Exports need to expand value before quantity
The question isn’t if exports will grow; it’s how, and what are we focused on?” Robert Chesler, United Dairymen of Arizona CEO, said as introduction to his comments on dairy exports during the September 14, 2022, Hoard’s Dairyman DairyLivestream. “Are we focused on volume and margin associated with said volume?” he continued. “It's that market volume that I think becomes of core importance to our producers.”
Volume is so critically important to the export story because it drives production levels on farm.
“I would say it's largely accepted throughout the global industry today that the European Union and Oceania are going to be supply constrained here in the short- to medium-term and maybe longer,” Chesler explained. “That means that the United States has the opportunity to answer the call for an increase in supply because of increased demand.”
While many of the market pressures in the EU and Oceania are being created by regulation, Chesler hopes U.S. changes in markets will be led by incentives. Among those changes, the dairy co-op CEO foresees a move from the sale of more commoditized products to more value-added options.
“Our foreign competitors are already making these changes because they see their milk pool under pressure,” Chesler detailed. “They're investing further upstream into higher value products knowing that they might have less milk, so they want to make higher margin products.”
Chesler shared that he hoped similar changes will be made in the United States.
“We need to continue to invest strategically as the U.S. dairy industry so that quality of the bell curve and the quality of the U.S. dairy industry is seen as better and improving by our customers overseas,” he explained. “When we invest strategically upstream into our customers, we're going to seize that market share and become a preferable supplier as opposed to a supplier of last standard and last need.”
This year’s estimated statistics point to steps being made in this direction already. USDA expects 2022 agriculture exports to reach $196 billion, up from 172.7 billion in 2021. Importantly, dairy is leading all agriculture exports in growth followed by livestock and poultry. Japan, Mexico, and South Korea all have posted double digit gains in U.S. cheese purchases in the first half of 2022.
To watch the recording of the September 14 DairyLivestream, go to the link above. The program recording is now also available as an audio-only podcast on Apple Podcasts, Spotify, Google Podcasts, and downloadable from the Hoard’s Dairyman website.
September 29, 2022