It is time to embrace milk protein concentrates (MPCs).

If someone asks you to name the current cheese price, you would probably quote the latest CME block cheddar close. And if you want to hedge your milk costs, your cheese sales or your inventory values, you can do so relatively simply using CME Class III or cheese futures. But if you’re in the milk powder business—either a seller or a buyer—how do you know what a load is worth? And how can you hedge against price movements when prices are all over the board, each series has different rules on which transactions are included and each actor may price off a different series?

Nina Bakht Halal is USDEC’s Middle East office representative, based in Beirut. In this Q&A, Halal answers questions about dairy marketing opportunities in the Middle East/North Africa.

In this issue, USDEC’s Middle East office representative provides a number of insights on the region. Among them: 1) the Middle East is erroneously seen as universally in turmoil; and 2) for U.S. suppliers to make inroads into what is a lucrative and growing dairy market, they need to put in more face time.

U.S. cheese exports grew nearly 16 percent in 2012, breaking the $1 billion mark for the first time. This was no fluke, no temporary spike in sales. This was a milestone more than a decade in the making.

The Middle East imports roughly 90 percent of the food it consumes—an astonishing figure that is unlikely to decline anytime soon. Limited water and limited arable land equal limited agricultural potential. At the same time, the region boasts significant purchasing power, a growing middle class, a large, youthful population, rapid expansion in the retail, foodservice and food manufacturing sectors, and historical familiarity with the nutrition inherent in dairy.

In the ongoing maturation of the U.S. dairy industry as a global player, we took another step forward in 2012.

In all the media reports about the ambitious global expansion plans of McDonald’s, Subway and the Yum! family of restaurants (Pizza Hut, KFC and Taco Bell), it might seem like the mega-chains are the only international game in town. There is in fact a thriving, locally-based, foodservice-chain second tier in most emerging markets that is expanding rapidly, increasingly beyond national boundaries and into surrounding regions. Often specializing in U.S.-style fare, many of these restaurants are sizeable users of cheese and prime examples of growing but often-overlooked potential customers for U.S. dairy.

The U.S. government is in the midst of a major overhaul of food safety regulations via the Food Safety Modernization Act (FSMA). In addition, consumers in the United States and abroad are more attuned than ever to food safety issues due to a series of widespread tainted-food incidents. Globalization, technology and the near-instantaneous media spread of any food safety misstep demand an accelerated response to food safety questions.

From Day 1, the U.S. Dairy Export Council’s (USDEC’s) message to the U.S. dairy industry has been one of global trade opportunities created by the rapidly expanding middle class in emerging markets. Higher per capita incomes for the middle class, particularly when coupled with population growth, equate to a significant rise in dairy consumption—so significant that traditional exporters and those markets’ own domestic industries would not become able to meet their needs.

Another year will soon be in the books and given market conditions, it was, from an export perspective, a pretty good one. Through 10 months, U.S. dairy exports grew 11 percent to $4.4 billion. Volume of major products rose a combined 5.5 percent to more than 1.3 million metric tons. Despite slower action later in the year than earlier, these are good numbers.

Russia is one of the largest dairy importers in the world, purchasing about 440,000 metric tons of milk powder, cheese, butterfat, whey protein and lactose in 2011 worth nearly $2 billion. Yet for more than two years, the United States has been locked out of the market due to Russian export certificate demands.

U.S. cheese export value through July topped $680 million—well on its way to breaking the $1-billion mark, a more than seven fold increase over 2000. The United States is firmly planted as the No. 3 cheese supplier to the world and we are gaining share.

We’re in the right place at the right time. The global dairy industry is a growth sector―that much is crystal clear.

There was a time in the not-so-distant past when PepsiCo and Coca-Cola Co. would have been considered enemies of the dairy industry. Today, Pepsi and Coke’s investments in dairy processing operations and dairy-based new product development have not only made them partners to the industry, but also speak volumes about globalization, nutrition trends and future sector growth.

Regular readers of this column know U.S. dairy exports have been steadily rising over the past decade-plus. The volume of U.S. milk solids shipped overseas grew from the equivalent of 5.5 percent of total annual solids produced in this country in 2000 to 13.3 percent of solids produced last year. And as we mature as an exporting industry, the composition of those exports is changing. Not only are we exporting more dairy products, we are shipping a far greater percentage of higher value, higher profit items than ever before.

Last week, the International Monetary Fund (IMF) announced it would reduce its global economic growth forecast for 2012. It was the latest in a line of unfavorable economic news from around the world, and it raises an important question: With global growth struggling in a time of increasingly globalized dairy markets, what does that mean to world dairy trade and U.S. exports in particular?

Back in 1997, the National Conference on Interstate Milk Shipments began making the case for a voluntary dairy food safety program called HACCP (Hazard Analysis and Critical Control Points). This program remains an internationally accepted, science-based system for ensuring food safety controls. At the time, the Pasteurized Milk Ordinance was doing the heavy lifting on dairy safety. HACCP was heralded not as a replacement for the PMO, but rather as another (voluntary) tool used to reinforce quality and customer satisfaction.

Since Jan. 1, at least 17 companies have announced significant plans to expand existing cheese manufacturing facilities or build new cheese plants. Geographically, the tally breaks out as follows: one in Japan, one in South America, three in Australia, six in Europe and six in the United States. That does not include projects that started taking milk over the past five months—like Brasil Foods’ new mozzarella plant in Itumbiara, Brazil—or new cheese capacity expansions that are on the drawing boards.

When the U.S.-South Korea free trade agreement (FTA) went into effect in March, it opened many doors to U.S. cheese suppliers. A few, however, remained shut—not from latent protectionist fears of the Koreans, as we might have originally feared, but the strategic maneuvering of the European Commission, which is in charge of policy and negotiating agreements for the European Union (EU).