Will move ahead with executing business plan in 2012
Jerry Kozak, President and CEO of the National Milk Producers Federation which created CWT, announced on November 14th at the organization’s annual meeting that CWT has achieved the 70 percent participation necessary for the organization to move forward in 2012 and 2013. Beginning with milk marketed in January 2012 by producer-owners of CWT member cooperatives and individual producer-members of CWT, a contribution of 2¢ per hundredweight (cwt.) will be collected throughout 2012 and 2013. The funds will be used to execute the strategic business plan approved by the CWT Committee in June 2011and includes the following goals and objectives —
- Support proactive development of sustainable export markets for:
- U.S. American-type cheeses
- U.S. butterfat (butter and anhydrous milk fat)
- Protect export market share and volume gains.
- Provide relative price stability and good returns to U.S. farmers by:
- Discouraging dangerously large domestic inventory build-up
- Encouraging development of overseas markets with better growth prospects
- Fostering strong buyer-seller relationships by showing the U.S. is a dependable supplier
In 2012, the CWT Export Assistance budget will be $35 million, allocated to support export sales activity of products as follows:
- American–type cheese: $22 million
- Butterfat: $ 8 million
- Hold $5 million in reserve to support exports of NFDM/SMP or WMP if necessary.
While 70% of milk marketings is the minimum level of participation needed to move forward with the business plan, CWT will continue to pursue additional participation because the greater the participation, the more effective CWT will be in achieving its primary goal: providing good returns and improving price stability for U.S. dairy farmers. Every dairy cooperative, every producer member in every dairy cooperative, every producer shipping to a proprietary processor – all benefit from the CWT Export Assistance program, and should be supporting it at just two cents (2¢) per hundredweight.
CWT having significant impact on cheese exports
Through the end of October 2011, CWT has assisted member cooperatives in selling more than 78.9 million pounds of Cheddar, Monterey Jack and Gouda cheese to 25 countries on four different continents.
CWT-assisted shipments of cheese, including sales assisted in 2010 but actually shipped prior to September 2011, represent 67% of cheddar exports, 70% of American-type cheese exports and 18% of all U.S. cheese exports this year.
While these numbers are impressive, they represent a little over half of the quantity of cheese CWT has committed to assist in 2011. There is another 35.3 million pounds of cheddar cheese for which CWT has agreed to provide export assistance in the process of being shipped yet this year.
Going where the growth is
The world market for dairy is growing at a rate at least eight times that of the U.S. market. The growth is occurring primarily in two regions of the world — Asia and the Middle East. As you can see from the chart below, the majority of the cheese CWT is helping member cooperatives to sell overseas is going to these two areas.
Of the nearly 30 million pounds of cheese CWT is helping members sell in Asia, just under 75 percent is going to Japan. However, product is going to seven other countries including Korea (with whom the U.S. has a new trade agreement) and China —both markets with tremendous potential.
CWT-assisted sales to the Middle East total 29.3 million pounds with 45 percent going to Saudi Arabia and 33 percent going to Egypt.
Concern growing that 2012 could mirror 2009
The fall of 2011 is starting to look a lot like the fall of 2008. World prices are declining while U.S. prices are holding, even rising somewhat. U.S. dairy product exports are approaching 15% of milk solids marketed. In 2009, falling world prices driven by buyer resistance in world markets resulted in the U.S. losing world market share and U.S. producer milk prices dropping dramatically.
Export sales of three key commodities — cheddar cheese, butter and nonfat dry milk powder (NFDM) — are critical to maintaining producer milk prices. In 2009, exports of these products plummeted and so did their prices — with butter down 22.6¢ per pound, NFDM down 30.3¢ per pound and cheese down 59.9¢ per pound. Fortunately in 2012 there will be a CWT Export Assistance program up and running to help prevent that from happening. The more producers that contribute to the program, the more effective it will be.