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International Dairy Foods Association
Orlando, FL
January 23, 2023


Michael Dykes, President and CEO, International Dairy Foods Association:

Isn't it great to be in Florida in January? You loving the weather? It's a little bit better than in America's Dairyland today, I'd say, huh? How about Paul Ryan last night? How many of you are ready to vote for Paul Ryan? What a great guy.

Somebody said to me, "Michael, he is such a nice guy." I said, "Maybe he's tired of fighting, which is maybe why he and people like Collin Peterson aren't there anymore." We miss those kinds of leaders. Could have talked to him all night last night.

Anyway, great to be here. Excited to be here. Thank you for being here.

We have been through a lot, not just in 2022, but in 2020, 2021, 2022, seems like a blur and it just keeps coming at us. We've managed through COVID, it's become a part of our life. Most things are referred to as pre-COVID, post-COVID. Supply chains, whether we were exporting and we're competing for vessel space or whether we were just simply trying to purchase things for the home. Either we couldn't get it or we'd ordered in May and it would maybe promise to be delivered in September. We've been dealing with 40-year inflation. Most every one of your cost lines have gone up. Whether you're a dairy farmer, or whether you're a dairy processor, or whether you're a retailer, or whether you're one of the wonderful suppliers that we have in the industry. Workforce, you have put forth the effort to keep the operations going. Again, whether that be on the farm or whether that be in the processing plant or in our retailers, because workforce has been a struggle. It's our number one issue.

But we have been blessed to have demand up. Dairy is growing. Dairy is a great place to be. We're up 12 pounds per person per year in 2021 and when the data is collected, 2022 could be even better.

And on the export side, we've had two great years. Not only record volume, but we also as US have had record value, $9.5 billion, 2.8 million metric tons when it's done for 2022. Great success.

If we think about the last three years and we think about the amazing things that you've been able to do, and we think about the commitment that you've had and it makes us think, what inspires you to do that, which is the theme for this year's Dairy Forum. We want you to leave here inspired and ready for 2023.

As I think about the theme of inspire, it causes me to think about what inspires me and I think about, as a kid growing up on a farm, milking cows and barley, tobacco. I think about the dedication that it takes, 24/7 to milk cows, to keep the milk flowing and it all starts with you, the farmers in the room. This industry starts with you. Without the milk, we don't have anything to process. We don't have anything to make. And I've been to over a hundred of the IDFA member processing facilities, and I can tell you the same 24/7/365 dedication is there in the processing facilities. The people who come in, unload the milk, process it, make the wonderful products that are there and get it to the retail shelves and, again, a similar type of thing. It takes a lot of commitment.

I also think about the opportunities food and agriculture has afforded me. I've been able to travel the world. I've been able to see food and agriculture in a lot of different locations. And for a kid growing up in Southeastern Kentucky, I've had opportunities that I never, ever imagined for me and it has been truly a blessing. But that's about me.

Now let's go to what inspires you. So I'm going to give you a minute. We're going to do a poll everywhere. If you would, please text in the word that what inspires you, what keeps you going, what causes you, what ignites you to keep going and striving for something higher, something bigger? So if you would, please text in. I think the number for the text should be showing on the screens. So text Dairy Farm 300 to the number 22333. I'll give you a minute. We'll let this populate of the things that inspires you, that encourages you, that causes you to take on the next opportunity, that caused you to think about things in a different way.

We have people, we have boldness, we have team, family, farmers, responders, fantastic, possibilities, nutrition, future, babies, maybe the next generation. It's awesome to see.

Whatever those things are that inspire you, we'll go to the next slide, still building. Whatever the reason is, maybe it's a family business that you've been involved in and you're inspired to watch it grow and the things it's able to accomplish. Maybe it's new innovation. Maybe you've been a part of a new product launch. Maybe it's the nutritional value of dairy products and what it can do for people around the world and what a difference it may make in some people's lives. Maybe you're inspired by the things we're doing for the planet. Maybe you're inspired by your people, the teams and the incredible dedication and commitment they've put forward to make things happen in this past year.

But regardless of what inspires you, we are all bound by a common thing and that's to leave the next generation in better shape than we found it, to build a brighter future for those that are behind us. So if that's our goal, if that's where we want to go, if that's our driving motivator is to leave things better for those that are following us, what's it going to take for us to do that? I'm going to lay out for you this morning what I think are five different ways of leadership that may help us get there.

I'll start with courage. Act with courage, courage to take the bold decisions, courage to lead. Because you know where things need to be, you know what the facts are, you have the courage to do it. You have the courage to move the business forward.

The next one I want to talk about is the ability to anticipate and adapt. Things change. If there's one thing that's for certain, change is always coming, and I would say even faster. So we have to anticipate what that is and adapt our plans. We have to evolve. We have to act with new information. We got to lean into the data, allows us to make more informed decisions.

Put the people first. We need to put people at the center of everything we do. If we express our gratitude to them, if we show them they are appreciated, show them that they matter, value them, they'll value your mission, your vision. They'll be behind you to make that happen.

Be bold. Be bold enough to accept the facts as they are, maybe not as you would like them to be. Be bold enough to know that what got us here is not going to get us there and that we need to move from status quo to something better. We need to evolve. And if we aren't growing and changing, we're probably falling behind.

And foster a culture that rewards bold actions. Not everything we try is going to be successful and that's okay.

When I talk about being bold and I'm talking about courageous, I'm not just talking to the CEOs in the room. I'm talking to every single person here. Be bold with the leadership of your teams. Be bold with your ideas and be courageous enough to speak out. And instead of thinking about "We can't because," let's be bold enough to turn that around to say, "We can if. If we move to "We can if," we're getting to places where we can make progress.

And unite. Since I've been at IDFA, I have encouraged unity, unity of our industry, uniting to come together for the greater good of the industry. That requires collaboration, requires courage, and we know courage will inspire others to act.

So I call these things the playbook for success and I've listed five of these as five new ways to lead. If these are the playbook for success, what else is needed? We need a clear goal. We need to know where we plan to go. I firmly believe, and I've said it many times-I firmly believe the U.S. dairy industry can become the world's leading supplier of affordable, sustainable dairy nutrition. I believe it with every fiber in my body. Just like when we get ready to go to a place, I'm sure most everyone in here uses Google Maps, Google Maps always starts with one clear question, where are you going? If you know where you're going, and you put that into Google Maps, it will tell you how to ride a bicycle there. It'll tell you how to walk there. It'll tell you how to take public transportation there. It'll tell you how to drive there, and it will anticipate the traffic up ahead, and tell you the best way to get there.

That's why it's so important that we have a clear goal, and that we know where we're going. If we know where we're going, we have a clear goal, we have the five ways to lead, and we apply those to our priority focus areas of the key things that are going to be important for us to get there, these all came out of a vision for the future process we did with 20 of our IDFA members, on a task force. We worked with McKenzie on this, people in workforce; technology and innovation; sustainability and nutrition, health, and wellness; domestic and global competitiveness. I'm going to walk through each of these, talk about them briefly, and apply the playbook to those.

If we think about people in workforce, dairy industry leaders are putting together plans. We know workforce is our number one challenge. Most of you are down 10% to 20% in workforce, and that's true across our industry. It's especially clear at the dairy farm level, but also, in the processing plants, the retail institutions, it is clear across the board. We have efforts in place to attract and retain a diverse, skilled workforce. We're going after the best and brightest, and we need to foster a culture that makes all of our people feel included. We all like to feel included. We've been working on people, and a head of people strategy for four years. I'm pleased to say that we have hired an IDFA Chief People Officer, Mia Mulrennan. She's here, I'd encourage you to meet her during the Dairy Forum.

Over the past four years, on the people strategy, we've worked on several elements. HR leaders in dairy, probably the most sharing group we have in the whole IDFA organization, wonderful folks. The sharing that occurred during COVID, absolutely unbelievable with helping each other of all the different plans they have in place, to make sure that the time at work was the safest period of time for all of our employees. The next generation of leadership, we're seeing a turn, as all industries do, with the leadership of the organizations. We have about 115 individuals that have either completed or are in the NextGen leadership program. I'm telling you, every time I'm with this group, I am absolutely inspired by their creative thinking, and how they will lead this industry forward. I'd like to ask anyone that's involved in the NextGen program, to please stand. NextGen folks, please stand. Thank you. I'd encourage you to go introduce yourself to these individuals while they're here. You too will be impressed with the things that they're doing.

Women in dairy, we have over 600 women. We're doing mentoring circles, dairy diversity, equity inclusion. You heard last night, this is not a passing fad, this is here. Our HR leaders had suggested that we need to do things to help them attract and retain talent, diverse talent that they can use at recruitment fairs, that they can play within their own local communities. Our team has put together a series of these videos, and I want to play one of these for you here now that I think you will find very interesting.



What an awesome video. We have about five of those that are on our website. We have them in English, we also have them in Spanish. Our team will work with you to change the logos, to make this more applicable to your own individual organization. Please work with our team. We know, going forward, our workforce is going to change. We know that we'll have a more diverse workforce, and we know that will only make us better. We also know, in terms of the workforce, we have what I refer to as a math problem. We don't have a replacement rate that we need. We need more people. We have two open positions for every person looking for a job.

We know immigration reform is needed. We talked about that last night with Paul Ryan. I thought our best chance of doing that was in the lame duck session of this past Congress. We came close, very close. We're working closely with the National Milk Producers Federation on that, and others in food and agriculture, but we won't give up, and we will keep going. We need to make sure that we are using all the Visa programs, that we're making Visa holders feel welcome in our organizations, and we need to be working closely with aspiring Americans. If we apply the playbook to people, and our people issues, we've got to put people first. We've got to show them that they matter. We've got to show them we care, and that's up and down our organizations, throughout our organizations. We've got to anticipate our future needs, and as we do our business plans in the future, our HR leaders will become a more integral part of the management team. We can't execute on our business plans if we don't have the people to fulfill those, and carry those plans out.

We've got to be bold. We've got to be bold in going after the best and brightest. We've got to look for people. We won't always get a workforce that comes from a dairy farm, and has milk cows. We need all kinds. We need computer skills, we need microbiologists, we need logistics experts. We need all kinds.

Our next priority focus area is technology and innovation. There's one thing that I hope you got from speaker Paul Ryan last night, technology is absolutely exploding. It's coming at us at such a rapid pace. You probably heard a new word last night, quantum computing, and how that's such a policy issue between the U.S. and China. We're winning there, and we need to keep up the effort. Dairy is on a digital transformation journey, meaning, we won't do that in one day. We're using technology to manage cost, to better connect with the consumers, to know consumer attitudes, behaviors, and we're use it to create growth. We're also using technology and innovation on the automation, and we need to look across other industries, to see what they're doing. For example, the pharmaceutical industry is using a thing called digital twins, creating a digital facility, training employees before the new facility is actually built and operational, using the digital twin to train maintenance workers to practice replacing parts, and repairing equipment before they actually go to the plant.

Technology's helping us bring more visibility to our supply chains. We know more about where our material is, and it has given us greater insights into consumer behavior, consumer preferences. As with many things, while we have many upsides in the case of technology, because of its explosive growth, we are seeing a 600% increase in cyber crime since 2019, and dairy is no exception. 16% of companies are really prepared for cyber crime. I would encourage each and every one of you to look into this. Make sure you have the best plans in place, and those plans will need to evolve as well. We have a sharing network inside IDFA, of the IT specialists. Tom Wojno is the contact for this, if you want to get your people involved. We have about 75 experts involved in this. We have a technology and innovation conference coming up in May, and Minneapolis, an opportunity to learn more about the new technology that's coming, how to leverage the new technology, and one session, for example, is on the way industry is looking at alcohol, and how we marry those two things together.

If we apply the playbook for success to technology and innovation, it's to act with courage. Courage to invest when the returns may not be as certain as they have been in the past because of the exploding, fast moving nature of technology, and to anticipate and adapt. Anticipate where the changes are coming, use the data and the technology to make more informed decisions.

Another priority focus area for us is nutrition, health, and wellness. I don't think we have a more important area to focus on today than nutrition, health and wellness. We must work aggressively to overcome the years of negative publicity around dairy and we need to be working to make sure that dairy can fit in a healthy lifestyle and that we're seen as a positive contributor when we talk about food as medicine for all people.

As we think about health, nutrition and wellness and we think about the policy area, we're seeing tremendous pressures on the policy. Politicians, the Congress is an echo chamber of what they hear from constituents. We need to be focused on bringing our very best science forward so that policymakers can hear that. We need science and research. I'm a firm believer that there are many positive things coming out of the ingredient sector that contribute to health and wellness, especially on the protein side, and I think there's more yet to come that we don't even know about. We may even fractionate milk for their fragments rather than wait till the whey process.

And we know consumer's habits are changing, eating occasions are changing. The way they want it, what they want, and we need to be there so that we're seen as a key part of that. If we think about policy in terms of nutrition, health and wellness, we talked about this a little bit last night, the upcoming Farm Bill 2023. We call it a Farm Bill, but it's really a food bill. Over $1 trillion in nutrition, which is primarily SNAP. I always say in the case of issues like the Farm Bill, while we keep farm policy and nutrition policy tied together is to get the votes into Congress. We have about 35 or 40 members of Congress that come from rural America and we need 218 votes to pass things. I often say, "Food is produced in Red America, consumed in Blue America." We need to merge the two groups.

In terms of the SNAP programs, we have been working at IDFA for the past four years on getting dairy seen as good for you and dairy as part of a healthy lifestyle, modeled after fruits and vegetables. Fruits and vegetables today are to the place where healthcare providers can write a prescription for you for fruits and vegetables. Wouldn't it be nice if someone wrote a prescription for you to eat more cheese, drink more milk, eat more yogurt? We have a program, we have $9 million appropriated. We were in the 2018 Farm Bill. We were authorized for 20 million, but in 2023, our plan is to be in up to 12 states and over 300 stores, and it's a simple program. When you buy a gallon of milk, you get a coupon to purchase another gallon of milk or an equivalent amount of other dairy products. We need to keep working for this. We need to keep pushing it and we will.

We also have some other policy coming down the road that's not so good for us in terms of dairy. Unfortunately, USDA has proposed to cut WIC moms, Women, Infant and Children, one and a half gallons of milk per month per WIC participant. We also know the dietary guidelines are getting started. They're every five years, they're getting geared up. This rotates between USDA and HHS. This year, it's HHS, Health and Human Services. They announced last week the 20 members of the Nutrition Advisor Committee, they'll be meeting for the first time on February the 9th and 10th, and some of those are specialists and researchers in equitable nutrition. We'll need to make sure we are bringing our very best science forward and get ready for these debates to defend the scientific benefits and nutritional value of dairy.

On health, nutrition and wellness, if there's one thing that unequivocally unites this dairy industry, nutrition, health and wellness is that. We need to come together, we are working together, we need to make sure we continue to work together and do evermore to bring the science forward. If we apply the playbook to this area, be bold. We must be bold, we must be aggressive, and we must get out there with our latest science. We need to bring it and we need to bring it now, and we need to stay united. And in this area, I say we need unexpected people saying unexpectedly positive things about dairy in unexpected places. It's absolutely critical for our future.

The next area I want to talk about is sustainability, another rapidly moving area. You heard this again last night, Speaker Ryan on ESG, Environmental Social Governance. Our dairy industry is investing significant resources to achieve some ambitious environmental goals. We're working on packaging. More than half of our ice cream companies are reporting they're moving towards sustainable packaging options. We're looking at water. How do we use less water, and how do we optimize the use and the quality of the water that we're using?

McKinsey did a survey of our IDFA members, and you'll hear more about this. 75% of them have sustainability, ESG strategies in place. We know that sustainability, and you heard this again last night, will have a role to play in trade. Speaker Ryan was talking about carbon taxes last night. We know that data and accounting, we're going to trade these things. If we're going to monetize these things, we're going to have to measure them and we're going to have to be able to verify them. It's going to require a standard.

During the survey of our members, we know that our members are reporting and they have priorities in the whole sustainability area, and we know that they're reporting to their customers on different things. 75% of our members have a ESG strategy. 72% are reporting that their boards of directors are providing oversight, and 25% are considered best-in-class, meaning they have systems in place to track and report Scope One, Two, and Three. And some people will say, "Well, this is only for publicly traded companies, Michael. This won't affect us because we're a private company." Dairy is largely a B2B business and no matter where you are in the system, you're probably selling or interfacing with a publicly traded company, so your numbers are going to be rolled up.

On sustainability, I'm very proud of what our dairy industry's doing collectively. Farm level, all the way through the entire industry. Fantastic commitments to net zero, greenhouse gas neutrality by 2050, 70% of the milk is enrolled. There are some incentives on the table from USDA on incentive, voluntary incentive programs. Dairy has done well in those programs, somewhere between 500 to $700 million in those to test different approaches, different technologies, and the US government is providing real leadership in this area, incentivizing the voluntary system.

We know that a global view is required, a global standard is required. We talked about the differences between the US and the European Union last night during the conversation, again, with Speaker Ryan. Carrots and sticks, sticks in the EU, carrots in the US. The EU appears to be going down the road of the farm to fork of less inputs, less outputs. Secretary Vilsack and his leadership and vision in the US government has been more of an efficiency. Let's produce more with less input per unit produced. And when I think about the dairy farmers in this room, I don't think we have any farmers, dairy farmers anywhere in the world that are more efficient than the US dairy farmer. For example, over the past 60 years, you are producing twice as much milk with half as many cows. To me, that is a phenomenal sustainability story. I think we have a great opportunity in this whole area.

We also, at IDFA, have put forward guidelines on environment sustainability principles for trade. We're going to have to be mindful of how we think about our traditional approaches to trade and the role of sustainability. Will our traditional SPS systems work? Will the traditional WTO system work? Will we need a new way of looking at these kinds of things?

So if we apply the playbook for success to sustainability, it too is moving rapidly. We need to be able to anticipate and adapt. We need to be mindful that this will be changing as we go and changing rapidly. And that technology will play a big role in what we're doing here, which will only make it go faster. We'll need to be bold, we'll need to be very bold with the actions that we take and we'll need to be searching for new technology and be bold in how we think about implementing those. And we'll need to come together as an industry. This will be an industry effort. When we think about sustainability and we think about what you do in your own facility, what you do with inputs there and how that goes down all the way to the farm, from Scope One, Two, and all the way down to Scope Three coming in from the farm, it's important that we are united and we're acting with one voice and that we're working on this on a global basis for a global standard.

Competitiveness. We've done a great job over the last two years with our exports, and I think about how well we've done on those with both volume and value, in spite of the fact that we've not done any new trade agreements in the last two years. And with all of the efforts that we put in on the supply chain issues, we were still able to achieve those great things.

We're creating new policies. We've got momentum in our back on how we do this, and we need to keep searching for new opportunities for our industry.

Infrastructure. We're spending money to work on our infrastructure. We've got efforts underway to digitalize our supply chains. We need to think about our trade agreements. Maybe we need to think about how do we expand the USMCA and we need to think about our pricing policy, our pricing policy for consumers. We've made pricing changes. We also need to think about our pricing system, our pricing policies for our 90 year old federal milk marketing orders.

We have new tools to use. When we had the prices with the empty containers going back to Asia, and we were competing with a new opportunity cost of an empty container, our leaders said, let's come together and see if we can find a business solution to this. Because sometimes government mandates have unintended consequences. So we've met with probably a dozen vessels, carriers, ocean carriers. We met with four or five different ports. We were able to reach an alliance with a port of Los Angeles and CMACGM. And I'm pleased to report through the 52 weeks of 2022, we saw 111% increase in dairy in containers carried by CMA going out of the port of LA and 57% across all other ports.

We're making progress here. We have this Port of Savannah here with us at Dairy Farm this year as well. Ocean Shipping Reform Act, we work together on that to make that happen. We're now working with the FMC to make sure that the implementing rules are put in place. Digitalizing the supply chain, both flow and score. And we have general lines from the US government here who's responsible for the implementation of flow so that we know more about where our assets are in the supply chain. And with the bipartisan infrastructure bill, we're actually spending money on some hard infrastructure.

Another thing that we have in the US dairy industry that I think will help us reach our aspirational goal being the world's leading supplier of dairy nutrition, is that we have land, we have space. We have efficient farmers. We have a system of rules and laws. We have the safest food in the world. We have a banking system that one can count on. We have many, many things in our natural competitive advantage. We've also been blessed by the work that was done several years ago to negotiate free trade agreements. Over the last 30 years, we've seen 20% increase in agricultural exports across all commodities in countries where we had free trade agreements. We know free trade agreements work. As we look ahead to our dairy industry and expanding our dairy industry, we know that it's anticipated that we will be producing more milk, estimated 27 billion pounds more by 2032.

Today, we are exporting more of your milk product than we are drinking. And as we move forward, we're going to need to export more. But 2028, we'll probably need to be at 22, maybe even 24% of our production in the export markets. We need market access. We need opportunities. Where do we look for these markets? Where will those happen? Some of the fastest growing economies and fastest growing populations. So we need people and we need people with economic development so they can afford to purchase. China will loom large here. We talk last night about decoupling from China. China is number one for most agriculture exports. Number two for dairy. De-linking from China's not in the cards. And I totally agree with Speaker Ryan, we need to think about how we do that in a reasonable, responsible way, and that will be a huge issue as we think about geopolitical risk.

And as we think about a move toward more populism and a move toward de-globalization, China will loom large if we think about populations. Another thing to think about, five of the 10 largest countries in the world by 2100 will be in Africa. So we need to put some eggs in the longer term play around Africa and be ready for that.

We also know that our dairy industry is evolving in many ways, and our pricing must evolve to keep pace. If we look at this chart, dairy consumption is increasing. Food milk consumption is declining. Cheese, yogurt, butter ingredients is making up the difference. Our industry is changing. Still a very positive story. The makeup is what's changing. What we need to think about is our 90 year old system keeping up with us? Does it need to evolve? Does it need to change? And does it need to evolve? And does it need to change to make it better for everyone? Farmers, processors, consumers, everyone won't work if we only do this to advantage farmers and not processors or vice versa. This has to be a supply chain.

I think Secretary Vilsack has done us a great favor, has given us a great opportunity. He has said your reform is needed. I think we all agree reform is needed. If we can come collectively to him, he will work with us to find a path forward. I am committed to try to do that. And since the first day I walked in here, I have been saying we need to unite and we need to think about how this can work for all players. Again, farmers, processors, everyone in the chain. So, if we apply the playbook to competition, both domestic and global, act with courage, this is going to take real courage. Real courage to stand up, real courage to lead. Real courage to acknowledge the facts as they are.

It's going to... Be bold, be honest, treat one another with respect, and be open and bold enough to accept new ways of thinking about it and new information. And it's going to require us to unite. Speaker Ryan said this last night at dinner, we need to come together. We need to unite on this for our industry. And I believe that there are far, far more that unites us than there is that divides us. I talk to Jim Mahorn frequently, and I can tell you he and I are both aligned how can we work together? How can we bring our dairy industry together? We will work on it. We will work on it. We need you to engage with us to make that happen.

So, in closing, I've gone through five new ways to think about leadership. Keep these in mind. Take these five home with you. And we know that inspiration requires courage. And we know that those that we are following, our predecessors, they were courageous. They had will, they had commitment, and they were determined to make things better in the future. They had an ability to see the world as it could be. And they had ability to think about how do we change that? How do we anticipate? How do we adapt? They treated people with respect. They valued people. We need to continue to do that as well. They were bold. They were courageous. They were bold enough to accept new ways of thinking. Bold enough to accept the facts that they were as they are, as they were.

And they could see how coming together to unite would make things better for the collective good, for the entire industry, for the future. So, I have two final things to ask of you. What part of this playbook are you going to take home with you and apply in your daily life? And how are you going to show up differently tomorrow, next week, next month to make this dairy industry the world's leading supplier of dairy nutrition? Thank you very much.