Benefits of Liberalizing the Global Dairy Market

The global dairy trade is being driven by demands from consumers in developing countries who want to improve their diets and markets in developed countries seeking specialty products. The U.S. dairy industry is increasingly looking at ways to take advantage of these new international market opportunities. Last year, U.S. dairy exports achieved a record high of $1.87 billion, which was an increase of 12% from 2005. U.S. exports of whey represented the largest growth with an increase of 45% from 2005 to $327 million in sales. Other dairy exports that enjoyed double-digit growth of more than 20% for 2006 sales include: cheese valued at $244 million, lactose valued at $160 million, and yogurt valued at $9 million. Nonfat dry milk experienced a growth of 5% when compared with 2005, and 2006 exports were valued at $600 million.

Even with the current upswing in exports, U.S. dairy manufacturers are finding their access to the global dairy marketplace hampered by unnecessary regulations and other market barriers. The current global dairy market is disjointed and markets, consisting of vastly diverse production systems and cost structures across and within countries, are not integrated. Government intervention in dairy policy is high and omnipresent in the global agricultural trade sector.

IDFA supports the liberalization of the global dairy market and has consistently been a champion of trade agreements that eliminate tariff and non-tariff barriers to trade. These barriers include export and other trade-distorting subsidies, discriminatory or arbitrary technical standards and regulations, and a myriad of other obstacles to free and open markets.

IDFA believes that the liberalization of the global dairy market will be beneficial to our membership. Although the American market is large, 96% of the world's consumers are outside U.S. borders. There is a substantial amount of unfulfilled international demand that could lead to much larger trade in dairy products. Presently only a minute percentage of total global dairy production is traded - roughly 5%. Moreover, the U.S. market is largely a developed marketplace, while significant growth opportunities lie overseas.

Developing and newly industrialized economies offer stronger consumption growth rates for food products generally and dairy products in particular. Studies show that, as household income increases, the consumption of value-added food products such as yogurt, cheese and ice cream increases as well. Diets improve with increased consumption of highly nutritious foods such as milk and dairy products. This is true for many countries in Latin America and is an important reason for the recent export growth to the Mexican market. Focused marketing programs in Asian countries have also succeeded in introducing dairy products, such as cheese toppings, into the diets in nations where dairy foods have not figured prominently on the menu for cultural reasons.

Presently, only New Zealand and Australia depend on foreign dairy markets for the lion's share of their dairy revenue. Liberalization of the global dairy market will allow U.S. dairy manufacturers to gain more valuable global opportunities for their products. As more market barriers fall, and the gap closes between U.S. dairy prices and world market prices, competitive opportunities for U.S. dairy foods will expand and more U.S. firms will take advantage of foreign markets.