As the dairy industry evolves and modernizes, dairy companies across the U.S.
are looking to capitalize on increasing milk production through international
joint ventures with companies that have significant manufacturing, networking
and marketing expertise, according to a new report from CoBank's Knowledge
Exchange Division.
While the U.S. has heavily invested in milk production, Europe and other regions
that faced production constraints focused their effort and investment on
technology for the processing sector. In 2017, many U.S. dairy companies and
international partners collaborated to capitalize on each other's strengths.
"The international dairy industry sees the U.S. milk supply as strong and
reliable and they see opportunity in the U.S. consumer," said Ben Laine,
industry analyst with CoBank.
Many cooperatives lack the available capital to take on new and costly
processing facilities -- a cheese manufacturing plant can cost between $300-500
million -- while many international processors see the possibility of
diversifying their offerings both in the U.S. and globally.
"There are many benefits to this model as the partners in these joint
ventures will share start-up costs and reduce the risks and costs along the
supply chain," said Laine. "These new plants are also benefiting
producers, as the additional capacity reduces transport distances."
However, once these ventures are in place, there is still plenty of risk,
according to Laine. For example, the market risk that a new product may not
meet sales expectations still exists, and if sales targets are not met, there
may be pressure from some partners to exit.