Game-changing agreement will lead to fruitful new opportunities that mutually benefit both China and U.S.
Dairy producers from the U.S. are relatively new on the scene in China, but a new partnership between China’s Jiangnan University and the U.S. Dairy Export Council (USDEC) hopes to lay the groundwork for increased dairy exports to the world’s number-one market for dairy.
Jiangnan University vice president Xu Yan and USDEC president and chief executive officer Tom Vilsack signed a memorandum of understanding (MOU) formalizing the relationship on March 30 on Jiangnan University’s campus in Wuxi.
“The Jiangnan partnership is a concrete, game-changing agreement that will lead to fruitful new opportunities that mutually benefit both China and the United States,” Vilsack said. “China is a top-priority market for the U.S. dairy industry, and we are very excited to be working with one of the best food science schools in the nation.”
Vilsack said the deep relationship with the premier Chinese university provides the ability to conduct joint research on formulations as well as receive firsthand knowledge of how to tailor ingredients to consumers’ taste preferences and specific foodservice needs. He said overall it offers the ability to have “laser-like focus” on the research needs for meeting China’s growing demand.
USDEC’s broader global marketing strategy, “Next 5%,” is the industry-wide effort launched in 2017 to increase annual U.S. dairy exports from the equivalent of about 15% of U.S. milk solids to 20%. Vilsack said China is an important component of being able to reach that goal and looking at ways to introduce U.S. dairy to consumers in China.
The partnership will encourage the development of innovative, China-friendly product formulations that incorporate U.S. dairy ingredients, particularly whey and milk proteins and skim milk powder. Vilsack said export increases have been seen in whey and milk protein concentrates.
Another big opportunity for growth in China is the use of permeate in food products. Currently, the U.S. and the European Union use permeate, a co-product of making whey protein or milk protein, as a flavor additive and sodium alternative. This has allowed food processors to keep the salty flavor in products while cutting out sodium.
Codex currently allows for the use of permeate in foods, and USDEC hopes China will adopt that standard too. If China signs off on permeate use in foods, Vilsack said it would “open up a real opportunity” to expand overall U.S. dairy exports to China.
Vilsack explained that every culture has different tastes. For example, on pizza, Chinese consumers prefer different toppings. The research will examine whether that affects the texture of the cheese and if consumers are interested in gooey cheese.
The MOU enables U.S. dairy suppliers to be more engaged with and responsive to China’s food industry through access to in-market facilities and opportunities for jointly pursuing innovation projects that leverage U.S. dairy ingredient functionality, versatility and nutrition.
Xu said they are pleased to establish the U.S.-China Dairy Innovation Center at the university together with USDEC. “The center aims to facilitate research innovation and technical services for the dairy and food industries and also strengthen education cooperation and research collaboration in dairy science and technology between our two countries.”
The MOU also offers a pathway to enrich students’ academic experiences in Jiangnan University’s dairy science and technology programs with practical, hands-on research and development skills using U.S. dairy to jump-start careers upon graduation.
Building demand and relationships
Vilsack, who previously served as the secretary of agriculture for eight years, started at USDEC just over a year ago. Since coming on board, he has added boots on the ground in markets to increase and develop partnerships and relationships at different levels, including government, research and market opportunities.
“We don’t sell products. What we do is raise awareness that could be beneficial to advocate and educate on behalf of our industry as well as provide extensive comments when new standards are being considered,” Vilsack explained.
Vilsack said China offers a multitude of opportunities for growth but also poses challenges.
The tariff level on U.S. dairy products previously was at 12%, but earlier this year, China reduced that to 8%. Some competitors are below that or will be over time because of trade agreements.
“If we have a fair relationship, we are confident we can win” those markets, Vilsack said. However, if faced with high tariffs or sanitary or phytosanitary issues, then it’s a different proposition. “By having a greater presence and deeper relationships, we hope to prevent some of those barriers,” he added.
The U.S. has been exporting to China only for the last 15 years, whereas competitors have been in the market for 50 years-plus. Building a relationship and understanding of U.S. reliability in the market is important.
“China is very sensitive to not being dependent on one source of dairy. It is important for us, at a personal level to maintain, and create relationships to allow us to continue to explore this market and expand it over time,” Vilsack said.
Vilsack optimistic about future
Vilsack said he’s “bullish” on the outlook for increased exports and overall U.S. dairy demand. USDEC is being more aggressive in growing world markets. U.S. dairy producers have realized record export months, including the top month in November 2017, followed by an increase in the volume and value of U.S. dairy products seen in January 2018.
Although there is an oversupply of milk production in the U.S. — which is being exasperated by the Class 7 milk situation with Canada — Vilsack is also “hopeful” that the North American Free Trade Agreement modernization process that’s winding down in the next several months will address the Canadian system that has undercut world prices for whey powder.
“Our producers continue to produce more every year,” Vilsack said. However, USDEC projects that, over the next several years, the world is going to need more product with an additional 1.00-1.75 million metric tons of additional need by 2022.
“As the world economy continues to improve, we are going to see a rising middle class and see more demand for protein. Dairy is one of the more wholesome and sustainably produced proteins,” Vilsack said. “We’re going to be aggressive in terms of selling it.”
By: Jacqui Fatka 1