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US Dairy Imports Help Show Where Opportunities Lie
The US has evolved from a net dairy importer to a net dairy exporter over the past decade or so, and one of the ramifications of that shift has been less of a focus on the impacts that dairy imports can have on the US dairy industry.
But one of those impacts can never be completely ignored: the potential opportunities that these dairy imports continue to represent for the US dairy industry. These opportunities lie, in part, in displacing imported products with domestically produced products.
Keep in mind that, while the US is now a net dairy exporter by a wide margin, it remains a very significant importer of dairy products, particularly cheese. US dairy imports have topped $2 billion in value for 10 straight years now, and are on pace to set a record again this year.
Also, the US last year imported around 325 million pounds of cheese, more than 150 million pounds below the record (475.6 million pounds, set in 2002), but still a significant volume. The value of these cheese imports is also significant, having topped $1 billion in value in eight of the last nine years.
One of the many reasons US cheese imports have been in general decline for the past decade or so is because US cheese makers are producing increasing volumes of some of these products. Go back maybe three decades, for example, and the only Havarti available in the US was produced in Denmark. Today in the US, Havarti is produced by over 40 companies in a dozen states, according to the Consortium for Common Food Names.
Cheese imports have helped carve out a number of additional niche markets for US cheese makers in recent years, as evidenced by the fact that USDA’s National Ag Statistics Service has recently begun reporting production figures for both Gouda and Feta (2013 output of which totaled 47.8 million pounds and 103.6 million pounds, respectively). And the list is almost endless beyond these varieties that are tracked by NASS.
But cheese is hardly alone in providing opportunities for US manufacturers looking to dairy imports for ideas. Probably the most visible of these products is Greek yogurt, which didn’t really even exist in the US a decade ago and now probably exceeds 2 billion pounds annually.
Beyond these consumer products, there are some dairy ingredients that previously were primarily or exclusively available only as imports, but are now not only being produced domestically but are also being exported.
Among these is milk protein concentrate, which generated more than a little controversy a decade or so ago. Back in 2000, the US imported about 143 million pounds of MPCs and didn’t produce any.
Last year, the US still imported about 120 million pounds of MPCs, but eight US plants also produced about 102 million pounds of MPCs. That figure alone provides an interesting bit of information about domestic MPC production, which grew so rapidly that NASS began tracking output back in 2008 (when it totaled about 75 million pounds).
Oh, and the US also exported almost 98 million pounds of MPCs last year, according to the American Dairy Products Institute.
Then there’s butter. Obviously the US is a major butter manufacturer; output last year was 1.863 billion pounds, the highest level since 1941. And the US exports a fair amount of butter (179 million pounds in 2013).
But the US also imports some butter, for at least a couple of reasons. One is price, which the current market situation (sky-high domestic prices, low international prices) nicely illustrates.
The other is quality. That’s not to take away from the quality of US butter, but rather to point out that some of the butter being imported into the US these days has a higher fat content (82 percent) and seems to be finding a niche among some foodies that might, in the future, be filled with domestically produced butter.
When it comes to dairy trade, there’s no bigger product than whole milk powder. Forecast whole milk powder exports for select countries this year will total around 4.8 billion pounds, according to figures from USDA’s Foreign Ag Service.
But the US hasn’t been much of a participant in this trade segment, until recently. Indeed, the US couldn’t really participate in this segment to any great extent, considering that US production of whole milk powder last year totaled all of about 72 million pounds.
But that’s changing, and changing pretty rapidly, as the US gears up its whole milk powder production for the global market. Just to cite one example: Dairy Farmers of America earlier this year started producing whole milk powder at a new plant in Fallon, NV.
Production figures are starting to reflect this additional whole milk powder capacity; August US production of WMP totaled 12.8 million pounds, up almost 86 percent from August of 2013.
In the future, the US dairy industry can benefit from the influence of imports in a couple of important ways.
First, US manufacturers can “steal” market share from imports, by producing products ranging from Havarti to MPCs domestically to displace imports.
And second, US manufacturers can increase production and exports of products such as whole milk powder, to take advantage of that enormous and growing international market.
The US will always be a significant dairy importer, simply because there are products produced in other countries (such as specialty cheeses) that can’t be produced in the US. But the US dairy industry can fuel growth by “borrowing” product ideas and filling both domestic and global niches. DG
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