Episode 29: What Did Farmers Want To Know About Dairy Exports At The Joint Annual Meeting?

Charles Krause 0:00
Under the bonus exports podcast where we answer farmer questions from the 2023 joint annual meeting. I am Charles Kraus, a dairy farmer from Central Minnesota and I’m the chair of the farmer relations committee at Dairy management Incorporated. I have with me two experts from the US dairy Export Council. Vicki Nicholson West is Senior Vice President global ingredients marketing and the executive director for US debt, Singapore. And William Lout, who is Vice President of Global Economic Affairs at US dairy Export Council. Let’s jump into the farmer questions either one of you can answer what trends are we seeing in dairy products develop here created for exports? Well,

Vikki Nicholson-West 0:41
I’ll kick us off on that one. I think I might have touched on it a little briefly earlier. But one of the key trends we see is around dairy proteins given you know, the focus on health and wellness worldwide, I mean, it’s the pandemic really drove folks to think more about their health and what they can do, and preventative health and how food can be medicine, and support a healthy lifestyle. And dairy is just such a perfect fit on that one. And, you know, protein definitely has risen to the top. And we’re really excited about that. And that’s a trend that we see really driving a lot of utilization, and incorporation and snacks, and in beverages going forward. So you know, also snacking and grazing is not just a US thing. It seems like everyone started snacking more around the world. And we’re really happy about that. So you know how we can incorporate dairy, whether it’s skim milk powder, or dairy proteins, or milk proteins and snacks, is really becoming a good opportunity for, for the US industry. And then I think I managed to mention some of those very high value elements, the bio actives is unique elements that you can find in dairy, that have some very unique benefits, like lactoferrin has a lot of immunity boosting elements. So, you know, this is just one of those things where as more research comes online, whether it’s through, you know, the National Dairy board, or a lot of the partners that we have, through DMI that do research for us with the universities, this is just going to help reinforce the value that dairy brings to a really healthy lifestyle.

Will Loux 2:35
Yeah, and I agree completely with everything. Vicki said I think this is such an interesting question, because there’s so many different threads that you could pull on this because I think Vicky’s points on moving up the value chain on the high value side is absolutely correct. I think we’re seeing that, especially in the ingredient space. I mean, certainly, obviously, a lot of the marketing that US DEC has done on the cheese space as well to highlight the image of us cheese through a lot of our great diversity of specialty cheeses has been fantastic. But we also do a lot of product on the more bulk side, especially on the cheese, as well. There’s a lot of great opportunities that we see there, especially with the new capacity coming online. And the fact that cheese demand is growing around the world. I mean, I think I look at, you know, the per capita cheese consumption and in most Asian markets, outside of perhaps Japan and Korea compared to the US, it’s a fraction of what we consume here. But it’s even in China and in Southeast Asia. It’s a fraction of other Asian markets. And so I think there’s a great opportunity for the US to continue to expand its portfolio beyond what we’ve done. But it’s not just the products exactly that we’re trying to find innovation in I think it’s also the channels and I think Vicki was alluding to all the different snacking opportunities, the opportunities at retail, the opportunities and food service, e commerce, I think there’s a lot of different ways that I think the US dairy industry is diversify in terms of what products is offering, which markets it’s targeting and which channels it’s going into. Let alone everything we can talk about on packaging and all the rest. I guess this

Charles Krause 4:03
is directed to Vicki can Vicki Can you tell us about our new single floor dairy center for dairy excellence?

Vikki Nicholson-West 4:09
Okay, how long do we have?

Charles Krause 4:11
Keep it under half an hour? All right.

Vikki Nicholson-West 4:14
Yeah, happy to you know, this is one of those really key cornerstone elements. accomplishments that the US dairy industry has made. Our us center for dairy excellence opened in 2020 Officially, and it’s really you know, an ideation and learning hub. It is a destination. So it’s envisioned as the first of its kind learning and discovery destination for all things us dairy. So think of it as that gateway linking us suppliers and Southeast Asian customers, health professionals, influencers and other partners that we have In Southeast Asia, to collaborate and work, you know, it’s this ideation and insights hub that’s going to deepen knowledge and create new opportunities for our industry, and to be more of a collaboration space. And, really, it’s the opportunity to hold programs that create and set the stage for develop winning food and beverage products, and menus that meet Southeast Asian consumer needs, and their tastes, preferences and their lifestyles. So this is what I like to say. And you know, first and foremost, thank you, for the dairy farmers for supporting us to be able to establish this, because really, this is the house that farmers built. It really is, we couldn’t have done it without the support of every dairy farmer within the US. Because it is your home away from home is our industry’s home away from home, to be able to use as that platform to meet with their customers. And to engage. If I go through the stats, just to kind of give you that part is 5000 square feet of space, we have a demonstration kitchen, which we also have a lot of cameras on there, and it can project throughout that whole 5000 Square Space anywhere within the facility to watch what’s going on behind within the kitchen when we have food technologists and chefs they’re demoing. But we can also live stream and record which we’ve done a number of things on of recording videos that can be used as like podcasts, to live streaming webinars and demos to customers across Southeast Asia who can’t make it Singapore, and might be in the Philippines or Thailand. We have a small sensory sensory lab there in which we support our, our our members in trying to identify what are those taste profiles and textures that local consumers are looking for. We also have a very large seminar room that can be broken up into two smaller ones where we host hands on workshops. So that’s one of our cornerstones, their events there is that we will bring in food formulators and customers from around the region to spend a couple of days with our team, and really learn how to utilize ingredients or cheeses. And if you think about it, we could talk to you in a seminar. But sometimes your eyes glaze over and it doesn’t really kind of set in. But if you think about like in high school, when there was homework or shop and you had to do it, you remembered it. And it’s a great opportunity for those customers to not only go through a classroom style, but to get in there and actually do it themselves. And this is a lot of fun, we actually have it little put them in teams, and they do a bit of a competition. And who can come up with some of those best local friendly, creative ideas using our dairy products in our dairy ingredients. It’s also a place where our members can utilize it for meeting with their customers and having meetings and even doing their own demos. We have hot desks or spaces where they can sit, because not every processor or Co Op has an office or an office rep sitting in Singapore, the region. So when they come to visit, they’ve got some place that they can sit and work for the day, they don’t have meetings with customers to make phone calls, get something done on their laptops, etc. So we’re really excited, it’s going to evolve over time. We know we’re we’ve gotten our feet wet. And we’re really, you know, starting to envision even more what we can do with the space and and how we can engage more with the trade. We’ve had a number of different SNR groups come and visit we’ve had a number, State Department of eggs come and visit. So that’s also really great as those different ad groups also start to come and spend more time in the region. This allows them also a base to be able to hold one day or half day meeting. So really excited. Hope I really wish that every one of you could come and see it and I hope at least one day that a number of you can but it is really a great endeavor. And I will tell you this one last point. It does reinforce our US dairy industry’s commitment to the region, having a brick and mortar footprint in Southeast Asia speaks volumes to buyers and end users. That to them is just a true establishment of how committed we are of working with them and wanting to collaborate and be a committed supplier

Charles Krause 9:48
and I can having just toured it in June this last year. I don’t know if everyone can get there. It’s only a little 17 hour plane ride to get there but I was so impressed and the thing that is impressed me most was the people that you have working on your staff there, and the passion and the pride, I think they were so excited to be able to finally meet some of the US dairy farmers that they’re working for, and put a face to the product and commend you for the excellent facility you put in, and for how well you manage the money that we give you to do it. It’s not elaborate, but it gets the job done. And it’s a very good cornerstone in that very large market that we have. So thanks, Vicki for that. So the next question, how can we make the export story relevant to other farmers back home, that have no concept of how this market impacts their business?

Will Loux 10:43
Yeah, so I can take this one, because I think this is one that I really find particularly important, just as so I grew up on a corn and soybean farm back home, and I see how important those international markets are to our farm back in Iowa. But crucially for dairy, I see international markets as critical to every dairy farmers business, whether they’re producing in the southeast, which doesn’t export much at all, or whether they’re producing in California where over a third goes to export, you know, critically, dairy exports do three major things to each farmer’s business. So number one, it’s crucial for maintaining market balance. So Vicki alluded to it earlier that basically, you know, one in six tankers of milk is going to export every year. And, you know, frankly, a lot of that is on the protein side of things. So we’re pretty close to being balanced and milk fat, so you’re on average butterfat, 95% or so 97% stays here in the United States, but around 20% of the protein and other skim solids go overseas. So if we want to be balanced as a market, we’ve got a choice of either one, we export that protein and other skim solids, as well as the milk fat, and particularly in cheese that goes abroad. Or two, we end up actually deciding to cut our milk production by 20%. And then import a heck of a lot of butter from our friends over in Ireland. And I don’t know many dairy farmers that want to do that. So one, just to keep the market where it is and keep pace with domestic demand growth on the fat side, we got to export. And number two is also dairy exports are really the engine for growth. I mean, I think that’s absolutely critical here too, is the fact that since COVID, so since 2020, US exports have grown more than US domestic consumption. Now, certainly we consume a lot more of our milk here in the US than we do sell abroad, as I was alluding to, you know, roughly upwards of 80% is consumed here at home. But even still US exports have really been the engine of growth. And even if your farm doesn’t necessarily want to grow, your neighbors might or folks around the country do. And so if we’re going to continue to grow as an industry, and really find demand for a lot of that new processing capacity that’s coming online that folks are wanting, we’ve got to find that abroad. And I think that’s the other critical piece here. And then finally, you know, day to day, what happens abroad matters to your milk check. I mean, if you think about our regulated pricing system today that it’s primarily driven, last one to class for, by what’s happening abroad and in many different products. It’s driven by your butter price, your cheese price, your nonfat dry milk price, and your dry weight price. And for nonfat dry milk and dry away, over half of those go abroad and cheese is increasingly becoming important for international markets. And if there’s anything you know, Vickie’s team can do to increase the reputation of us dairy products abroad and US nonfat abroad. If we increase our reputation, and you know, we’re able to increase our value of our nonfat dry milk by just 10 cents or so because we’ve either driven demand or we’re getting a premium in the marketplace. And that filters back to the milk price that’s going to add about tenths almost $1 to your class for price. So I mean, we’re talking about one, we just got to keep exports going to keep the market balanced, not imported a heck of a lot of butter from Ireland, but it’s also driving our growth and from a day to day basis. It matters a lot for what your milk check looks like month to month. And so as an industry if you think about those three things, I mean, man, we’ve got to really do our due diligence and invest in what’s happening abroad. And it’s not to say domestic sales aren’t important. It’s a both and between domestic and international today just given how interconnected the world is. And I look to the international market with particularly excitement as we go forward in those next 510 15 years as we talked about.

Charles Krause 14:39
So here’s another question from the Annual Meeting does unique branding and logos for dairy products make a difference in the export markets so

Vikki Nicholson-West 14:48
I’m I’m gonna build on that because of you know, there’s a dovetail to what William touched on. Where we do brand and have a seal is in the air If cheese, I will admit not my area that I lead. But I’m going to speak on behalf of my counterpart who has done a fantastic job when it comes to specialty cheeses in the retail market, where they brand cheeses, and we have a seal in which we brand cheeses from the US. And it’s about raising the awareness, but also raising the understanding and that brand equity of us dairy. And does that matter? Yes. Because as consumers and customers are willing to pay more, I II move us up the value chain because we they see that brand equity, and they start to associate that brand awareness of us cheese with a quality cheese, a high value cheese, one that they’re willing to pay more far for, that has a halo effect across all the other dairy products and dairy ingredients. So we do that there. You might ask, Well do we brand it elsewhere, kinda a little hard to brand ingredients, because we’re not the finished product. And you’re not always sure if you’re being used at 10%, or 15%. And that finished product, or whose finished product you’re going in, because of the supply chain. But to take advantage of that halo of consumers learning and understanding more and recognizing, you know, that brand equity that comes from the cheese portfolio really has value when they see products elsewhere. And it also has impact on those buyers and their perception when they’re buying for their company. Yeah, and

Will Loux 16:37
if I can add just even a tangible example of how us building that brand is critical in the long run. I like to look at the Europeans a little bit here. Because when Europe sells cheese to the United States, where they’ve done a very good job of building their reputation and brand, they’re selling it on average, the export value is about $4.50 a pound to the rest of the world, it’s about $2.50 a pound. So we’re paying just $2 Extra basically for the name of Europe. So if there’s things we can do to increase the reputation of the US abroad, that then can filter back to the value of us cheese and back to the value for dairy farm.

Vikki Nicholson-West 17:13
And if I can build on that some more, because I just can’t let go of this. So part of building that brand equity. Having a US center for dairy excellence in Singapore is an element of branding. It’s not on the product, but it’s on the building, so to speak. It’s on the floor. So that helps build that brand equity and that brand recognition. And it just helps to drive the value and that willingness to pay a little more even for

Will Loux 17:42
Yeah, and that’s not just Cheez Its ingredients. It’s everything. It brings that whole halo of us dairy, I think to customers around the world. Well

Charles Krause 17:49
thank you, Vicki and we’ll for the conversation about exports today. I think we could go on and on but we need to wrap it up. It’s been interesting to hear about how the what the Dairy Checkoff did ore exports in 2023 and how we look forward in the coming year of 2024. In closing, I just want to say thank you for joining us and all the farmers listening today. If you want to hear more about various issues affecting the dairy community, subscribe to this podcast on your favorite podcast platform, including Stitcher, Spotify and iTunes or you can check out our website Dairy Checkoff. podcast.com for future episodes

Transcribed by https://otter.ai