Overseas Demand For Dairy Exports Sours

Businesses that rely on exporting their goods continue to struggle. The U.S. government had been hoping the market would turn around to at least help offset sluggish consumer spending. But forecasts are less than optimistic. Dairy farms have been one of the hardest hit industries, as demand from China and India for powdered milk and whey continues to slump. Kirk Siegler

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

MICHELE NORRIS, host:

And I'm Michele Norris.

It's been a long week on Wall Street. Stocks fell for a fourth day in a row, on continued signs of a sluggish economy. President Obama and others have said the U.S. must boost its exports to turn things around.

President BARACK OBAMA: We're tired of just buying from everybody else. We want to start selling to other people.

(Soundbite of cheering)

NORRIS: Well, here's one American industry that's managing to do more of that: dairy.

Kirk Siegler, of member station KUNC, takes us to one farm north of Denver to see how it's faring.

(Soundbite of cows)

KIRK SIEGLER: What do these cows on this dairy farm in northeast Colorado have to do with China? More than you'd think.

Mr. LES HARDESTY (Owner, Painted Prairie Farms): One out of 10 gallons of milk that I produce is consumed by not only someone I don't know, but someone that lives in a country that I, most likely, have not been to.

SIEGLER: Cows at Les Hardesty's Painted Prairie Farms churn out milk that will be drunk locally, made into cheese and sold in the region - or increasingly, dehydrated into powder and shipped and sold abroad.

Mr. HARDESTY: And my farmer math will tell you that 95 percent of the people live someplace other than the United States. As their income increases, they, too, want the Western diet.

SIEGLER: Now, this all started happening a couple years ago, when Hardesty says the dairy industry decided to ramp up exports. Farms across the country were getting so big - and some say too big - that all the milk couldn't possibly be consumed domestically.

Mr. HARDESTY: And it just made sense. The world economy was strong; people wanted U.S. dairy proteins.

SIEGLER: It made sense until the global economic crash. Americans bought less milk. But Mexicans also demanded less dehydrated milk; China, less whey protein and pizza cheese.

And here's where the dairy business can be different than others who export. Hardesty can't just stop milking all these cows and turn off these efficient, automated and expensive milking machines.

Mr. HARDESTY: A different business might be able to lay people off. Here, we deal with animals, weather on a daily basis, and so we have to have the people and the resources to do that.

SIEGLER: And so Hardesty spent much of the recession burning equity and borrowing money to keep the farm afloat.

It's a familiar story, says Scott Brown. He's an economist at the University of Missouri's Food and Ag Policy Research Institute.

Professor SCOTT BROWN (Program Director of Livestock and Dairy, Food and Agricultural Policy Research Institute, University of Missouri): I think the United States dairy industry has figured out that playing in world markets, although it can have some very good benefits, certainly can only add to the volatility that the industry's faced the last few years.

SIEGLER: But there are some positive signs. Buried in this week's sour economic news that U.S. exports continue to slip, are numbers showing that U.S. dairy exports actually increased - if slightly, by 3 percent. Yet Brown says nobody is celebrating.

Mr. BROWN: We came out of 2009 in the worst financial situation many of them have probably ever faced in their lifetime.

SIEGLER: And Brown says despite the blip, there are signs that dairy exports could drop off again later this year as Australia and New Zealand ramp up production again.

As for Les Hardesty? This spring, he became the chairman of the U.S. Dairy Export Council. And he believes expanding the dairy export market now is key for his industry's long-term survival.

Mr. HARDESTY: The world economy is slow to recover, but it will. And when it does, we need to be positioned to fill those needs.

SIEGLER: Agriculture officials in the Obama administration say they're aware of this, and efforts are under way to expedite long-pending, free-trade agreements with Asian and Central American countries.

For NPR News, I'm Kirk Siegler.

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