Food Aid Can Be a Win-Win Strategy

This isn’t a column about the sudden burden of milk powder casting a long shadow upon the U.S. dairy markets.

Because the truth is that for many years the United States has produced twice as much nonfat dry milk/skim milk powder (NDM/SMP) as needed for the domestic commercial market. This isn’t new; it isn’t something we do just when the delicate balance tips from short to long. The only difference from year to year is what we do with the overage.

From 2000 to 2004, most of the extra powder was sold to the government at the rock-bottom support price. From 2005 to 2008, nearly all the extra was sold overseas at strong prices as commercial exports. Here in 2009, the Commodity Credit Corp. is our No. 1 customer again.

As government stocks rise, we are left with two challenges. For the short term, we need to come up with rational, non-distorting ways to whittle down the growing stockpile, for the larger it gets, the longer before our domestic market recovers. For the long term, we need to proactively develop new, sustainable commercial channels for our dairy protein stream.

Within a few days of the administration changeover, the National Milk Producers Federation submitted a list of suggestions for how the U.S. Department of Agriculture might clear some of its inventory (as well as channeling some butter and cheese).

One focus was the domestic feeding programs like the Women, Infants and Children (WIC) program, school nutrition program and food banks, which would welcome the milk powder that’s sitting in the cupboard. A litany of agencies is in place to provide nutritional assistance to low-income families within the United States.

Longer-term, food aid represents a significant opportunity. The world is very different than it was the last time the government had milk powder filling up its caves. The global economic collapse means more people are needy, not just in our own backyards but in communities throughout the world.

Overseas food aid can be more than just short-term medicine for what ails us, more than just an outlet for growing inventories. Feeding the world’s hungry, economically stressed populations can present a strategic, profitable opportunity rather than simply surplus disposal through donations.

We are reaching out to partners around the world to see that dairy proteins are recognized in food aid programs. Last fall, for the first time, a consensus rose within the World Health Organization (WHO) that 8 to 10% of the protein in food aid should consist of animal proteins.

Consequently, public and private food aid agencies are now exploring how best to deliver this nutritional benefit. Supplies of dairy proteins to food aid providers would likely come from commercial channels, not from government surplus stocks, because products would be tailored to specific applications. This opportunity could be so substantial it would require product from all dairy-producing countries, not just the United States.

In addition, dairy proteins may improve the quality of life for the most vulnerable populations – the millions who suffer from acute malnutrition or HIV/AIDS. Aid agencies are especially interested in tapping effective nutrition to boost the ability of afflicted populations to contribute economically to their societies, which is far cheaper than medical treatment.

The U.S. Dairy Export Council (USDEC) first began looking at applications for whey proteins in treating HIV/AIDS-related wasting about five years ago. USDEC, in cooperation with Dairy Management Inc., is sponsoring clinical research in Ethiopia to determine the impact of whey protein consumption on body composition, progression of disease and quality of life. If the study can demonstrate efficacy, it could clear the path for greater use of dairy proteins in global humanitarian programs.

The key to tapping into food aid programs like these is to create a sustainable demand pull for the dairy proteins we have in such abundance. If aid agencies seek out dairy proteins for their intrinsic nutritional and functional value, they will buy the product off the market at commercial rates, rather than simply await the donation of surplus government stores.

In turn, we may be able to prevent those inventories from piling up after all.