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Sunday
Nov182007

All dairy is local until globalization steps in

When our pediatric dentist told me two years back that my adopted Chinese daughter was going to prematurely lose her top front baby teeth, it occurred to me that Wisconsin's dairy industry was facing a long boom. A leap of logic perhaps, but let this native "cheesehead" connect the dots on this stunning global demand shift.

My wife and I adopted Vonne Mei when she was 9 months old, by which time her baby teeth's fate was sealed by the diet in her native province of Jiangxi, part of China's vast interior rural landscape. Being a "persona au gratin," I was struck by the dearth of dairy in Jiangxi cuisine. There was poultry, pork and vegetables galore but few milk products and virtually no cheese. Butter seemed a luxury item.

Think back to that childhood admonition: Drink your milk so you'll have strong bones and good teeth!

Well, Vonne Mei's choppers turned out as brittle as you might imagine, given that low-calcium diet. By the time we first noticed the large brownish areas on her front teeth, thinking they were plaque, it was too late. Our relatively high-sugar diet had destroyed what thin enamel our little "Mei Mei" possessed. Ten crowns and many procedures later, they were gone.

Naturally, Vonne Mei's diet is much improved here in the States, where calcium-rich dairy products abound. As such, X-rays indicate that her permanent teeth will not suffer the same weaknesses.

By adopting Mei Mei, our family radically elevated her up the global income chain, meaning she escapes certain medical liabilities associated with poor diet and picks up different ones associated with a rich diet, with the net effect being a longer, healthier - and somewhat taller - life.

Now consider India and China rapidly growing their economies, with upwards of two-and-a-half billion people upgrading their diet commensurately. For example, China's per capita income has doubled in recent years, and Beijing's leaders pledge to double it again over the next generation.

As someone who's seen his own personal income rise like that over a similar time frame, let me say that I eat a lot better today than I did as a starving college student - not just more food but much higher quality.

Invariably, Chinese and Indians are doing exactly the same, with the net effect being a huge increase in global demand for dairy products. A recent New York Times article even went so far as to declare milk "the new oil," noting that global milk prices had doubled since 2005, leading to "reports of cows being stolen on Wisconsin dairy farms"!

So much for the feared "cheddar curtain."

Now, here's the trick on accommodating all that new demand. Unlike oil, dairy products are perishable, so dairy markets - like all politics - tend to be local.

As the Times piece noted, "Only about 7 percent of all the milk produced globally is traded across borders." But, with the average Chinese now drinking more than six gallons of milk a year, roughly three times the volume consumed in 2000, something's got to give.

Having worked on a dairy farm in my youth and lived for years on end with a nursing wife, let me present one inescapable fact about creating milk: It takes one heckuva lot of water. For the average dairy cow to produce nine gallons of milk a day, it needs to drink 18 gallons of fresh, clean water, something booming China does not possess in abundance.

China is already a top global milk producer and the world's largest importer. With water tables dropping precipitously throughout the country, thanks to China's prodigious use in both industry and agriculture, there's little hope that the country can keep up with its booming dairy requirements, especially when you factor in the resource competition from the expanding domestic beef industry. China's meat consumption has increased by more than 50 percent since 1995.

The upshot for America's dairy land? Today's global milk prices stand higher than our subsidized domestic prices, meaning American farmers could dramatically increase exports without government support.

Such trade expansion would only re-emphasize that, as globalization's advance triggers local resource constraints, nations are forced into greater economic interdependence - otherwise known as comparative advantage.

Think about that whenever politicians propose turning our heartland into one giant ethanol plant as part of some quixotic quest for energy independence.

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