Global Dairy Market PerspectivesPresented by World Perspectives, Inc.

Conference for Uruguay’s Dairy IndustrySponsored by the

Embassy of the United States of America

Montevideo, UruguaySeptember 30, 2003

 

   

… Providing Market and Policy Analysis

Intelligence Reports Feed Grains, Sugar, Trade Policy, and Dairy Trade Updates

Customized Consulting Projects Covering all aspects of the agriculture and food sector

 

   

A Weekly report On Trade and Policy Issues in the Dairy Sector.

CONTENTS:

1.U.S. Dairy Industry Strategy2.Competitors Respond3.Congress Adds Heat4.Geographic Indicators

SAMPLE C

OPY

Market and Trade Developments

Aggregate milk production in 2003 is about one-half percent above 2002

US$ has depreciated against major exporters

13 pct vs EU€ 17 pct vs AU$

19 pct vs NZ$

WTO settled a case against Canada’s export pricing; could reduce Canada’s exports

WTO Cancun Ministerial failure; trade barriers persist

€

Production Snapshot (25 Sept)

NZ – milk production up 5 pct seasonally; forecast to be up 2-3 pct annually

AU – drought recovery is helping milk supplies; forecast up about 1 pct annually

EU – milk production is down, heat wave affected production, feed availability, milk composition

US – milk production is up over 2002, but tailing off after first half of 2003; herd liquidation with strong beef prices. Product processing is up with milk production.

Utilization Snapshot (25 Sept)2003 FOB Export Prices ($USD/MT)

New ZealandAustralia

Western Europe USA

High Low High Low Current

WDM 1850 1600 2000 1625 2389

Cheese 1650 2100 NA NA 3203

Butter 1500 1100 1700 1250 2342Utilization/Demand remains steady to strong globally; reform in Canada (and EU) keeps world market prices firm

Whole Milk Powder (Jan 02-Jul 03)

Non-Fat Dry Milk (Jan 02 - Jul 03)

Butter (Jan 02 – Jul 03)

Cheese (40 lbs blocks of cheddar) (Jan 02-Jul 03)

Highly volatile markets – 50 pct fluctuation in price

GLOBAL DAIRY TRADE BARRIERS

GLOBAL DAIRY TRADE BARRIERS

TARIFFS: 40-90 pct avg; can be 300 pct

TRQ’s & Subsidies: prohibitive over quota rate; administration of TRQ; “dump” marketOTHER:

OTHER: packaging, labeling, testing, inspection, mandatory shelf life requirements, recipe and manufacturing declaration, standards of identity

North AmericaUSA – TRQ’s domestic support = gross overproduction of NDM, minimum prices per class, standards of identity

Canada – TRQ’s,with over quota tariffs, until recently two-tiered pricing

Mexico – growing market; preferential treatment via NAFTA hurts 3rd parties

Asia, Middle EastJapan/Korea: growth market for cheese and ice cream; non-tariff barriers

Taiwan: fairly open; imports all but fluid milk

Israel: cheese TRQ admin problems; high over quota tarifs

Iraq: WDM potential (compete w/ US DEIP)

India: market closed; (imagine potential)

Europe

EU: High in-quota tariffs, licensing rules; $1 bln in export subsidies; wants to impose new and stricter “geographical indicators”

South AmericaBrazil – new federal payments (US$75 mln) to improve

productivity of cows; maintaining anti-dumping duties on powder; UHT market, but fluid milk consumption is down

Colombia: 97 pct tariffs

Venezuela: import licensing

Chile: FTA with US

Argentina: Uruguay largest export supplier; Argentina actually dropped import duties in 2002, but no purchase power and imposes export taxes

WTO: Cancun CollapseDraft Text (#2)

• Product specific AMS caps;

• Eliminate some export subsidies;

• Review Green Box;

• Special and Differential

Global Dairy Alliance

• Include dairy reform WTO round

• End export subsidies, market barriers, and production subsidies

EU’s “GI” Plan

• The EU plan would extend GI’s beyond TRIPS register which effects cheese, e.g. feta, parmesan, cheddar, brie

• Also add quality descriptions, e.g. double cream, aged)

G21 Countries

• Refused to budge on market access and facilitation issues

GLOBAL DAIRY TRADE BARRIERS

GAINS FROM TRADE

PRICES: export prices increase 18-40 pct for most products; 40 pct for cheese

URUGUAY: could see 84 pct increase in value of cheese exports; 15 pct increase elsewhere

NICHE: certain niche products can and are exported without trade agreements; in fact lack of agreements sometimes define the product and market

WTO: Cancun Fallout,What’s Next?

Fallout is still being calculated

Brazil will not open to ag imports - Ricardo Ferreira, rep of GDA/ALG

US likely to pursue even FTA’s•Keep pressure on Brazil•Facilitation/Transparency

TWO TYPES OF DAIRY EXPORTS

COMMODITY

WDM

NDM

Butter

Cheese

NICHE

Whey

Lactose

Ice Cream

Concentrates

TWO TYPES OF DAIRY EXPORTS

COMMODITY

Highly volatile, low margin, fungible standard products; markets distorted by subsidies and barriers

NICHE

Defined by high value, or tariff avoidance; market often defined by regulation and barriers; not a lot of value to producers; significant current trade

Milk Protein Concentrates (MPC)

MPCs, casein and caseinates – if 40 pct protein, there is no TRQ

Not a direct replacement for NDM, but if no price support for NDM, MPC’s wouldn’t be marketable

The ITC will release its report by May 14, 2004

Ice CreamGrowing export product: US ships 40 million

gallons totaling $USD80-100 mln per year

Japan, United Kingdom, Mexico, Canada, Hong Kong are top 5 importers

US Standard of Identity using whey for ice cream

Artificial sweeteners in ice cream due to Atkin’s diet

US Dietary Guidelines

US “Food Pyramid” – average diet should have 22 percent more dairy

Most would be low fat products – yogurt, low fat cheese

Revised in 2005, new focus on weight loss properties of dairy calcium

Specialty Cheese PricesWashington, DC, USA (week of 22 Sep)

Cheeses of the World (cut to your order!!!)

Chevre De Belley $11.99Blue D'Auvergne (France) $ 7.99Caerphilly Wales $ 6.99Huntsman (England) $ 9.99Kashkaval $ 7.99Morbier (France) $ 7.99Parmesan Reggiano (Italy) $12.99Parrano Cheese (Dutch) $11.95Port Salut (France) $17.99Saint Andre - Triple Cream (France) $12.98Saint Nectare (France) $ 9.49Taleggio (Italy) $13.95Tilsit (Danish) $ 8.49

Avg retail price:

$10.83 USD

Uruguay: US Strategy

Cheese HTS Code

Action/Goal

Italian Type 0404.10.54 1,200 ton increase

Swiss/Emmethal

0406.10.64 600 ton quota

Swiss/Emmethal

0406.10.68 600 ton quota

Gouda/Edam 0406.10.44 1,000 ton quota

Cheese Powder 0406.10.30 1,000 ton quota

Uruguay: Regulatory Strategy

FMD – cheese, ice cream, butter, butter oil, and chocolate milk

Harmonize regulatory structures – Chile sets precedent with US Chile FTA: industry wants to use the USDA, Agricultural Marketing Service list of Dairy Plants Surveyed and Approved for USDA Grading, and t he FDA’s Interstate Milk Shippers List for Grade A Dairy Plants

Industry Association plays a key role, …

Asociación Internacional de Productos Lácteos (International Dairy Foods Association)

Éstos serán sus beneficios específicos como miembro internacional de la IDFA:

Oportunidades para relacionarse

Acceso al personal de la IDFA

Acceso a los documentos exclusivos para miembros del sitio web de la IDFA

Recibirá publicaciones de cortesía (En inglés)

Seminarios educativos

Investigación de mercado

Comunicaciones y relaciones públicas

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