Dairy exports pipeline flowing again, but risk remains

Hoard's Dairyman: 

Dairy exports pipeline flowing again, but risk remains

Date: 
Fri, 04/09/2010

Anyone who milks cows wants demand for their milk, and the more the better. But as producers saw all too painfully in 2008-09, expanding to meet that demand comes with risk. Recent news from the U.S. Dairy Export Council is encouraging for dairy producers – and a reason to be cautious.

On the encouraging side, USDEC reported that the total value of dairy exports posted a double-digit gain in January, the first time since the fall of 2008 when the world crashed into financial recession and buyers drastically cut back purchases of U.S. dairy products.

The caution is, it was robust export demand that gave U.S. dairies the incentive to expand – which put them in the risky position of having to rely on export sales to keep supply and demand in balance. With foreign buyers taking more than 10 percent of all U.S. milk production, the sudden slowdown in exports caused an immediate and impossible surplus of products here at home that collapsed milk prices.

As the world begins to claw back from recession, USDEC points out the U.S. is perhaps best positioned to meet renewed demand for dairy products and build strong relationships with buyers before several new emerging competitors arrive in 10 to 15 years. Topping that list are Brazil, Argentina, Belarus, Ukraine, and Uruguay.

Tim Hunt, a senior analyst at Rabobank, says the point probably isn’t to guess which one looms as the biggest competitive threat, but to understand that at least one of them will. “The key is that those wishing to build a sustainable footprint in international trade need to get peddling now because be it 5 years or 10, these guys are coming.”