The Center sought to update the research to determine if fast-changing international dairy market conditions since the 2008 global financial crisis altered the initial findings, conclusions and recommendations to the dairy industry.
“Just as in the first study, our latest analysis showed that long-term demand for dairy products will remain strong, driven primarily by emerging markets,” says Clinton Anderson, a partner with Bain & Co. “At the same time, traditional sources of supply are constrained and will fall short of expected needs. In fact, the demand gap is likely wider than anticipated a few years ago, and the window of opportunity remains open, with the US well-positioned as a supplier to take advantage.”
Over the last three years, China, India, Southeast Asia and the Middle East/North Africa have shown continued demand growth, the report notes. More than 75% of the projected increase in world non-fluid dairy consumption from 2010-15 is expected to come from these four regions.
Meanwhile, Russia’s dairy production has dipped and potential low-cost producers such as Brazil and Ukraine have failed to develop their supply capabilities.
Other sources, such as Argentina and Belarus, have good potential but are relatively small. New Zealand and the European Union, despite modest production increases, will be unable to keep up with emerging market needs, the 2011 report update concludes.
In the original report, researchers identified a number of structural weaknesses that could prevent the US from capitalising on the global market opportunity. As a result, the Innovation Center Board recommended a series of pre-competitive industry initiatives to help the US industry improve its competitiveness and stake a position as a globally consistent supplier.
Programmes targeted reform of US pricing and risk management policies, increased access to international markets and improved responsiveness to serving product needs of global buyers.
“The refreshed study confirmed the findings of the initial report,” says Kevin Toland, chair of the Center’s Globalisation Operating Committee (GOC) and CEO and president of Glanbia USA and Glanbia Nutritionals. “The ‘Consistent Supplier’ strategy is still sound and we’re on the right track.
“However, the report also says the US dairy industry has yet to make critical policy reforms needed to fully benefit from the global opportunity. Policy reforms, whatever their details, must encourage key outcomes: pricing and supply flexibility, customer focus and volatility management. If we don’t make needed changes, we will miss out on sustainable volume and value growth.
“Unmet demand will accelerate the expansion of other producers, and the US industry will see lower competitiveness and less ability to meet market needs.”
The window of opportunity cited in the 2011 report update won’t remain open indefinitely, says Tom Suber, president of the US Dairy Export Council, which manages the globalisation programme on behalf of the Innovation Center.
“As an industry, we have a limited ability to control the ‘size of the prize’,” he says. “What we can control is time; how quickly we move into this space to build a defensible, sustainable position against the inevitable emergence of new suppliers.
“Global buyers see the US as the natural source of future supply, but they await improved US policies and practices that will permit a greater reliance on the US as a consistent global supplier rather than as a residual one.”
Drawing from the insights and conclusions from the updated report, the GOC will continue work programmes in seven strategic areas:
The Innovation Center for US Dairy features in the latest issue of Dairy Innovation.
Source: Innovation Center for US Dairy
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