Dairy Globalization Refresh:

2011 Update

Commissioned by Dairy Management Inc. & U.S. Dairy Export Council

Conducted by Bain & Company

August 2011
Preface
In 2009, the Innovation Center for U.S. Dairy (Innovation Center), with support from Dairy
Management Inc. (DMI) and the U.S. Dairy Export Council (USDEC), prepared a strategic
analysis of the global dairy landscape in order to find a common understanding of the
challenges, opportunities and threats to the U.S. dairy industry posed by increasing
globalization. Recognizing that in the intervening 18 months, the global downturn has
significantly impacted the dairy industry, the Innovation Center commissioned a new study to
refresh the insights and recommendations that came out of the 2009 analysis. This document is
a summary of the work and analyses that is intended to provide objective information for U.S.
dairy industry participants to facilitate important discussions on the future impact of globalization
on the U.S. dairy industry. The goals of this document, with the support of the broader analysis,
are as follows:

• Primary: to provide a refreshed strategic analysis of the global dairy landscape to

establish a common understanding of the challenges, opportunities and threats posed by
increasing globalization to the U.S. dairy industry
• Secondary: from the analysis, reaffirm suitable programs of work at an industry level to
address the opportunities and challenges of globalization, and thus help the U.S. dairy
industry participants be better prepared to compete for increased sales in the global
dairy marketplace, including dairy demand in the United States.

As in the 2009 analysis, the project included interviews with a number of stakeholders
throughout the dairy value chain, both within the U.S. and across a number of regions of
interest, and utilized publicly available information and reports from a variety of sources.
Economic and trade data used originated mostly from 2010, updating the 2009 study that relied
on 2007 and 2008 data.

This document is intended to assess global dairy industry trade dynamics to help create and
support a framework for discussion and debate among institutions which participate in the U.S.
dairy sector. Information and analyses herein are based on third-party sources. Projected
market and financial information, analyses and conclusions should not be construed as
definitive forecasts or guarantees of future results. These analyses form the basis for
recommended actions that the U.S. dairy industry might implement for its collective benefit.
Therefore, any party considering action on the basis of the analyses provided in the document
should independently determine which course of action is most reasonable in the context of its
own economic situation.

This document, prepared by the Innovation Center for U.S. Dairy, contains research and analysis
conducted with the support and assistance of Bain & Company, a global management consulting
firm.

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Additional Information

The key findings of the “Dairy Globalization Refresh: 2011 Update” study are also captured in a
news release and an executive summary, which are both supported by a 240-slide fact base.
Links to these study findings may be retrieved in the globalization section of USDairy.com.

For more information or to request a hard copy, please contact Clemente Santiago at
[email protected].

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Executive Summary
Introduction

The original Innovation Center study on the impact of globalization on the U.S. dairy industry,
completed during 2009, took place in the context of world dairy demand rising during 2007 and
2008, when U.S. dairy exports reached historic highs, which in turn exposed the U.S. dairy
industry to the opportunities and challenges of a globalizing marketplace. The first study
resulted in the recommendation that the U.S. industry pursue a strategy of Consistent Exporter
(since renamed Consistent Supplier), with an attendant list of seven industry- and corporate-
level recommendations to support such a strategy.

2009 recommendation was for U.S. dairy to become a consistent

supplier to the global market
“Fortress USA” Status Quo Consistent Global Dairy Player
Supplier

Complete focus on Limited industry Commitment to global Consistent exporter

domestic market efforts to address opportunities for U.S. strategy, plus:
globalization milk supply
Use of additional Industry moves to an export
tariff and non-tariff Current policies and Broad efforts to focused model that includes
barriers to regulation improve commercial milk supply and processing
overcome foreign focus and align assets outside of U.S.
Opportunistic
competition product portfolio
participation in global Commercial and innovation
Supply mgt. as a trade as prices allow Collective effort to capability development
means to balance reform FMMO and
Individual companies May include off-shore
production and price support
may choose to investment and other
demand, and limit
develop differentiated Efforts to improve significant efforts
volatility
export capabilities forward contracts,
Capabilities will support
Attempt to limit futures markets
Limited effort to domestic market, though
effects of
manage volatility Strong domestic investments may be
globalization
market as a basis for diverted globally
global trade
Joint industry efforts
to build insight/
capability

Recommended
by IC Board

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 The 2009 study recommended seven industry- and company-
specific initiatives

Reform U.S. I. Reform of regulated milk pricing systems (Federal and State)
pricing and risk and price support mechanisms
management II. Development of better mechanisms for risk management and
policies reduction of volatility

Increase access III. Continued pursuit of trade treaties that provide net export
to international benefits
markets

Improve IV. Analysis and prospective redirection of industry’s global, pre-

responsiveness competitive sales and marketing investments and capabilities
to global demand V. Build on existing food safety assurances and traceability as a
competitive strength
VI. Develop better ability to meet customer product specification
requirements globally
VII. Encourage increased product and technology innovation

Since then, the global economic downturn has significantly impacted the dairy industry.
Sensing that globalization would be an ongoing force shaping the dairy industry in the future,
and concerned that the U.S. might not be fully prepared to deal with a rapidly changing dairy
landscape, the Innovation Center commissioned a second study on the topic of globalization to
determine what, if anything, had changed about the outlook for global dairy, and whether such
changes might impact the Consistent Supplier strategy recommended in the prior study. This
strategic “refresh” assessment of the global dairy landscape, and its impact on the U.S. dairy
industry, was led by a task force comprised of dairy industry leaders and supported by Bain &
Company.

New data available since the completion of the 2009 study revealed that global trade in dairy
slowed from 2008 to 2009 (from 6.2% year-on-year growth in 2008 to 2.3% year-on-year growth
in 2009), only to recover at a higher growth trajectory in 2010 (10.5% year-on-year growth).
Second, global raw milk production declined slightly from 2008 to 2009 (-1%), while prices for
internationally traded dairy products declined (2008 to 2009) then recovered (2009 to 2010).

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 The global downturn significantly impacted the dairy industry
During the downturn, … stalling production … and driving down prices
global trade slowed… and growth …

YOY NET GLOBAL TRADE GLOBAL RAW MILK WORLD DAIRY PRICES
GROWTH (BY WEIGHT) PRODUCTION (USD/MT)

“The financial crisis in the global economy caused international demand for dairy products to decline
in late 2008 and had a dramatic impact on product prices during the first half year of 2009…the
financial crisis impacted every aspect of the dairy business: production, trade, consumption and
prices.”

International Dairy Federation, “The World Dairy Situation” (2010)

Note: Global raw milk production refers to 27 key markets

Source: FAPRI (2011); IDF (2010); ABARE (2011)

Despite the reversal in negative trends in prices and the level of trade, the impact of the global
downturn left many in the industry with several key questions:

1. What, if anything, has changed about the outlook for dairy?

2. How might these changes impact the Consistent Supplier strategy recommended in
2009?

A narrower set of objectives was created to guide this refresh, specifically:

1. Determine if globalization trends have substantively changed

2. Agree on which changes could materially affect the primary conclusions of the original
study
3. Assess any expected change to the duration of the “window of opportunity” facing the
U.S. dairy industry
4. Synthesize updated findings to determine potential impact on the U.S. dairy industry, the
Consistent Supplier strategy and the recommended industry initiatives derived in 2009
5. Communicate the findings of the project to key dairy stakeholders and constituents

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The refresh study did not start from a “clean sheet of paper;” rather, the study sought to validate
the most critical assumptions from the 2009 study around long-term demand for, and supply of,
internationally tradable dairy products and to supplement these analyses with interviews of
large-scale buyers of dairy products around the world. Last, several external factors (“wild
cards”), such as currency and upward pressure on feed costs, were also examined.

Overall Findings

A refreshed view of global dairy fundamentals shows that a robust export opportunity still exists
and the strategy of Consistent Supplier remains the best option for the U.S. dairy industry
moving forward. Three key themes emerged from the analysis:

Demand: Despite short-term disruptions due to the global downturn, long-term demand for dairy
products will remain strong, driven primarily by emerging markets.
Export supply: Traditional sources of supply continue to be constrained over the medium-to-long
term and will fall short of expected demand. Although Europe and New Zealand may expand
output more than originally anticipated, Brazil and Ukraine have stumbled in recent years while
Argentina and Belarus have yet to emerge as major global players.
Buyer feedback: Significant global dairy product buyers desire an alternative source of supply
and have affirmed that the U.S. is well-positioned to meet this need, but the U.S. still has clear
areas for improvement.

In addition, the export market for dairy can provide value to the U.S. markets beyond what is
available domestically. For example, from 2008 to 2010, Class III equivalent export prices
exceeded U.S. actual Class III prices in all but one month.

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 The export market can provide value to U.S. dairy beyond what is
available domestically
Available export prices exceeded … and U.S. prices have benefitted less
U.S. actuals for most of the last than those in New Zealand
two years…

CLASS III ACTUAL PRICES VS. U.S., FONTERRA MONTHLY MILK PRICES INDEXED
EXPORT EQUIVALENT, 2008-2010 TO 2006 AVERAGE PRICE
(JUN ’06-APR ’11)

Source: USDEC globalization metrics, Fonterra Annual Reports;

Fonterra Media Releases; NZX Agrifax Monthly Dairy Reports

This updated view, coupled with the 2009 findings, shows the long-term outlook is for a demand
gap that is wider than previously anticipated. The window of opportunity, while finite, remains
open for the long-term, with the U.S. dairy industry well-positioned to be a primary source of
supply to satisfy that demand. However, company, industry and policy efforts to increase pricing
and supply flexibility, reduce the impact of volatility and improve commercial focus are still
necessary to position the U.S. to fully benefit from the long-term opportunity to grow value and
volume.

Strategic Update on Net Import Markets

1. Compared to the 2009 assessment of net import markets, China and Russia are
likely to be larger net importers.

For China, dairy consumption growth has increased since 2009 and promises to show sustained
growth over time as economic development moves inland from the more affluent coastal region
and 200 million more Chinese join the ranks of the middle class. Over the same time period,
domestic Chinese production took a significant hit from the melamine crisis of 2008-2009, which
exacerbated the supply/demand imbalance. The current structure of the Chinese dairy industry
makes it unlikely for there to be large production increases without major investments in large-
scale industrial farms. Such investment would be massive in scale and would displace millions
of small-scale dairy farmers throughout rural China, making such large-scale production
increases unlikely.

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Likewise, ongoing quality issues and a lack of trust in domestically produced dairy products are
creating opportunities for increased imports. That being said, while China is likely to be a net
importer for some time, Chinese governmental policies around tighter import documentation
requirements may create increasing difficulties for U.S. imports.

Russian production dipped from 2007 to 2010 due to droughts, high temperatures and
increased feed costs, increasing the need for imports and widening the demand gap. Recent
instability in milk production along with shifting government policies creates an unclear picture
for future production quantities. Coupled with the fact that dairy consumption growth has been
slowed by a declining population size in Russia, Russia is expected to remain a major dairy
importer—this despite efforts by the government to encourage domestic production and impose
stricter import documentation requirements (effectively blocking Ukrainian and U.S. production
in the near term).

2. Net importers Southeast Asia, Mexico, Middle East/North Africa, and India will likely
not change the demand equation much versus the 2009 analysis.

Southeast Asia, which in 2010 had net imports of 777,000 metric tons of dairy (17% of global
dairy trade), remains a sizeable importer of dairy products with strong potential for consumption
growth over time. While milk consumption has increased faster than expected, local production
still represents less than 10% of domestic consumption. The net effect is little change in its
potential versus the 2009 assessment.

Mexico, with net imports of 299,000 metric tons in 2010, has experienced continued growth in
consumption. Stable economic growth is expected to continue to fuel this trajectory. However,
increasing public health concerns over obesity may gradually create a shift toward lower-fat
products. Despite faster production growth, Mexico is expected to remain a significant importer
through 2015 and beyond.

The Middle East/North Africa region had net imports of 519,000 metric tons in 2010. Taken
together as a group, Algeria, Egypt, and Saudi Arabia collectively imported more than China
during this time period. While production has slowly grown in the region, water and forage
limitations will constrain future production growth, leaving an industry that will not satisfy
domestic demand. The current unrest in the region creates enough uncertainty that it could
threaten short-term economic growth, although subsequent political reforms, should they be
taken up, could lead to significant long-term upside for economic (and indirectly, for dairy)
growth.

In 2010, India was almost neutral in net dairy trade (20,000 metric tons of net exports, less than
half a percent of global dairy trade). Slower production, due to bad weather combined with
continuing growth in consumption, made it difficult for domestic supply to keep up with demand.
The government’s long-term encouragement of self-sufficiency has failed to close the rising gap
between consumption and domestic production. This has caused imports to creep up by a small
amount, with similar opportunities expected to continue. However, domestic production has the
potential to increase dramatically and should grow under the government’s National Dairy Plan.
Also important to note is that while India is essentially closed off to American exporters, the

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growing international demand they create may indirectly create export opportunities for the U.S.
elsewhere in the world.

Strategic Update on Net Export Markets

1. Compared to the 2009 assessment of net export markets, New Zealand and the
European Union are likely to expand their capacity to export, thus creating a net
reduction in the latent demand gap forecasted in the prior global dairy study.

New Zealand had net dairy exports of 1,997,000 metric tons in 2010, fully 41% of the global
total. Production grew faster than expected during the 2007-2010 period due to cow population
growth (driven by conversion of sheep land to dairy). At the same time, domestic consumption,
always a small fraction of the total, slumped due to increased prices, leaving more product
available for export. Future production growth is expected to slow, with fluid milk production
likely to reach 23 million metric tons by 2020. Despite the increased production (versus the 2009
study), New Zealand will still not produce sufficient milk to fill the latent demand gap.

In the EU, which exported a net of 1,419,000 metric tons in 2010, aggregate production could
increase by 5-8% between 2010 and 2020. This anticipated growth will likely result in a step-
change in output by some countries such as the Netherlands, Ireland, Austria, Belgium, and
Spain. These countries will expand production to use the full potential of existing dairy farms
when production quotas are scheduled to disappear in 2015. The growth will be partially offset
by production declines in other EU countries. After the 2015 transition point, growth will likely be
constrained by environmental regulations and the steep incremental investments required to
expand production.

2. Brazil and Ukraine are likely to play a lesser role in addressing the global dairy
demand gap than was expected in 2009.

Ukraine had net exports of 64,000 metric tons in 2010, or 1% of the global total. Financial, policy
and quality issues caused a reduction in production versus forecast from 2007-2010, leaving the
level and quality of future exports dependent on government and industry participants
addressing many of these issues. A weak economy and high dairy prices conspired to lower
consumption as well. While some production growth is possible, it is unlikely that Ukraine will
become a major participant in global dairy trade in the near term.

Brazil became a net importer in 2010, importing 48,000 metric tons due to production drops
spurred by poor weather and unattractive profitability. However, domestic consumption has
continued to rise, leaving the country in a net importer position until at least 2015, at which point
they may become an exporter again. In the long-term, Brazil has a strong potential to become
an increasingly large net exporter.

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3. Australia, Belarus, Argentina and the United States, collectively representing 26% of
global exports in 2010, have not fundamentally changed the latent demand gap
equation since the 2009 study.

Australia, which had net exports of 390,000 metric tons (8% of 2010 global dairy trade), had
countervailing forces of a production deceleration due to droughts and then floods, but an
improved water table should spur limited production growth over the next several years.

Domestic consumption has remained relatively flat, leaving Australia, as it was in 2009, a large
net exporter with limited capacity to expand production.

Belarus continues to rely heavily on its trade relationship with Russia but has continued to grow
its dairy exports at a fast pace. It had net exports of 312,000 metric tons in 2009, or 6% of global
trade. It has begun to diversify its export base beyond Russia. However, poor economic
conditions dampen consumption growth domestically and are likely to slow the country’s ability
to invest in production—despite promising underlying fundamentals.

Argentina exported a net 247,000 metric tons in 2010. Even with the economic downturn, it
continued to grow both production and domestic consumption, thus remaining a promising
exporter, despite protectionist policies. An improved dairy-grain price ratio should encourage the
use of feed, leading to improved herd yields over time.

The United States was a net exporter of 322,000 metric tons in 2010, or 7% of the global total.
The global recession, coupled with slow reaction of compatible U.S. dairy and trade policies and
a period of elevated feed costs, could lead to a less competitive U.S. industry. Slow growth in
consumption is expected through 2015, relatively unchanged from the 2009 forecast.
Production growth is also expected to be slow given the current environment, thus a focus on
reforming U.S. pricing and risk management policies, increasing access to international markets
and improving responsiveness to global demand is required.

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In summary, the window of opportunity for globally traded dairy products remains open in the
near- to medium-term, with the previously estimated latent demand gap of 6.5 billion to 7 billion
pounds likely to be as big or larger than estimated in 2009. It should be remembered that this
latent demand gap represents an estimate of a gap that exists at a particular point in time, one
that would continue to grow according to the underlying supply and demand trend lines.
Therefore, it is not simply a finite volume that, once attained, remains static with no further
growth opportunity.

The window of opportunity remains open and appears to be

expanding
2013 demand gap widened during the … leaving the window of opportunity
global economic downturn… open at least through the medium
Net impact on 2013 demand gap term

China • China shows continued growth in demand

IMPORTERS

while ongoing melamine incidents raise

Russia questions regarding future supply
• Russia production dipped, forcing continued
Southeast Asia, Mexico,
exports to satisfy domestic demand
MENA, India
• Potential low-cost producers such as Brazil
Brazil and Ukraine stumbled in recent years, with
Brazil becoming a net importer
Ukraine •
EXPORTERS

New Zealand and EU, despite expected

growth and some production increases, are
New Zealand unable to fill the demand gap
• Other sources such as Argentina and
European Union
Belarus have good potential, but are still
Australia, Argentina, Belarus relatively small

The previously estimated latent demand gap

of 6.5-7 billion pounds still exists and may be
larger than previously estimated

Note: MENA includes Algeria, Egypt and Saudi Arabia.

Southeast Asia includes Thailand, Indonesia, Vietnam, Malaysia and Philippines

Wild Cards

As was done in the 2009 study, several market forces or “wild cards” were examined to
determine what effect, if any, they might have on global supply/demand balance and the
opportunities presented to the U.S. in international dairy trade. The 2011 study focused primarily
on two such wild cards: feed costs and trends in global currency valuations.

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Feed costs were included as a wild card since there has been significant upward pressure on
feed costs in the last decade, and feed plays a material role in determining relative cost
competitiveness of various countries and production systems. Corn, soybeans and wheat have
all more than doubled in cost from 2000 to 2010, with the most significant spikes in 2007 and
2008. While there was some abatement of elevated feed costs in 2009 and 2010, forecasters
predict that by 2013 corn, wheat and soy will be well above the average costs for the prior two
decades. To ensure the best possible competitive cost position, producers and processors will
be well served to focus on reassessing their cost structures in anticipation of higher feed costs.

Feed prices have risen quickly over the past decade

HISTORICAL COMMODITY PRICES
(INDEXED AT 1983)

Product Change 1983-1999 Change 2000-2010

Wheat -27% 126%

Soy Bean -33% 111%

Corn -34% 104%

Source: Bloomberg (2011)

However, this upward cost pressure is not likely to negatively impact the U.S. cost position on a
global basis. If traditional grazing production regions such as New Zealand seek to
accommodate a finite land base by switching from a pure grazing model towards a feed-based
production system, the marginal cost of production is likely to far exceed that of the U.S. This
will put disproportionate upward pressure on such systems relative to the U.S., which already
operates predominantly on a feed-based production model.

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 High feed prices not likely to shift U.S. cost position; major
expansion will be costly for most competitors
Despite higher feed prices, And, even for traditional producers, major
the U.S. should maintain its commercial growth will be costly
cost position

2011F RAW MILK PRODUCTION RAW MILK ESTIMATED MARGINAL PRODUCTION COSTS
COSTS ($/MT) 2011F ($/MT)
Costs based on IFCN average-sized farms Costs based on IFCN average-sized farms

NEW ZEALAND
MARGINAL
COSTS INCLUDE
SHIFTING TO
100% FEED
AFTER PEAK
PRODUCTION IS
REACHED
UNDER
GRAZING
MODEL

Note: 2011F total costs were estimated using expected feed and land cost changes; U.S. (West) and EU
calculated from 2008 data
a) U.S. farm marginal cost change expected to be minimal due to accessible land and capital; range mostly
driven by growth in land costs
b) Netherlands reflects total costs for average large farms; significant change in total cost structure not
expected as dairy footprint is near peak
c) China costs estimated based on 340-cow corporate farm under feedlot production system; higher costs
driven by imported cows and feed
d) New Zealand marginal costs estimated for move to 100% feed, with 50% purchased and 50% silage
Source: IFCN 2010; USDA 2009; China Dairy 2010; Teagasc Ireland Dairy 2010;
“The Wealth Report” (2011); Eurostat (2011); Expert interviews

Currency, another potential external wild card, is unlikely to have a near-term impact on U.S.
dairy. Certainly, longer-range currency trends may influence the long-term cost positions of
suppliers and boost the purchasing power of import markets; however, currency fluctuations are
unlikely to radically influence shorter-term purchase decisions. Many of these shorter-term
fluctuations are managed through hedging operations, especially by those manufacturers who
are concerned about ingredient substitution, quality issues, reformulation and the like.
Moreover, even with a strengthening U.S. dollar (not the current mid-term forecast for the dollar
versus the Chinese renminbi, the Mexican peso, or the Indonesian rupiah, but worth
considering) the latent dairy demand gap will still exist, and its existence will create pricing
levels that will make the export market attractive to producers and processors.

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Summary and Recommended Actions

The window of opportunity for expanded international trade in dairy products described in 2009
still remains open to the U.S.; however, there are reminders that the window will not stay open
indefinitely. Dairy buyers want more from the U.S., but import markets over time will try to
address their demand needs, and other export markets will also try to address the global market
opportunities.

Potential long-term U.S. trajectory

In numerous interviews, and in our global survey, international buyers of dairy products affirmed
that they view the U.S. as an important source of future supply, but want the U.S. to commit to
being a more reliable, consistent participant in global markets. In major import markets,
investment in domestic production, and a willingness to protect local producers, may over time
reduce the latent demand gap. Likewise, export supply may expand via growth in traditional
larger scale focused exporters as well as advancement of developing producers like Brazil,
Argentina, Ukraine and Belarus.

U.S. policy reform on the topics of milk pricing, price support, risk management, and standards
of identity would contribute significantly to allowing the U.S. dairy industry to achieve the full
potential of value growth over the long-term. In milk pricing, reforms should support
improvements to the forwards/futures market to manage price volatility, and risk management
tools should be developed to help mitigate the impact of volatility. In the arena of price support,
reforms should remove the government as a “buyer of last resort” and avoid disincentives for
product innovations. Standards of identity should be modified to better align to global norms if

15
commercially needed to meet customer needs. The policy reforms, whatever their details,
should enable flexible pricing that allows milk to flow to its best and most profitable use; achieve
greater price stability, thereby decreasing the cost of volatility; permit market incentives to better
align product portfolios with customer needs; achieve value growth through investment in
innovation, safety and quality; and permit American dairy farm production to grow.

Failure to achieve needed policy changes may not fully derail the Consistent Supplier strategy
outlined in 2009; but without reform, the U.S. will retain many damaging elements of the status
quo, e.g., the U.S. will be a balancer of global excess supply, opportunistically exporting as a
supplier of secondary (or last) resort, and will thus be exposed to heightened volatility. A
relatively narrow industry product portfolio will limit export opportunities and focus much of
export on lower-value products, limiting the ability to grow in higher-value segments of the
market. Likewise, diminished returns on investment in the industry over time will erode farm and
processor equity, making it harder to make long-term investments in future growth. The U.S. will
miss out on sustainable volume and value growth and unmet demand will accelerate the
expansion of producers in other parts of the world. With less growth in higher-value products,
capital investment in the U.S. dairy supply chain will be dampened, ultimately leading to
declining competitiveness. Without a policy and economic environment that facilitates the
growth and advancement of the U.S. dairy farmer, filling the latent demand gap could be out of
reach.

In summary, as we examined the events that have transpired since the last analysis of global
dairy trade, we found no fundamental reasons to divert from the strategy recommended at that
time, the Consistent Supplier strategy. With the greatest potential for growth and future profit,
Consistent Supplier has a higher estimated present value to the entire U.S. dairy industry
versus the Status Quo scenario. The benefit of the Consistent Supplier approach is an improved
ability for the market to access international export opportunities while increasing the capability
to meet the needs of the domestic market. Company and industry actions focused on enhancing
U.S. strengths and fortifying against competitive weaknesses will lead to a more competitive
and capable U.S. dairy industry:

I. A customer-centric market approach, developing deeper and stronger relationships

at all levels of customer organizations, leading to collaborative innovation, product
development and sustainable relationships
II. Develop the capabilities to make the products our customers want
III. Focus on innovation and leading-edge product development, creating a sustainable
market position globally with more value-added products
IV. Focused effort to reduce costs and increase efficiency of U.S. milk sheds, to
maintain a “low enough” cost to compete globally
V. Create a safety and quality assurance system that builds a sustainable advantage
against emerging dairy markets
VI. Develop tools for the market to manage volatility, both supporting producers on the
cost side and processors on the selling side
VII. Targeted efforts to develop global markets that are attractive for U.S. dairy
companies
VIII. Create new growth opportunities for U.S. dairy farmers

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 IX. Align industry efforts to address structural policy reform that will facilitate investment
by the U.S. dairy industry in global opportunities

Despite market by market variations in supply and demand, the net effect of the past 18 months
has resulted in a wider latent demand gap that creates marginally more leeway for the U.S.
dairy industry to act.

Industry and company efforts can combine to make the U.S. a

globally Consistent Supplier

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 Innovation Center Board Member Organizations

Anderson Erickson Dairy International Dairy Foods Association

Associated Milk Producers Inc. Kraft Foods Inc.

California Dairies, Inc. Land O’Lakes

Dairy Farmers of America Leprino Foods

Dairylea Cooperative, Inc. Maryland/Virginia Milk Producers Association

Dairylea/DMS Michigan Milk Producers Association

Darigold, Inc. Milk Processor Education Program

Davisco Foods National Milk Producers Federation

Dean Foods Prairie Farms Dairy

Farmland Dairies, LLC Schreiber Foods Inc.

Foremost Farms Select Milk Producers

Glanbia USA/Nutritionals Shamrock Farms

Grupo LALA Swiss Valley Farms

Hilmar Cheese Company United Dairymen of Arizona

Hilmar Ingredients U.S. Dairy Export Council

HP Hood LLC

Globalization Operating Committee

Kevin Toland, Glanbia (Chair)

Dermot Carey, Darigold, Inc. Keith Murfield, United Dairymen of Arizona

Kimberly Clauss, Hilmar Cheese Company Carol Kitchen, Land O’Lakes

Richard Cotta, California Dairies Inc. Steve Shelley, Schreiber Foods Inc.

Les Hardesty, USDEC Chairman Sue Taylor, Leprino Foods

Jeff Kaneb, HP Hood LLC Jay Waldvogel, Dairy Farmers of America

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© 2011 Innovation Center for U.S. Dairy • usdairy.com/globalization