Agriculture

Dairy leaders see nachos in China, Gouda to Mexico

The future of the state's dairy industry could depend in part on nachos catching on in China.

Dairy leaders, meeting in Modesto this week, said boosting exports would help pull the industry out of its slump.

And if that requires introducing that especially gooey snack to Chinese people, so be it.

"They don't know that you melt cheese on chips and it tastes good," said Steve Gulley, export manager for DairyAmerica Inc., a Fresno-based marketer of dairy products. "You have to teach them that."

The meeting drew nearly 100 people to the DoubleTree Hotel and was the last of three dealing with the sharply reduced milk prices for dairy farmers.

Last month, Northern California farmers got a minimum of 97 cents per gallon of milk bound for bottling plants, compared with $1.87 a year earlier and $1.30 in February 2007. Milk to be made into cheese and other products fetched even less.

"Their feed costs are 120 percent of the milk price," said Linda Lopes, a dairy farmer in the Turlock area. "I don't know if any dairymen are going to keep wanting to do this."

Retail prices have dropped, too. A gallon of low-fat milk sold for an average of $2.75 in Sacramento stores in February, versus $3.55 in May 2008, according to AC Nielsen, a marketing and media information company.

Milk is the No. 1 farm product in the Northern San Joaquin Valley, bringing $2.26 billion in gross income to farmers in 2007, according to county crop reports. Several thousand people in the region work at dairy processing plants.

Tuesday's meeting, organized by a task force of farmers and processors, dealt mainly with exporting dairy products with long shelf lives. They range from the familiar cheese and butter to whey protein concentrate, a byproduct of cheese-making that goes into many other foods.

About 90 percent of California milk is consumed in the United States, but the industry has looked to foreign markets to absorb much of the cows' increasing output.

This strategy worked fairly well in the past few years, but the recession has brought a sudden drop in foreign demand, experts said.

"Everybody is running out of purchasing power, and it's happening on a large basis," said Matt McKnight, vice president for ingredients marketing at the U.S. Dairy Export Council in Arlington, Va.

Over the long term, he said, foreign consumers will want U.S. dairy products because of their quality and safety. He noted promising markets for specific products, such as Gouda cheese in Mexico.

The pizza business is booming in many parts of Asia, said Stan Andre, chief executive officer of the California Milk Advisory Board. This makes it a market for mozzarella, the state's No. 1 cheese.

The milk board, which has an office in Modesto, puts on "pizza seminars" for chefs in Asia, Andre said. It hosts similar events to promote butter to the growing bakery industry there.

"We have found that the name 'California' resonates very well in international markets, even more than the name 'USA,' " Andre said.

Experts said foreign sales are hindered by complex rules on food safety and packaging, among other issues, and a shortage of home refrigerators in many countries.

But they said China, India and several other developing nations have an increasing number of people entering the middle class and seeking dairy and other high-protein foods.

Hilmar Cheese Co., whose Lander Avenue plant is the largest such operation in the world, also produces huge amounts of whey protein concentrate. It ends up in dips, dressings, infant formula, nutrition bars and other products.

John Jeter, president and chief executive office at Hilmar Cheese, said the whey products benefit the immune and cardiovascular systems and aids weight control. It is exported to 44 countries.

Hilmar Cheese also markets the lactose left after making cheese for use in formula, sauces, soups and other products.

"We just feel dairy is a great product," Jeter said. "It's the most diverse, nutrient-dense product, period."

The task force will gather in a few weeks to go over the recent meetings, said member Ray Souza, a Turlock-area farmer and president of Western United Dairymen.

Farmers and processors sometimes are at odds. Ideally, milk prices would be high enough to provide farmers a profit but not so high that they scare off consumers.

People at the meeting acknowledged the tension but also said the industry can work as one. They included Glenn Wallace, a regional chief operating officer for Dairy Farmers of America, a processing cooperative.

"People want to make a living," he said. "They want to have their farms sustained and not go through the stress they are going through today with the pricing system."

Bee staff writer John Holland can be reached at jholland@modbee.com or 578-2385.

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