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BUSINESS PLAN

A Strategic Evolution

MANAGED BY DAIRY MANAGEMENT INC.™

CONFIDENTIAL | © 2013 U.S. Dairy Export Council

Table of Contents

Introduction .................................................................

Executive Summary .....................................................

OUTLOOK

Situation Analysis.........................................................

Product Portfolio Analysis ..........................................

Strengths, Weaknesses, Opportunities and Threats ...............................................................

Business Assumptions ..............................................

PROGRAMS

OBJECTIVE: Maximize U.S. Opportunities through Improvement and Maintenance of Market Access and Rules of Trade

Trade Policy ...............................................................

Market Access and Regulatory Affairs........................

OBJECTIVE: Accelerate Stakeholder Efforts by Providing Actionable Insights and Information to Drive Commercial Sales

Strategy and Insights .................................................

OBJECTIVE: Protect and Defend a Positive Sales and Marketing Environment Issues Management and Crisis Preparedness ............

OBJECTIVE: Drive Demand and Preference through Marketing Services that Accelerate Customer Success Global Marketing .......................................................

COMPLEMENTARY PROGRAMS

GLOBAL TRADE SERVICING & INTERNATIONAL

REPRESENTATION, EVALUATION .........................

GLOBALIZATION: A GLOBALLY

CONSISTENT SUPPLIER ........................................

C OMMUNICATIONS AND MEMBERSHIP ..............

EXPORT FORECASTS AND BUDGETS

Export Volumes and Forecasts ..................................

Sources of Funds ......................................................

Program Investments.................................................

Glossary of Terms ......................................................

Funded primarily by the dairy checkoff

program through Dairy Management Inc. (DMI),

the U.S. Dairy Export Council (USDEC) is

a non-profit, independent membership

organization that represents the global trade

interests of U.S. dairy producers, proprietary

processors and cooperatives, ingredient

suppliers and export traders.

2014-16 Business Plan / Introduction // 3

Introduction

impact of volatility, more robust supply chain traceability systems, as well as useful and innovation-friendly product and processing standards. Yet, few are more important than the Innovation Center's globalization

initiative in store for 2014 to move concretely to reform our dairy pricing system that retards our ability to act on market signals and inhibits product innovation. So, continuing our effort to meet members’ commercial needs, this business plan will help address the key factors that we can influence—new markets, lower commercial risk through better rules of trade and improved market information, tools to assist exporters to expand, and changes to our domestic policy environment that allow us to be more responsive to the market, innovative and customer-centric.

Your insight and your participation will ensure that we can continue to deliver on USDEC’s mission of assisting you to increase the volume and value of U.S. exports.

Sincerely,

Thomas M. Suber President

Responding to members’ stated priorities, this year’s business plan continues the three- year migration towards a stronger emphasis on nuanced and creative efforts in trade policy and market access and regulatory affairs.

CONFIDENTIAL | © 2013 U.S. Dairy Export Council

4 // Executive Summary / ©2013 U.S. Dairy Export Council

Executive Summary, 2014–16 Business Plan

It’s been three years since USDEC embarked on a “strategic evolution” to re-examine its program focus so that it maximizes

resources and aligns them with a shifting global business environment and with more

capable and committed U.S. dairy exporters.

In the first year of the organization’s evolution process toward strategic change, programs were prioritized and a resulting framework was put in place to realign and evolve resources and programming. The 2013 plan moved the organization beyond the strategic framework with programs moving directionally towards change. In this plan, the organization is now firmly on a new path to solidifying the U.S. dairy industry as a consistent global supplier, with shifts in programs, resources and staff now complete. Following are some major strategic initiatives to be emphasized in 2014–16.

Trade Policy

Because it has the greatest potential to remove foreign tariff and non-tariff barriers (NTB) and provide the greatest market access opportunities, great emphasis will rest on trade policy. Primary efforts will focus on delivering indus- try priorities through the TPP and the TTIP between the United States and the EU, as well as advancing regulatory coherence so that countries work proactively and preemp- tively to resolve sanitary and phytosanitary (SPS) issues.

Market Access and Regulatory Affairs

Of equal importance will be resolving regulatory barriers to trade and maintaining access to core markets. In 2014–16, USDEC will increase efforts in developing regulatory frameworks and science-based product standards, particularly in China. Such efforts, specifically early engagement in the development of foreign regulations, will help ensure that new standards are risk-based and that they reflect internationally-accepted scientific principles.

Strategy and Insights Strategy and Insights programs will assist stakeholders by providing actionable insights and technical assistance to drive commercial sales. Among the major initiatives in 2014–16 will be greater consultative technical assistance to address supply gaps in skim milk powder (SMP), dairy proteins for food aid, whole milk powder (WMP), fluid milk and low-spore SMP, and exploratory research about U.S. export opportunities in Sub-Saharan Africa. Issues Management and Crisis Preparedness In this planning period, USDEC will work to strengthen online crisis readiness especially in the sensitive markets of Asia. Another effort will strengthen overall readiness through an assessment of the organization’s current crisis plan and through drills, training exercises and spokesperson training, again with a specific focus in China and greater Asia. Global Marketing With an increased emphasis on consultative marketing, USDEC will maintain its long-term relationships with targeted end-users where increased volume sales for U.S. suppliers can be achieved. Such projects will focus on ingredients, specifically key global accounts and those involving industrial use for U.S. ingredients in the Middle East, as well as cheese for foodservice in the Middle East and Asia. Another key initiative is a marketing communica- tions program to enhance U.S. dairy’s image and position- ing among global buyers. Globalization (on Behalf of the Innovation Center for U.S. Dairy) Of the suite of six programs to advance the U.S. dairy industry as a globally consistent supplier, four programs in particular will be advanced during 2014. First is the development and subsequent industry adoption of volun- tary enhanced dairy supply chain traceability practices to help the industry meet pending legislation and to address buyer needs. Second is a business plan for change to

improve price discovery and reporting of milk powder that will facilitate more functioning risk management tools to better manage volatility. A third is an effort to obtain GRAS (generally recognized as safe) status for U.S. concentrated milk proteins to further drive U.S. milk protein concen- trate (MPC) use in high-value product categories. Finally, the industry work group will focus on updating certain U.S. standards for processing and equipment in order to improve U.S. global competitiveness.

A profitable U.S. dairy industry that is growing its global market share by efficiently and consistently meeting customer demands

VISION

Through analysis and collaboration, enhance demand for U.S. dairy products and ingredients by securing access and assisting suppliers to meet market needs that facilitate sales

MISSION

USDEC Funding

2013 2014 2015 2016

$26.0 M (^) $24.5 M $22.7 M $22.7 M

DMI will provide primary funding support through the dairy farmer checkoff for the three-year period 2014–16. A DMI-funded multinational pizza chain promotion will be continued only in 2014 and discontinued thereafter. USDA funding is projected to stay level throughout the plan period as are membership dues.

Outlook

8 // Outlook / ©2013 U.S. Dairy Export Council

Though conditions seem poised to stimulate increased milk production in late 2013 and into 2014, robust dairy import demand

growth is likely to parallel or outpace the availability of exportable supplies, thereby

creating relatively tight market conditions.

Milk production among leading dairy export regions is recovering from challenges of high-feed costs/low margins and adverse weather conditions. In addition, various regions, both exporting and importing, face structural constraints that are likely to increase costs and slow milk production growth. Contrastingly, beginning in April 2015, EU milk production quotas will be eliminated, unleashing much anticipated, though uncertain, potential among lower-cost European production regions. These conflicting factors will exacerbate uncertainty associated with global supply-demand balance into 2015–16.

Status of Macroeconomic Indicators

A recovering economy and lower unemployment should have a positive effect on U.S. domestic dairy consumption, increasing competition for exports. U.S. economic growth is expected to average 3.3 percent per year during 2014–16. Unemployment is expected to decrease from an average of 8.3 percent during 2011– to an average of 6.9 percent in 2014–16. In addition, U.S. housing markets are recovering. Downside risks associated with fiscal uncertainty and spillover from euro-zone debt and banking issues have diminished. However, decreased U.S. labor force participation and lower-median real household incomes may drag on U.S. consumption growth.

Asian economic growth is a primary driver of global dairy import demand growth. Emerging and developing Asian Gross Domestic Product (GDP) is expected to grow 7.

percent per year during 2014–16. Though the euro-zone is expected to return to positive growth during 2014–16, the lackluster increase averaging just 1.4 percent per year will drag on all advanced economies, which are expected to increase by an average of only 2.5 percent annually. Global economic growth is expected to average 4.3 percent annually during 2014–16, 0.8 percentage points slower than the 5.1 percent annual growth during 2005–07, the most recent three-year peak. From a competitive supply perspective, the value of the U.S. dollar affects returns to competing export suppliers. Over the past year, the euro has averaged US$1.31/euro ranging from US$1.28 (-1.9 percent) to US$1.33 (+2. percent). The New Zealand (NZ) dollar averaged US$0.82, while ranging from US$0.79 (-3.8 percent) to US$0. (+3.4 percent), the NZ$ declined by 4.2 percent from May to June 2013. The Australian dollar has weakened considerably, falling from US$1.04 in September 2012 to US$0.90 in August 2013. Consequently, returns to Oceania exporters are benefitting from weaker currencies as well as from higher international prices. In the absence of any major economic shocks, competing currencies are expected to trade in similar ranges over the 2014– business plan period.

The U.S. dollar rate vis-à-vis major dairy importers is important for its impact on dairy demand, regardless of the supply source. The importance of the Chinese yuan grows along with what appears to be China’s insatiable demand for food and dairy imports. After trading near an average of 6.33 yuan from July 2011–December 2012,

the yuan has recently strengthened to 6.12 yuan (+3. percent). The Mexican peso averaged 12.73 pesos over the past year, ranging from 12.21 pesos (-4.1 percent) to 13.06 pesos (+2.6 percent). Stronger currency in major importers offsets some of the impact of recently higher prices. Expectations of stable relative growth rates suggest that—in the absence of major economic shocks—the U.S. dollar will likely trade in relatively stable ranges with the currencies of major dairy importers throughout 2014–16.

Food price inflation in the short to medium term is expected to moderate as livestock product prices (including dairy) and crop prices diverge. Meat and dairy prices will remain historically but will be offset by lower cereal, oilseeds and sugar prices. Though food prices are expected to be relatively flat during 2014–16, prices will generally be above longer-term historic averages. Food affordability will remain an issue among many developing nations as food accounts for 20–50 percent of total expenditures. Consumption and Demand China—which imported nearly 1.5 million metric tons of dairy products during the 12 months ending June 2013—will remain a primary driver of global dairy import demand. Conditions favorable to increased dairy consumption are expanding in second- and third-tier cities as well as in rural areas where per-capita dairy consumption growth has lagged that of first-tier cities and coastal urban areas. China’s dairy imports have grown at a compound annual rate of more than 30

Asian economic growth is a primary driver of global dairy import demand growth. Emerging and developing Asian Gross Domestic Product (GDP) is expected to grow 7.7 percent per year during 2014–16.

China—which imported nearly 1.5 million metric tons of dairy products during the 12 months ending June 2013—will continue to be a primary driver of global dairy import demand.

Situation Analysis

10 // Outlook / ©2013 U.S. Dairy Export Council

U.S. milk production growth has begun to recover, but is still well below longer-term trends. The most recent World Agriculture Supply and Demand Estimate (WASDE) report forecasts milk production to increase by about 1 percent during 2013. However, based on milk production estimates through July, milk production would need to increase at the rate of more than 2 percent for the remainder of the year to achieve the WASDE estimate.

Ultimately, U.S. production growth will need to make a significant contribution to the net global supply picture as growth in Southern Hemisphere export is expected to fall short of demand growth. Response to increasing milk prices and decreasing feed costs—assuming a normal 2013 harvest—can be expected to lead to increasing milk production into 2014. Production growth should continue in 2015 and 2016, increasing by 1.2 and 0.7 percent, respectively.

EU Quota Elimination

On April 1, 2015, EU milk production will no longer be subject to quota limitations. Expectations are high in areas where milk production costs are low and expansion was limited by the quotas. However, growth will not be uniform across member states. Increases

of 10–20 percent in low cost areas are expected to be offset by decreases in high-cost areas. Overall growth is expected to total about 5 percent by 2020. Capacity investment in areas where milk production is expected to grow has focused on dryer capacity as opposed to cheese production. These factors are likely to alter the relative mix of exportable products. Recent EU milk production growth has facilitated export growth as per capita domestic consumption declined. Overall EU export growth focused on SMP and cheese. SMP export growth was also facilitated by elimination of domestic use subsidies, and robust internal butter demand contributed to profitability of SMP/butter production. Growth in cheese exports focused on the Russian market. Economic recovery is likely to stimulate recovery in domestic cheese consumption, especially among new member states. After quota elimination, new lower-cost milk production will facilitate the competitive position of EU suppliers in SMP and cheese markets.

Conclusions Slower rates of milk production growth among Southern Hemisphere suppliers provide an opportunity for the U.S. dairy industry to capture an increasing share of global dairy product imports. Robust demand growth will be driven by persistent gaps between domestic production and domestic demand in China, Mexico, Southeast Asia and the Middle East, as well as other emerging economies. Despite less-than-optimal policy structures, now is the time for the U.S. industry to take advantage of these opportunities. EU milk producers will be unencumbered by production quotas on March 31, 2015. Moreover, EU processors are not subject to the outdated classified milk pricing structures in place in most of the United States. These outdated administrative milk pricing systems are likely to put U.S. exporters at a competitive disadvantage vis-à-vis EU suppliers with access to increasing cost-competitive milk supplies. As a result, the United States industry will still struggle to escape its role as a global shock absorber, the de facto balancer of global supply and demand. In addition, high-levels of volatility create uncertainty and enhance the risks and challenges of navigating an increasingly competitive global dairy marketplace.

Slower rates of milk production growth among Southern Hemisphere suppliers provide an opportunity for the U.S. dairy industry to capture an increasing share of global dairy product imports.

Situation Analysis

2014-16 Business Plan / Outlook // 11

Product Portfolio Analysis

The United States is positioned to take

advantage of growing global demand for dairy products. Multiple factors support

competitive U.S. exports, including a large and seasonally stable milk supply, relatively limited structural constraints on expansion

of milk production and processing capacity, existing modern milk production

and processing infrastructure, research and development investment and a large sophisticated domestic market.

To strengthen its position, the U.S. industry should accentuate those advantages that will elevate its reputation as a consistent supplier to manufacturing, foodservice and retail customers and identify and focus on strategic, high-value growth segments of the market to enhance returns to all levels of the value-chain.

Milk Powder

SMP/nonfat dry milk (NFDM) trade expanded from 1. million metric tons in 2008 to 1.79 million metric tons in 2012, a 52 percent increase. At this rate, global SMP trade would exceed 2.4 million metric tons by 2016. In 2008, the United States was the largest supplier with a 33 percent market share. By 2012, the EU had eclipsed the United States as the largest supplier, having captured 56 percent of incremental growth. The U.S. market share dropped to 25 percent as New Zealand captured 24 percent of incremental growth compared with just 9 percent for the United States.

U.S. domestic utilization is driven by NFDM for cheese milk fortification while international buyers prefer low- spore, protein-standardized SMP for recombination. Mexico, a market dominated by the United States, is

the largest global destination for SMP/NFDM trade; and much like the United States, a large portion is utilized in cheese fortification. The United States captured 84 percent of the incremental growth in the Mexican market during 2008–12, but generally missed growth in most Asian markets to the EU and New Zealand. For example, the EU and New Zealand supplied 98 percent of incremental growth in SMP exports to China. Despite the loss of market to EU suppliers, the United States is positioned to compete for future growth in SMP markets. EU export expansion was aided by elimination of subsidies for SMP use in animal feed, as well as economic recession that reduced overall per capita dairy consumption. Export opportunities will be driven by value-added, low-spore SMP for use in rapidly growing pediatric and nutritional formula segments in key Asian and emerging markets.

WMP trade expanded from 1.88 million metric tons in 2008 to 2.26 million metric tons in 2012, an increase of more than 20 percent. At these rates, trade in WMP will approach 2.63 million metric tons by 2016. WMP trade growth lags SMP trade growth. In 2008, WMP trade was 60 percent greater than SMP trade. By 2012, WMP trade was 26 percent greater and by 2016, WMP trade will be only 8 percent greater than SMP trade. New Zealand dominates trade in WMP, while the United States is not a factor with less than 2 percent market share. As total trade expanded by 383,000 metric tons, New Zealand increased WMP exports by 655, metric tons, increasing its share from 32 percent in 2008 to nearly 56 percent in 2012. China and members

of the Organization of Petroleum Exporting Countries (OPEC) accounted for 79 percent of New Zealand’s WMP trade growth. WMP exports, nonetheless, have strategic benefits for the U.S. industry. New production capacity and export of gas-flushed standardized WMP allows the U.S. industry to provide a full line of milk powders to customers looking for alternative suppliers. In addition, WMP provides an alternative outlet for butterfat, which might otherwise contribute to periodic domestic imbalances. New Zealand milk production growth alone cannot sustain the increased demand for WMP, and tight EU butter markets make SMP and butter production a more attractive alternative to WMP. High Protein Ingredients (HPI) High protein powder exports—including MPCs and whey protein concentrates (WPCs)—grew from 213, metric tons to 283,000 metric tons during 2008–12, a 33 percent increase. At this rate, these exports would total 353,000 metric tons by 2016. New Zealand has a 39 percent share followed by the EU with 23 percent and the United States with 19 percent. The United States is also a large importer of these products and is the destination for 53 percent of New Zealand’s exports in these categories. These markets include high-value, highly-functional ingredients with less price volatility than commodity products. U.S. suppliers have unique opportunities for import displacement as well as expanding export opportunities. In addition, production of MPC and WPC also yields permeate—a cost-effective source of dairy solids, primarily lactose. Permeate has historically been used for standardization of milk powders, but also offers its own unique set of properties in various feed, food and beverage formulations.

Despite the loss of market to EU suppliers, the United States is positioned to compete for future growth in SMP markets.

CONFIDENTIAL | © 2013 U.S. Dairy Export Council

2014-16 Business Plan / Outlook // 13

Strengths, Weaknesses, Opportunities and Threats

Analysis STRENGTHS WEAKNESSES

• U.S. milk production is seasonally less pronounced than competitors, enabling a more consistent supply base
• Global investors see the United States as a favorable platform from which to meet growing global dairy demand
• A large domestic market captures economies of scale, product innovation and R&D
• Industry moving towards more diversified product offerings
• Existing, unified industry effort assisting suppliers to expand exports
• Great capacity to expand milk production in response to demand
• Recent gains in export volumes and market share have established U.S. product in many key markets - Domestic pricing policies and mechanisms inhibit competitiveness and impair product diversity, innovation and risk management strategies - Relationship gaps linger between U.S. suppliers and end-users that deter knowledge of product needs and market dynamics - Competitors are often more dedicated to customer needs, including tight technical standards, understanding pricing and payment strategy, and after-sales support - Relatively low U.S. product and processing R&D investment versus competition doesn’t capture value-added potential - Risk management tools and utility remain underdeveloped, exposing industry to higher damage from volatility

OPPORTUNITIES THREATS

• Global dairy consumption is increasing over time at a greater pace than the growth capacity of traditional suppliers
• Global customers increasingly see U.S. milk supply as critical to market stability and sustained supply
• Improved mechanism and trading volumes in U.S. dairy cash and futures markets could improve forward pricing capability and minimize volatility damage to supply chain
• United States offers alternative supply chain security against traditional supply sources, notably Oceania
• New free trade agreements (FTAs) are in play that could ease tariffs and access rules into attractive markets while enhancing U.S. competitiveness
• Improving U.S. production and processing practices may remove negative differentiation point in sustainability, food safety and traceability - Health and quality attestations required by overseas authorities are straining U.S. regulatory capacity to satisfy - Spread of third-country FTAs imperils U.S. access and competitiveness - U.S./New Zealand FTA could displace internal high-value markets and hollow out U.S. growth capacity - Insufficient speed in improving consistency of U.S. supply could accelerate production growth in emerging suppliers, especially in South America - Increasing demand for traceability and tighter commercial specifications requires continuing quality assurance spending - Increasing use of NTBs (e.g., biotech, arbitrary standards, burdensome licensing requirements) creates more commercial risk - Rising export volumes and share of production create larger risk exposure if sudden trade disruptions impair lasting trade flows

CONFIDENTIAL | © 2013 U.S. Dairy Export Council

14 // Outlook / ©2013 U.S. Dairy Export Council

Business Assumptions

U.S. Market

• A new farm bill (provisionally effective October 2013) will replace price supports with less onerous safety nets, while maintaining USDA’s Market Access Program (MAP) and Foreign Market Development Program (FMD) matching funds in the near-term. It will also eliminate the Dairy Export Incentive Program (DEIP) (existing maximum volumes shown below).
• U.S. milk supply changes projected for 2014, 2015 and 2016 are noted below.
• U.S. feed costs will remain towards upper-end of price curve due to continued effects of U.S. ethanol policy and lingering drought.
• New and revised risk management tools will improve utilization and liquidity, dampening the impact of volatility.
• Industry consolidation and overseas capital will drive investment in U.S. plant capacity. - U.S. production of MPCs, dairy blends, whole and filled milk powders will increase as price supports decline. - Cooperatives Working Together (CWT) will exist in 2014 to provide export assistance for selected products and markets. - Demand for value-added ingredients that provide enhanced nutritional benefits will continue to increase. - Growing consumer awareness of protein benefits will fuel usage for dairy proteins in manufactured foods beyond nutritionals. - Animal diseases or drought, flood or other weather- related events will not significantly hinder feed supplies or milk marketing. - Current internal review process by U.S. Department of Defense will result in commercial demand for a range of dairy ingredients (proteins) by the middle of the business plan period.

International Markets

• See Situation Analysis on page 6.
• Economic growth in China should average near 6–8 percent. Oil exporters should benefit from stable to strengthening prices throughout 2014.
• Economic growth in OECD remains problematic, with greater uncertainty in the eurozone. Southeast Asia should see a growth in 2014 and 2015 that exceeds the OECD average.
• China’s appetite for WMP and other dairy products will remain a major factor influencing global price developments.
• Multinational buyers will continue to demand “custom” specifications, technical support and traceability capabilities for suppliers to achieve “preferred” status.
• Significant Australian milk production increases are constrained by rainfall limitations and water rights issues.
• New Zealand investments in offshore milk production and competitive supply chains will continue; independent processors will grow yet remain dwarfed by Fonterra.
• Generally stable political conditions will prevail in target markets.

U.S. Milk Production, 2011 – 2016

2011 2012 2013 2014 2015 2016 bil. lbs. 196.2 200.3 202.5 206.5 209.0 211. % change* 1.72% 1.84% 1.40% 2.00% 1.20% 0.70%

Source: NMPF *Adjusted for leap year

DEIP Volumes (MT) NFDM/ SMP CHEESE^ MILKFAT^

OTHER (I.E. WMP) 68,201 3,030 21,097 34

16 // Outlook / ©2013 U.S. Dairy Export Council

CHINA

1. China will continue supplementing its rapidly increasing demand for dairy with imports.
2. The FTA with New Zealand and a potential one with Australia will favor non-U.S. sources.
3. The impact of various food scandals will continue to support dairy imports based on food safety concerns.
4. Reflecting strong consumer concerns, China will revise and develop new standards for domestic and import suppliers to improve confidence in its current food safety system.

OTHER ASIA

1. With a stable economy, moderate growth is anticipated in Korea. Overall dairy imports are expected to grow, due to FTAs with both the United States and the EU.
2. Southeast Asian dairy import demand will remain firm, driven in part by local processing focused on meeting consumer demand in Indonesia, recombined milk in Africa, infant formula in China and processed cheese in Japan.
3. Dairy processors will continue to establish a presence inside the Association of Southeast Asian Nations (ASEAN) to capitalize on tariff-free movement of goods within the region.
4. India’s growth in domestic demand will continue to challenge its goal of self-sufficiency. Through the business plan period, U.S. imports will continue to face SPS barriers and technical barriers to trade (TBT).

EUROPEAN UNION

1. Good farmgate prices will push production close to current quota maximums under the Common Agricultural Policy (CAP). EU processors will focus investments in powder production, where better returns are expected.
2. Casein production will increase, particularly in Ireland, with parallel increases in acid whey.
3. EU milk production growth post quota in 2015 will be concentrated in the North Europe “dairy belt” (Ireland, Netherlands, France's Brittany region, Northern Germany).
4. New farm milk contracting mechanisms are under study, although details and levels of market distortion are currently unclear. OTHER MARKETS
5. Brazil will remain an important market for Argentina and Uruguay, but with only minor export capability.
6. Argentine production will grow well if government export restraints remain moderate.
7. Russian dairy self-sufficiency will remain low, with imports depending on the ruble’s value and erratic use of NTBs against imports. SPS/TBT issues will persist.
8. Canada’s rigid supply management system will remain in place during the business plan period, though concessions under TPP and to the EU in its separate FTA will weaken the system in years outside the plan period. Regardless, Canada will continue to hinder imports through various non-tariff barriers.
9. North Africa will remain a large buyer of cheese, butterfat and milk powder.
10. Middle East regional demand will continue to rise due to recent FTAs and continuing economic growth. Spreading political pluralism will create challenges and opportunities.
11. Africa will remain primarily a commodity market dependent on finance and price concessions.
12. Trade and travel restrictions to Cuba will remain in place through the plan period, albeit at a lesser intensity.
13. Central America remains an area of U.S. competitive advantage.
14. Rising national debt burdens in several Caribbean target markets could hamper regional import volume growth.

Business Assumptions

42 // Export Forecasts and Budgets / ©2013 U.S. Dairy Export Council

 - 2013 2014 2013 – 2014% CHANGE Source of Funds ($000) 

• Dairy Management Inc. $18,538 $17,530 -5.4% $16,142 $16,
• USDA Foreign Agricultural Service $5,855 $5,370 -8.3% $5,370 $5,
  • Market Access Program $4,941 $4,620 -6.5% $4,620 $4,
  • Foreign Market Development $702 $750 +6.8% $750 $
  • Other FAS Programs $212 $0 -100.0% $0 $
• Membership Dues $1,020 $1,100 +7.8% $1,100 $1,
• Draw from Program Development/Unused Checkoff $520 $412 -20.8% $0 $
• Other Revenue $50 $40 -20.0% $40 $
• TOTAL $25,983 $24,452 -5.9% $22,652 $22,