In the 15 years since the Cooperatives Working Together (CWT) program was founded by the National Milk Producers Federation (NMPF) as a self-help tool for dairy farmers, it has undergone significant evolutionary shifts to ensure its maximum effectiveness and return on investment, NMPF president Jim Mulhern noted in his most recent monthly column wherein he provided an update on changes being made to address the current state of the industry.
Mulhern explained that CWT initially supported both dairy herd retirements and product exports, but since 2010, the program's exclusive focus has been on growing exports. CWT has specifically targeted products containing a significant amount of milkfat -- such as American-style cheeses and butter -- since the value of fat is a dominant factor in farmers’ milk checks, he said.
“Over its life span, CWT has helped its member cooperatives move more than 900 million lb. of cheese, butter products and whole milk powder into export markets, representing the milk equivalent of 11.1 billion lb.,” Mulhern said.
Additionally, he said the overall growth of U.S. dairy exports in recent years is due in no small part to the role played by CWT. In fact, he pointed out that 80% of total American-type cheese exports and 23% of butter sales are made because of CWT’s export bonuses.
“It’s a successful model that ultimately benefits every cooperative and dairy farmer in America, regardless of their degree of involvement in the export activities of CWT,” he said.
However, times are changing, and the CWT business model must change with it, Mulhern said.
“The domestic market for dairy sales is growing at a slower rate than the world market overall. Total U.S. dairy exports have plateaued in the past three or four years at a roughly 14% share of overall U.S. milk production,” he said.
The fast-rising middle class in the developing world, however, presents a host of opportunities for dairy exports from the developed world – a fact that has not escaped the attention of the U.S.'s primary competitors, Mulhern noted, explaining, “Companies in the European Union and New Zealand are repositioning their dairy sectors to capitalize on the long-term trend of growing demand for dairy in Asia and the Middle East.”
Against this backdrop, and with the support of the CWT board, NMPF recently formulated a new strategic assessment to evolve the CWT program to address the new challenges of today’s global marketplace.
“We want to continue building on successful past practices but, critically, make course adjustments to address new challenges and take better advantage of all the opportunities in an increasingly dynamic global market,” Mulhern said.
A series of proposed improvements in the overall strategic mission and plan are currently under review by CWT’s member cooperatives, with the goal of incorporating these strategic approaches in the near future.
According to Mulhern, the following recommendations for CWT are under consideration:
- Expand the range of exports to engage more products, shippers and customers. Mulhern said the present emphasis on American-style cheeses (cheddar, jack, gouda, Swiss, colby) needs to include more varieties as well as other cheese types that are commonly traded internationally, such as cream cheese and natural cheese blends. There may also be opportunities to develop more markets for processed cheese. Adding these and possibly other products will expand the CWT supplier base and also create more potential end users for these U.S. products abroad, Mulhern said.
- Adjust the bidding process to facilitate longer-term contracts. The current limit of three months to fulfill an export contract will be increased to six months for cheese, which Mulhern said will help CWT members move beyond short-term commodity spot sales to either larger sales based on longer-term pricing and/or value-added products that are less vulnerable to shifts in commodity price cycles.
- Encourage higher-value marketing strategies in retail and foodservice channels. This adjustment will help CWT evaluate and potentially contribute matching funds toward efforts by members to create integrated export sales and marketing plans. While still under development, Mulhern said this possible role for CWT has the potential to boost member exports to meet longer-term performance benchmarks, moving beyond assistance for spot sales.
- Develop improved market intelligence on prices and market needs. In order to spur more innovative uses of CWT’s membership resources, Mulhern said the program will need a greater emphasis on generating market intelligence and the ability to manage more complex program offerings.
- Maximize collaboration with other farmer-funded efforts, such as U.S. Dairy Export Council and Dairy Management Inc. Although cooperation with these groups already exists, additional non-duplicative and membership-appropriate synergies can be developed to ensure that such efforts continue to increase collaborative opportunities. Specifically, greater emphasis will be placed on market intelligence and identifying new market opportunities, Mulhern said.
“CWT has been a critically important and valuable export marketing tool for America’s farmers, but as we focus on helping to make the United States an even stronger and more effective player in the international dairy marketplace, the challenges ahead are different than the challenge of the past, when our task was introducing more American dairy products to foreign customers,” he said.
NMPF plans to work this year to encourage those currently investing in CWT – as well as those who haven’t yet or who once did – to consider the value in these new ideas and the importance of being a collaborative part of CWT going forward.
“There is much more we can accomplish as we collectively adapt to a changing landscape, harnessing a united U.S. dairy cooperative community to work together in expanding our export capabilities and sales," Mulhern said. "There’s a big market out there with lots of opportunity for increased sales. CWT is going to do its part to make sure America’s dairy farmers capture our share of those opportunities.”