The President’s Breakfast

View the PowerPoint presentation here.

As delivered January 22, 2024.

Welcome to Dairy Forum 2024. I hope you're excited. I hope you're ready to elevate for dairy!

How about Scott Pelley last night? Did you enjoy that? Think about the places that man's been and the things that man has seen. Amazing. I was really taken back by, he started off with this question, what's the meaning of life? And I kept thinking, "Okay. This is a pretty nice setup. So what's the meaning of life? What's the meaning of life? And then at the end, he's going to tell us what he's decided the meaning of life is." But he changed the question and realized he wasn't asking the right question. It's not what the meaning of life, it's what the meaning of you, which I thought was quite moving.

Which made me think all of you in this room are successful in your own right. And I know some of you probably think maybe you did it yourself, but I would tell you, you didn't do it yourself. Everyone in this room that's been successful has had help. You've had support. You've had people that believed in you that accounted for the reason you are where you are.

So I'd ask you to think just a minute about some of those people that have made a difference for your life and are part of the reason you're where you are. It may have been a teacher, may have been a parent, may have been a sibling, may have been a neighbor, may have been a boss, a colleague. Who knows? Somebody that gave you a helping hand, somebody that believed in you when the chips were down. Somebody that maybe gave you a swift kick in the pants when you needed it and no one else had the guts to do it. But there are probably two or three names that come to your mind almost immediately, because they made a difference for you.

So as you reflect on that just a minute, I'd ask you to think about it's 2024. When the group of Dairy Forum folks are together again in 2044, I probably won't be here, but others will be here. If that group is asked that same question, who's made a difference in their life, how many of them will have your name top of mind?

So think about that for a minute, and maybe that's something we can all work on to help make this world a better place. Because one of the questions that came through for Scott Pelley last night is how do we figure out how to get along? How do we figure out how to work together? So think on that.

Thank you for being here. Thank you for making this the most successful dairy conference in the world. We can plan all day long, we can get great speakers like Scott Pelley. We can do all that kind of stuff. We can't make Dairy Forum happen if you aren't here, if you don't register, if you don't come, if you don't participate, so thank you for being here.

We have something for everyone. We have sessions on sustainability, we have sessions on AI, we have sessions on leadership, on people. You're going to hear from some great speakers. You're going to hear from our industry leaders. You're going to get a broad perspective, and I hope you leave here elevated, and I hope you leave here ready to win for the future.

We've been through some turbulent times, and I thought Scott Pelley's comments last night about the amazing work that everyone in this room did when you came together. I grew up on a farm. Cows have to be milked every day. They don't care. Cows never knew we had COVID. Milk's got to be processed, people got to eat. We got to get the food on the shelves.

And Scott Pelley's point I thought was awesome last night. Because of the great work of everybody in this room, we never missed a beat. That's because of you. We have a lot to be proud of. I want to see us continue to think about winning for the future and winning for dairy. We need to win for dairy.

As I think about that, I think there are about five key areas that we can focus on that will be the keys to us winning for dairy. Embracing a new vision for dairy, reclaiming our health halo, leaning into sustainability, reigniting our competitive fire, and focusing on people, our number-one priority. So I'll walk through these a little bit.

Adopt a growth mindset. Our industry has a growth mindset. Our farmers want to grow, our processors want to grow. And if we aren't growing, if we aren't looking toward the future, we're going to get surpassed by others. We need to keep looking forward, not backwards. We have an opportunity to become the world's dominant supplier of affordable, nutritious, sustainably produced dairy products. It's there for us. Let's go get it. Let's win for dairy.

We can elevate the premiumization of our products and the precision of our products, and we can do both. Consumers want healthy, they want indulgent. They want convenient, they want inexpensive. We can do both. We are doing both. We are investing in innovation to meet the changing consumer needs, and you'll hear more about that here at this conference.

We have the most efficient dairy producers in the world, bar none. We are seeing fewer farms, larger farms, more milk per cow. It's amazing. We're seeing vertical integration in our industry, we're seeing consolidation and concentration in our industry, whether that's good, whether that's bad, but it is, and it will happen, and it will continue to happen. As a matter of fact, we're producing twice as much milk today with half as many cows as we were 60 years ago. An amazing story. An amazing story about efficiency.

We have some great opportunities in front of us. We have an opportunity to seize the moment. We had talked about a recession hitting. A recession didn't hit. We were talking about stagnation, no growth. GDP'S growing. We've been worried about inflation, interest rates. They seem to be easing. Consumer sentiment seems to be increasing, farmer sentiment's increasing. Yes, we've been through some challenging times.

In the McKinsey survey, of our survey, in the fifth year of the survey, 60% of our executives are expressing optimism for 2024, and the most are excited for growth. 73% plan to increase their investments over the next three to five years. And as a matter of fact, increased investments is exactly what's happening.

We are in a growth mindset in dairy. What you see on this chart is more than $7 billion in planned investments, and we are probably missing some. And there's some that I've heard about since I've been here that aren't on this chart yet, but they're in the planning stage.

So a question that often comes to mind, and I saw Mike McCauley's article the other day, and Mike's here, thank you Mike for being here, and the question is, so where's the milk going to come from? I have no worries about where the milk will come from. I know dairy farmers. Dairy farmers will produce the milk. Look at these investments. Cheese plants, aseptic, UF. We're changing the products we're making. We're doing more ingredients, more fractionation of milk.

Dairy consumption is hot. We've had a record year. Oftentimes, when I do media interviews, they start off by saying, "So what do you have to say about the declining consumption of dairy?" Dairy's not declining. Dairy is growing. We're simply eating more of our dairy than we are drinking.

Cheese is driving the bus. We're at 652 pounds per person overall in dairy. We're 42 pounds on cheese. Amazing. And cheese is paving the way for other products to come along as well. Cottage cheese, taking a resurgence. Thankful for TikTok helping on that.

Our cheese is doing well around the world. 147 medals in 2023. Why is that? Because we have a quality product. Our dairy farmers are doing an amazing job of producing quality milk. When I was in veterinary practice a few years ago, herds of less than 100,000 somatic cell counts were unheard of. Today, that's more commonplace. Our producers are doing an amazing job. We have great farmers.

Yogurt has been maintaining consumption as well. And yogurt is not just a morning treat. More opportunities for yogurt. Savory, dessert.

Milk fat, premiumization. Even our cows are a little confused, because times are changing so fast. Our Holsteins think they're Jerseys. They're doing over 4% butter fat. Unheard of when I was a kid. Unheard of. 9% sold as non-fat. Amazing.

Butter consumption has increased 9% in the last 10 years. For those of us who were around, we've gone through a period of where butter was to be avoided at all costs. 1980 dietary guidelines for Americans said, "Avoid fat, avoid red meat, avoid eggs." Along about 2010 '12, '14, new science began to emerge. Science is always evolving. New things to be learned.

And begin to think, "Hey, we said that we needed to avoid fat because we had an obesity problem." We've been doing that for several years. We have an increasing obesity problem. We've got a type 2 diabetes problem. Significant. Maybe eating fat doesn't make you fat. Maybe we've missed the point.

So, fat is making a resurgence of where we are. We are doing fat and spreads. We're doing flavored butter. Butter spreads. It's amazing the changes we're seeing and our producers are responding because you are responding to the consumer demands.

In our multicultural society today, we're seeing an increase in demand for lactose-free for ultra filtered milk. Up 7.7% with a 2.4% market share among milk, and you saw some of the investments to further expand that. Ice cream. Probably leading the pack on premiumization. Consumers want indulgence. They want more butter fat, they want creamier, they want it to taste good, and you're meeting that demand and you're also doing it with whipped cream as well coming along.

We are also finding new avenues of value from dairy. Wasn't too long ago when whey was a byproduct we needed to pay to dispose of. Today, we're finding great value in whey. We're turning whey into spirits. We're turning whey into ethanol. We're finding opportunities. There'll be more to be found. I know this slide doesn't look like the rest of them because I pulled it out of the Dairy Forum speech in 2018. And at that point in time I said, "We will move beyond the jug. Innovation will take us to new places. Yes, we'll continue to have the jug of milk. Yes, we'll continue to make the historical traditional products, but we'll find new opportunities in fractions of milk in the ingredients. We'll find ingredients we didn't know. They'll have benefits we didn't know about." Today we are bypassing some of those intermediate steps and we're going from the milk straight to the fractions.

A lot of investments there. We have a great opportunity. Fortune says global dairy will reach $1.2 trillion by 2028. From 2020 to 2028, that's about a 6.4% compound annual growth rate. For all the CFOs in the room, and CEOs, you know how to appreciate compound annual growth rates. We have a great opportunity in front of us in terms of dairy.

The second topic I want to talk about is regaining our health halo. We have been focused since I arrived at IDFA of putting dairy in the good for you category. Dairy needs to be something you seek, something that you value, something you want to consume. We need to become central to the food as medicines movement. It's going to be huge. All of us baby boomers have one overarching desire. Live longer. Live longer. We don't want to give up. Americans are moving toward that.

We need to continue to support, further develop, the SNAP Dairy Incentive Program. It basically doubles the purchasing. Spend a dollar, you get a dollar, an extra dollar in incentives for anyone on SNAP. 43 million Americans on SNAP. $1.5 trillion Farm Bill mostly focused on nutrition. We need to elevate our science. Science is evolving. The science of fat, the science of dairy. We need third party spokespeople out talking about that. So, let's talk about the dietary guidelines. The first one came out in 1980. We have another one coming out in 2025. We need to work to make sure that we have the most recent science there and the most credible scientists talking about that. We need to expand our SNAP healthy fluid milk incentive program. Today, the purchase qualifying purchases to get the incentive is skim milk and 1% milk. People often ask me, they say, "Well, Michael, did you forget the rest of the dairy? How about 2%? Whole? Which is what 74% of the households buy. How about cheese? How about yogurt?"

Didn't forget them. This is all we could get done in the Congress, so we took it in the 2018 Farm Bill authorized for $20 million and we're continuing to work on that. Continue to expand it.

We want to preserve WIC benefits. There's a proposed rule by USDA to cut WIC moms three gallons of milk per month. We think that's the wrong direction. We're working to try to prevent that from happening. There was a proposed rule to remove flavored milk from schools. 8% of our milk volume goes to schools. We think that's a bad idea. We've done some things to try to counter that. FDA has said they're going to define healthy in the next 12 to 18 months. We want to make sure dairy is defined as healthy, as dairy is defined as good for you.

We need to elevate and be core and be central to food as medicine. We all know what a nutritional powerhouse that dairy is. 13 essential nutrients. 25% of all Medicare Advantage plans offer food as medicine benefit. Today, healthcare providers can write a prescription for fruit and vegetables. We need to be at a place where healthcare providers write a prescription for dairy products. Retailers are advancing in this area. Dr. Mark Watkins, medical director for Kroger was on one of our most recent Dairy Downloads talking about the things they're doing at Kroger and the other retailers are doing similar things, monitoring the loyalty programs and purchases, and trying to help advise shoppers how to make healthier selections and they're viewing dairy as part of the good for you category.

We have a major obesity problem in this country. More and more individuals are looking at the GLP class of drugs for weight loss. About 1% of the population today. That's expected to increase significantly in the coming years. They're changing their consumption pattern. They're eating less. They're eating less of those products in orange and they're eating more of those products in blue. You can see where dairy's positioned there. One of our hallmarks of being there is our protein content in dairy. It's another opportunity for us.

SNAP incentives created in an '18 Farm Bill, as I was saying. We've been to the tribal lands. This is a store in South Dakota for many of you from South Dakota you're probably familiar with this retailer. We'll be in 19 states, over 700 stores by the end of this calendar year. We've been very pleased with the work we've done with Baylor Collaborative on Hunger in the first couple of years. Last couple of years we've been working with Auburn Hunger Solutions and we're pleased Auburn's in the audience with us today. We're pleased to have them here working with us.

We just had a recent announcement with going to electronic point of sale. One of the problems was when you give a coupon, how do you get those redeemed and what is a redemption rate? If it's an electronic point of sale, that's done automatically on the cards. That gets us to 100% redemption. We've had $9 million so far appropriated for this program. We have appropriations requests pending in the current appropriations. We'll have to wait to see when Congress ever can decide on exactly how they're going to fund their government.

I said the program is expanding 700-plus stores. One of our IDFA members, Meyer Retailer in the Midwest just launched in 500 stores and will be launching this year. Proud of that work. We would like to expand. We would like to expand the SNAP program. We don't like the qualifying purchases being skim and 1% milk. We want to see it be all fat levels. We want to see it be cheese, yogurt, as qualifying purchases. We have legislation introduced in both House and Senate for members of Congress to support this in the Farm Bill. It would make it mandatory funding for $10 million and it would expand the choices. It's called Dairy Nutrition Incentive Program. We need your help with that.

I don't know when the last time you spoke to one of your elected officials, but if you take out your iPhones and use your camera and scan this QR code, put your name, zip code in, and you'll be able to send a letter to your elected official saying, please support the Dairy Nutrition Incentive Program. We need help.

I mentioned what we're doing on the School Milk Program. The proposed rule came out to eliminate flavored milk from schools. We didn't want to accept that, and we didn't want to have hope as a strategy. Hope that it wouldn't go forward. So we worked aggressively. We took a proactive action. We reached out to you, the major suppliers for schools and said, "Hey, let's make a virtue of necessity. Let's come in and commit to 10 grams of added sugar maximum and school milk."

We have 37 processors. We're probably at 98%, 99% of the school milk that have committed to that. It's making a difference. We committed to do it by the '25-'26 school year. You're already there. You're already there on a volume basis of about 7.5 grams, added sugar. You're making a difference. There probably hasn't been a program that's done as much to unite the dairy industry as putting a whole milk back in schools. Whole Milk for Healthy Kids Act. Very pleased with the outcome in the House vote the other day, 330. One of the keys to success was this: Congresswoman Kim Schrier, a physician from Washington State led some of the Florida debate in getting support for this. This is another opportunity if you haven't been talking to your elected official, another opportunity to voice your support for Whole Milk for Healthy Kids in the Congress. We've had over a thousand letters and emails so far go in on this. It makes a difference. Zippy Duvall is at the American Farm Bureau Convention now doing the same thing with their members, getting their cards and letters, their voices in, getting their voices heard.

The dietary guidelines for Americans will be in 2025. We need to make sure we're protecting dairy. We have a target on this glass of milk. We need to make sure we preserve the special three servings a day for dairy.

We need voices. We need credible third party spokespersons speaking in support of dairy, that dairy is good for you. And I'm pleased to tell you as a dairy industry, we're focusing on this. We're working collaboratively with National Milk Producers Federation. We have excellent working relationship on this. We're also working with the check off on this to get these credible third parties there.

I want to go to move to sustainability. It's a hot topic. It's garnering a lot of attention. We need to be able to thrive in a new era of sustainability. It's coming and the US is going to be market driven. We need to leverage our US dairy carbon footprint. We have no need to be apologetic when it comes to sustainability. We're doing a great job. The efficiency of our dairy producers, tremendous support on this. We need investments. We need to invest in infrastructure. We need to invest in monitoring systems and data. We need to be able to report. We need to be transparent to maintain consumer confidence. And we need to advocate for credible standards as well. We're doing a lot of work in this area.

I'd ask you a question. This glass of milk has the lowest carbon intensity footprint in the world. Where do you think this came from? Right here in the good old US of A. Facts are on our side. This glass of milk produced with 90% less land, 63% smaller carbon footprint, and 65% less water than the glass of milk produced here 70 years ago. Tremendous progress on the part of our dairy producers. Absolutely phenomenal.

Our dairy CEOs are motivated by sustainability. 65% are looking to pursue sustainability in a greater way. It's moved from sixth place to third as the leading priorities, and our CEOs have sustainability leads and they are investing in sustainability leads.

More and more companies are tracking their emissions. More and more companies are submitting to global standards like science-based target initiatives. There's a growing interest in how do we report scope 1, 2, and 3. We have a new California law that's going to mandate carbon reporting for anything over $500 million. We have a new California rule pending on recyclability of gable top milk cartons and we will be able to be recyclable or not. All those are things we're working on.

We've been advocating for a uniform global standard. We need investments. We've been working on investments. We need standards, global standards. We need compliance. We need the rules of the road, and we need a process for how do we do this. One of the things we just kicked off about three weeks ago was an insetting program, offsetting where you said to sell the carbon credits outside the system, insetting where they flow with the milk. We called it capture and value within the chain. If you missed it, it's on our website. We'll be coming with more programs on this.

We have a lot of advantage to our US system and we need to leverage that. We need to take advantage of that. It's voluntary. It's incentive based. It's market driven. That means that we won't have one mandate about everybody does the same thing. It's going to take us some time to evolve. We need to take advantage of it. We'll need to watch it in the export markets to make sure that we have a bright future of that, but we're going to need a trade agenda to do that.

Speaking of trade agendas in the export markets, we need to reignite our competitive fire. The world demands more of our US dairy. We need to go take that market. We need that. We can become the world's dominant supplier. We can match our surging investments and the surging demand, to get the products that the consumers are demanding where they want them.

We need to expand our export opportunities. We need to make sure that we're uniting on pricing policies that enable us to become globally competitive so can meet those customer needs, customer requirements, so that we can become the reliable supplier.

USDA is projecting 20 billion pounds more milk by 2030. So if you remember on the investment slide, I asked you to think about the question, where's the milk going to come from? I'd ask you on this slide to think about where's the milk going to go? I have no doubt producers will produce the milk. They will respond to the market. Today we're exporting about 18% of our milk production and the growing coming years as the more milk comes online, we're going to need to be north of 22% of our milk for exports.

We'll need a game plan for that. We'll need to build globally competitive markets. We'll need to defend against the unfair trade barriers. We'll need to expand our existing agreements and work on new agreements. We'll need to think about new tools and new policies. Will our WTO system continue to be there and function? It's basically been broken for the last two or three years.

We'll need to form new alliances. As we saw during COVID, we can have market access, but we got to get the product from here to there, which means we need trucks. We need rail. We need ports. We did a great thing with the Port of Los Angeles during that to get the containers filled with dairy products going to Asia and other parts of the world rather than going back empty to load up with electronics.

Where are our administration and our Congress? They're too busy fighting with each other and not focusing on helping. And when they're fighting, we're not going to be winning. And when we're not winning and not doing the things we need to be doing, we're putting capital at risk. $7 billion on the table already. Jobs at risk, 3.3 million jobs in dairy. Growth at risk. If we aren't growing, we're getting behind. And our national influence, food security's global security. We need to be at the table. We have a role to play. We have great things we can do.

US dairy export picture, it's kind a tale of two worlds, the best of times and the worst of times. Our exports have continued to grow. Our exports on value for the last year is down about 11%. Will that continue? We'll keep growing, but we still had two record years. Great work, tremendous work over the last 20 years to take dairy exports where they are. So we're doing all this with zero trade agreements. What would we be if we had any trade agreements? On a volume basis, we're down about 13%. We're doing both value and volume in our dairy trade, which is where we need to be.

We have some unresolved trade issues. The TRQ issues with Canada as part of the USMCA. The Biden administration has been focused on the Indo-Pacific economic framework. Don't know where that's going to go, but there's no market access in that. There's no method to address facility registrations in that.

Trade Promotion Authority is really not talked about in the Congress, which is where this has to pass. We don't have a focus on trade and advancing ourselves in trade. For the first time in history, the US food and agriculture, we've always had a positive balance of trade, meaning we export more than we import. This past year we imported more food and agriculture than we exported first time in history. In dairy, we're exporting far more than we are importing on dairy. We have a good story to tell.

China policy. There probably isn't a hotter topic in Congress than China. What do we do with China? How do we de-link from China? We can't afford to de-link from China from a dairy perspective. It is our number three market. We need to stay connected.

Trade agreements take time. New Zealand's trade agreement with China was signed in 2008. January 1st 2024 they have duty-free access to China. They don't happen overnight. We need to be thinking about our China policy.

If we have the Biden administration to continue, doesn't appear as though we will have a trade agenda. If we have the Trump administration, it looks like we're going to be back into tariffs and we see how the tariffs even stayed on during the Biden administration. Trump is talking about 10% tariffs. What happens if we have tariffs? Food and ag products get retaliated on the import side.

We need to be where the people are. By 2100 India will surpass China as the most populous nation in the world. We see the fastest five of the world's 10 largest countries will be in Africa. Six of the ten fastest growing economies will be in Africa. Today, one third of the global population lives in Africa and India. We need to be where the people are. We need to diversify our markets.

Back here at home, we need to be unified on what we're doing and thinking about our pricing policy so that it works for dairy farmers for profitability, and processors for profitability, so that we can meet the terms and conditions of international trade and be globally competitive. We will be much, much stronger and much, much more effective when we are united.

People, we need to put a focus on people. People is at the core of everything we do. We used to always say in business, "Customer was king." Customer is still king. You can have all kinds of customers. If we don't have people to make it and get it there, we won't have customers. We got to have people. It's their number one concern of our industry. We got to build cultures that excite, attract and retain the best and the brightest. We've got to invest in the next generation of leaders. You'll be able to see that demonstrated to you of what our industry is doing just on that point.

And as leaders, you've got to create growth and development opportunities for those emerging new leaders in your organizations. In the survey of our CEOs, these are the things, three common approaches, to managing labor. Compensation.

We've got to work on paying benefits. We've got to be competitive. Our industry is doing that in spades. We've got to work on process, automation, to take out some of these difficult, risky jobs in processing. We're doing that. Our CEOs are focused on making the workplace a great place to work because they're connecting to purpose and values. Purpose and values. Unlike in my day, we got a chance for a job, we asked one question, "What does it pay?" We figured out what we had to do once we showed up for work because it didn't matter. That's not the case today. That's not the case. Fortunately, they're making different choices than we ever made.

We have a great opportunity ahead of us. Yes, there are a lot of things. There are a lot of distractions. There are a lot of obstacles in the world today and we could dwell on those. Those are not within our control. The things that's within our control is the focus on the future and make sure we're doing what we need to do to empower and support the people in our organizations. At IDFA, we've been focused on people strategy. I am so thrilled with the work that we are doing. We have a dairy diversity coalition. We have the Women in Dairy. We're releasing a report today on Women in Dairy. I encourage you to get that. Read it, look at it. We have work. We're doing great things. We have work to do. We need to make sure that we are looking at every part of the population in terms of leaders, people we can bring into our organization.

Our HR leaders group, I enjoy that group. We met weekly during COVID. How do we make sure we're doing everything we can to make the workplace the safest place of the day? That was what our leaders said when we pulled that had the first conference call during COVID. "What are we going to do guys? We got to process all this milk. What are we going to do?" First thing we're going to do is make sure our employees know the eight to ten hours they spend at work will be the safest eight to ten hours of their day. Whatever we need to do to make that the case, we will do. We've done that.

Our Next Gen Leadership Program, absolutely phenomenal. It's a year long program, a series of modules. We take about 30 every year, recommendations, from leadership. You're going to get to see, when I conclude here, some of the alumni of the next gen program. I usually sum up the next gen program with one word. Absolutely impressive. We have 130 plus alumni through the first five cohorts. With the next gen members of the next gen program would you please stand so people can see who you are? Please stand. Thank you. I'd encourage you to go by, introduce yourself to these folks. They will be leading this industry. Absolutely phenomenal. Very impressive.

The other thing we're doing this year that we are so proud of, we're thrilled about, is the first ever IDFA Workplace of the Year award. It's like so many things we do, we have a vision, we have a thought. Wake up one morning, get out of the shower one morning and you have a new idea and you think, "Okay, we're going to go do that." You really don't know what it's going to be. You don't know how it's going to run. You don't know how successful it's going to be. The people strategy was much that way. I came to the team and I said, "We're going to do a people strategy." They said, "Well, Dykes what is a people strategy? What are we going to do with a people strategy?" Six years later, we're very proud, IDFA Workplace of the Year. The applications blew me away. The competition for this is immense. As I said, we are going to release the dairy report, Women in Dairy Today. I encourage you to read that.

So to recap, these are the five areas I think that will be important for us to win for the future. Think about those. Reflect on those. We're going to be following these. We're going to be trying to work on these.

In closing, I want to summarize. I've covered a lot of stuff today, but I want to summarize. I think it's in a few key points. We need to invest in our people. Our people are our future. We need to double down on nutrition. We need to be a part of the food as medicine movement. We need to continue to embrace growth. Without growth, we're moving backwards. We need to be able to compete both here at home and abroad. Key to our future. We need to innovate in our processes and our products. We need to continue to invest in innovation and we need to invest in leverage and sustainability. So with that, thank you. Thank you for being here. Enjoy Dairy Form. Thank you.

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Andrew Jerome

Vice President, Communications