2012 Shaping Up To Be Good Year For Exports

February 01,2012
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Although dairy commodity prices have faltered in recent weeks, there’s no disputing the fact that 2011 was a year with strong milk prices, due in no small part to a robust global market. While the final, official tally isn’t yet in, it appears that 13.3% of U.S. milk production in 2011 was sold to customers outside of our borders. That’s a new record, and a welcome development for farmers and processors alike.

While the outlook for both the global economy and dairy prices in 2012 is anything but clear, what is clear is that we need to continue building on our track record of success in developing foreign customers, whether close to home in Mexico and Canada, or in Pacific Rim countries miles from home.

Several developments last year augur well for 2012. First, we’ve resolved the trucking dispute with Mexico which derailed a portion of our cheese exports last year when Mexico slapped tariffs on the U.S. because we weren’t living up to our NAFTA commitments. Mexico’s trucks are now getting approved for use in the U.S., meaning that our dairy foods won’t be penalized any longer.

Second, the U.S. free trade agreement with South Korea was approved last year (along with FTAs with Colombia and Panama). Korea is a significant, growing market for U.S. dairy foods, and we estimate that an additional $380 million per year in sales will result in the next few years as Korea’s tariffs are reduced by this FTA. The two Latin American countries will add another $50 million in annual dairy sales.

But the other big news in terms of our export capabilities comes with the renewal of
Cooperatives Working Together. We announced last November that CWT will be getting a new stream of revenue starting this month, resulting from the two cent per hundredweight contribution made by its member cooperatives and individual dairy farmers producing 70 percent of the nation’s milk supply (that’s 31 cooperatives and nearly 200 individual producers).

CWT had been active last year in providing export assistance to members, however, the money used was carry-over funds from the 2009-2010 program. Now, the combination of these existing funds, plus new revenue, will allow CWT to increase the sales of commodities that have the most positive impact on dairy farmers’ milk checks. Here’s a case in point:

Since 2006, exports of cheddar cheese have accounted for a growing share of U.S. foreign sales. From the 11 million pounds exported in 2006, to the 101 million pounds exported in 2011, the percentage of cheddar produced in the U.S. that is exported has grown from 0.4%, to 3.5%. The only downturn in that steady climb was in 2009, when cheddar exports dropped by 27 million pounds, to just 0.9% of production.

Of the 101 million pounds of cheddar cheese exported in 2011, CWT assistance was used for more than 75% of that volume. In fact, 19 percent of all the cheese exported by the U.S. last year was through CWT. That’s the equivalent of nearly one billion pounds of milk, leaving the U.S. through nearly 300 individual sales facilitated by CWT.

Despite all the unfounded political rhetoric last year that the congressional Dairy Security Act will doom our future ability to export, dairy farmers care deeply about foreign sales, and recognize the bottom-line importance of exports. That’s why they formed, and continue to fund, the
U.S. Dairy Export Council. That’s why they formed, and continue to fund CWT, which is no longer in the business of retiring dairy cows, and is exclusively focused on exporting products and building long-term markets for U.S.-made dairy foods.

The globalization of food production has made it a challenging world for farmers, wherever they are located. CWT gives dairy producers in America a unique and crucial tool that they will increasingly need in the future.