areas.”
He added the USDEC is looking forward to the ratification of the U.S.-Mexico-Canada Agreement for trade in Congress, which would replace the North American Free Trade Agreement.
“I would expect that the retaliatory tariffs that have been a bit of a drag on our Mexican business opportunities will be lifted, and hopefully we will reach some consensus with China before the March 1 deadline that allows us to avoid a ratcheting-up of that dispute, and potentially a resolution to that negotiation.”
While there has been a lot of interest in exports all over the world, lately Southeast Asia is sparking some attention. According to the USDEC, Japan's growing love for cheese will continue, presenting an opportunity for U.S. dairy exports to more than triple the sales over 10 years, if a new U.S.-Japan trade agreement is negotiated.
Conversely, there is a chance that U.S. annual cheese exports to Japan could fall by 80 percent in a decade if there is no trade deal between the two countries. That would solidify the New Zealand, Australia and European Union trade agreements, resulting in a tilted playing field.
The USDEC study revealed Japan is the second-largest net importer of cheese in the world after the United Kingdom. Since Japan’s two largest dairy suppliers, Australia and New Zealand, have limited capacity to increase their supply, Vilsack said this would give a foothold to the United States. And while the Japanese population is shrinking, their consumption per capita is increasing.
Adding income to U.S. dairy producers’ bottom line is the ultimate goal – Vilsack said the aim of the USDEC is to increase exported production from 14-15 percent to 20 percent. “And, that will add a couple billion dollars to the bottom line and will stabilize farm prices,” he said.
“Our ability to sell dairy products in these markets isn’t just a function of saying we have ample supply, we have a safe supply and we have a nutritious product. That has been the pitch that we’ve used forever. We have to add additional elements to it.
“The dairy industry has a remarkable story to tell, most of the milk produced in this state is in under the FARM (Farmers Assuring Responsible Management) program and we are the only dairy industry in the world that has internationally certified animal welfare standards. That is a marketing tool that we need to use to its fullest advantage,” he explained.