Moo-ving up in the world

With the U.S. dollar hitting historic lows, global food demand on the rise, and agricultural strongholds such as Australia afflicted by drought, the export of grain and dairy has increasingly become the economic bread and butter of U.S. agriculture.

In 2007, exports to foreign markets accounted for one-fifth to a quarter of all Wisconsin farm income. Statewide, agricultural exports totaled more than $2 billion – nearly double the dollar amount shipped outside the country in 2004.

International giants such as China and India are experiencing rapid growth in both disposable income and population, which means that demand for food – especially nutritious, high-quality food – has reached an all-time high. 

Home to four of the nation’s largest dairy genetics companies and an agriculture sector that generates $51 billion per year and a half-million jobs, Wisconsin is on track to become an international leader in dairy and farm exports if current trends continue. In 2007, state dairy and agricultural exports grew by a staggering 45 percent while Wisconsin exports as a whole grew by 11.8 percent. Both growth rates outpaced the national average. 

And dairy producers aren’t the only ones benefiting from the sky-rocketing demand.

“We see the trickle effect of exporting throughout all the industries connected to agriculture,” said Jen Pino-Gallagher, economic development consultant with the Wisconsin Department of Agriculture, Trade and Consumer Protection.

 

The packaging and shipping industries are an example of a few ancillary businesses that have strong ties to state agriculture. Along with manufacturing and transportation, non-agricultural service providers also stand to gain from increased trade.

“There are businesses that benefit from the exporting of agricultural products that wouldn’t be considered agricultural companies,” Pino-Gallagher said. “We have a lot of service providers in Wisconsin who do international work to help companies export their products either (through) consulting or helping with documentation or translation.”

A few industries that profited from the world’s growing appetite for dairy are livestock genetics vendors, food processors, and ethanol producers who sold dried distillers grains – a biofuel byproduct – as feed for livestock.

Bemis Company of Neenah is one local manufacturer that has benefited from the rise of the gastronomic middle class – consumers in Asia, South America, and other growing regions that are enjoying higher incomes and have acquired a taste for high-protein and processed foods. Flexible packaging for the food industry – including dairy and cheese products – constitutes two-thirds of the company’s sales. Bemis operates more than 50 manufacturing plants in ten countries and nets $3.5 billion per year in domestic and international sales.

“We see lots of opportunity to grow outside of the U.S.,” said Melanie Miller, vice president of investor relations for Bemis. “It’s important for us to be a global company; our customers are the largest food and consumer product (manufacturers) in the world.”

Celebrating its 150th anniversary this year, Bemis is adding a historic new chapter to its legacy of widespread success. The company is expanding into the Asian market by constructing a new paper converting factory in China. Bemis’ effort to boost international sales included acquiring South America’s largest flexible packaging company in 2005.

“In South America, where the economy has stabilized and is improving, they have a growing middle class – like they do in China – and with that comes more demanding packaging requirements,” Miller said.

A growth in the “middle class” of industrialized nations – and in food demands world wide – is a universal theme that underpins the expansion of Bemis Company and a whole host of Wisconsin manufacturers and agri-businesses. Trade agreements, lower tariffs, and a weak dollar have made U.S. products more attractive to overseas buyers. 

However, it’s not just consumable commodities that nations like China are looking for. Equally sought after is Wisconsin’s expertise.

 

Home to one-fifth of the world’s population, China’s demand for milk-based baby formulas and other protein-rich foods is booming. Although imports such as powdered milk and whey meet short-term needs, China is also looking for a long-term solution. To become more self-sufficient, the Chinese government has launched a World Bank-funded project to modernize its dairy industry.

The Chinese province of Heilongjiang, Wisconsin’s sister-state, is hosting a $200 million revitalization project that will turn subsistence dairy farms into high-tech agri-businesses.

“They’re going from an industry where there’s lots of one or two cow farms to the state-of-the-art, and they’re wanting to ramp up their production very, very quickly,” Pino-Gallagher said. “That’s going to result in demand, for not only our expertise, but also dairy equipment. 

“They’re going to need genetics in order to build their herds up; they’ll be looking for feed products,” she said. “It creates a domino effect; as soon as you modernize one aspect, you have to support it with all of the pieces that go into making a healthy herd and achieving good production.”

Though the U.S. economy has slowed, companies like the Shawano-based Cooperative Resources International – a producer-owned cooperative and parent company to the Wisconsin-based AgSource and Genex – are posting record sales for the first quarter of 2008.

“Our biggest month ever was last month,” said Bob Stratton, associate vice president of international marketing for CRI, during an interview in May.

CRI provides scientific testing, artificial insemination (A.I.), and information technology services to the dairy industry. International sales represent between 12 and 14 percent of total sales. Last year, CRI exported its products and services to five new countries in Eastern Europe and Central Asia. More recently, the northeast Wisconsin-based cooperative has made a concerted effort to build a rapport with China. 

“The dairy industry in the U.S. has a pretty good reputation throughout the world,” Stratton said. “We’re definitely world leaders and we have the infrastructure to make that even better with dairy herd improvement testing. We’re far ahead of other countries, so that reputation is there.”

Four of the largest dairy genetic companies in the nation are headquarted in Wisconsin, giving the state an elite stature in the global market. Recent innovations such as GenChoice – bull semen guaranteed to produce a heifer calf 90 percent of the time – are revolutionizing the industry.

Even though international demand for dairy is soaring, so are producers’ costs, said Eric Olstad, marketing director of Waupun-based East Central/Select Sires. The cooperative is one of ten regional branches of North America’s largest dairy A.I. company. Select Sires offers state-of-the-art biotech solutions that boost production and help farms run more efficiently. 

Modernization is the key to staying ahead of inflation, Olstad said. While China launches a dairy modernization project to keep pace with demand, Wisconsin is promoting its own industry-wide upgrade through the Dairy 2020 program. Modernization, both on the home front and abroad, is driving the demand for livestock genetics. 

“We had growth of over 10 percent last year,” Olstad said.

Grant programs sponsored by the U.S. Department of Agriculture and Wisconsin’s DATCP “have really helped reposition Wisconsin as one of the leading dairy states,” Olstad said. “Hopefully we can continue to be aggressive with that to secure our position there. With cow numbers growing, we’re finally starting to see that happen.”  

Whetting China’s appetite for whey

Along with dairy genetics, China has shown an increased affinity for a product which Wisconsin possesses in excessive abundance – cheese and its bountiful byproduct, whey. The explosion of whey exports over the past decade is proof that it can pay off to explore new marketing horizons.

Partnerships between two state agencies – DATCP and the state Department of Commerce – combined with the know-how and networking power of regional and national trade associations, are linking up small producers and manufacturers with sophisticated consumers abroad. 

“As a result, we’re seeing companies with five to ten employees who are exporting to Japan or the European Union,” Pino-Gallagher said.

Wisconsin’s International Trade Team serves as the central hub for agribusiness exporters, connecting companies who are new to the international scene to state experts and trade associations, such as the Food Export Association of the Midwest. Services provided by Wisconsin’s Trade Team include one-on-one consultations, market evaluations, access to geographic specialists, distributor and client searches, buyers’ missions and trade missions, and assistance with customs, labeling, and regulatory matters – to name a few. 

With a network of experts at the disposal of even the smallest agribusiness companies, there’s no need for Wisconsin agri-businesses to take a backseat to California and coastal companies that have the advantage of ready access to Pacific and Atlantic ports. Demand for the very products that Wisconsin makes in greater quantity than any other state  – cheese and whey – is strong enough to make the initial costs and learning curve of going global worthwhile. 

Last year, whey topped the list of Wisconsin’s dairy exports, making history with a record-breaking 99.5 million pounds shipped out of the U.S. for sales revenue of almost $80 million. 

As the nation’s No. 1 cheese producer, Wisconsin literally had more whey than it knew what to do with only a decade ago. 

“Whey is a byproduct of cheese production, and in the past, whey was a throw-away product,” Pino-Gallagher said.

“Cheese plants had to try to find some way to dispose of it and oftentimes they would spread it on fields as fertilizer until they realized that there was market for it. Whey is used in everything from baby formula to processed food products.”

 

Apart from China, Japan consistently ranks among the top five export destinations for Wisconsin dairy, food and livestock genetics. An island country with a population of 127 million and a land mass smaller than California, Japan imports 60 percent of its food. 

Japanese consumers who “eat with their eyes” are looking for high-quality, attractively packaged products. The market presents an abundance of opportunities for specialty food producers and artisan cheesemakers. 

Chris Gentine, a veteran of the state’s cheese industry whose family founded Sargento Foods and Masters Gallery Foods, has spent the better part of his life promoting the state’s cheesemaking industry. Though Wisconsin is still the top cheesemaking state in the nation, Gentine – a connoisseur of the state’s specialty cheeses – is working hard to make certain that other countries know that when it comes to handcrafted high-quality cheese, Wisconsin artisans are world-class.

In 2006, Gentine founded the Artisan Cheese Exchange to connect producers of handcrafted specialty cheese with markets abroad. Wisconsin cheesemakers produce more than 2.5 billion pounds of cheese annually, encompassing more than 500 varieties and styles of cheese. 

“The craftsmanship is what we’re targeting – the best of the best,” he said. “They’re small producers; it’s not large volume. Some of these guys make only 1,500 pounds a week.”

“I’m doing it because the cheese deserves to be on the world stage,” he added.

Because European cheesemakers and consumers take great pride in their own artisan cheeses, the EU market can be tough to crack. However, both Japan and Britain have taken interest in Wisconsin’s artisan cheeses. 

Apart from the exchange rate, Gentine credits the Australian drought and Europe’s shortfall in milk production for buoying international interest in Wisconsin cheese and dairy. 

Australia’s six-year-long drought reached fever-pitch last year, when some of its best agricultural lands dried up along with the country’s largest river, the Murray-Darling. As a result, dairy exports from the country fondly nicknamed the “doorstep of Asia” slowed to a trickle, giving Wisconsin producers and cheesemakers a chance to step forward and bridge the gap. It’s not every year that environmental, political, and economic factors conspire to create near-perfect conditions for marketing Wisconsin-made products to Asia. 

“Export is hot; it’s on everybody’s tongue but it doesn’t mean that it’s right for everybody,” Gentine said.

Through state and national trade assistance programs, there’s “some good resources for getting your feet wet,” he said. 

To learn more about Wisconsin’s International Trade Team, visit http://international.wi.gov/business.html or call 800.462.5237.