Cwt dvd presentation_12-1


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Cwt dvd presentation_12-1

  1. 1. The Importanceof the World Dairy Marketto U.S. Dairy Farmers<br />Peter Vitaliano<br />Vice President, Economic Policy and Market Research<br />National Milk Producers Federation<br />
  2. 2. Export Market Participation Important to U.S. Dairy Farmers<br />Exports now represent a major segment of the commercial market for U.S.-produced milk, and it is the fastest growing market.<br />
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  4. 4. Export Market Participation Important to U.S. Dairy Farmers<br />The U.S. domestic market is a large, but mature market for dairy product sales<br />The export market is growing at a rate at least eight times faster than overall growth in domestic sales<br />
  5. 5. 1.1% growth per year<br />8.8% growth per year<br />
  6. 6. U.S. Dairy Sales, 2008-2009<br />
  7. 7. Export Markets Impact on Income<br />The large drop in U.S. dairy exports in 2009 was the direct cause of the worst financial crisis the U.S. dairy industry has suffered in decades, if not ever<br />But, it was not caused by a drop in world demand<br />In fact, total world dairy imports by all other countries in 2009 were well above 2008 imports on a volume basis<br />
  8. 8. 2009 World Market Growth<br />2009 dairy import volumes grew in all major product categories:<br />Butter: up 7%<br />Cheese: up 2%<br />Skim milk powder: up 9%<br />Whey and lactose: up 18%<br />Whole milk powder: up 9%<br />All products, milk equiv.: up 7%<br />
  9. 9. What Caused the 2009 U.S. Dairy Crisis?<br />Competing exporters aggressively cut prices to maintain export sales and avoid building inventories. <br />
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  11. 11. What Caused the 2009 U.S. Dairy Crisis?<br />U.S. dairy exports did not compete aggressively in this lower-price world dairy market environment, and the U.S. suffered a major loss in export sales and a considerable drop in international market share.<br />
  12. 12.
  13. 13. 2009 Export Market Shares<br />
  14. 14. Exports Drop, Inventories Build<br />In 2009, the EU, New Zealand and Australia increased their exports by sharply lowering prices and avoided burdensome product inventory buildups.<br />The U.S. did not.<br />
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  16. 16.
  17. 17. Effect of Exports on Milk Prices<br />Even at the lower world prices of 2009, the world market as a whole would have returned more to U.S. dairy farmers than the domestic market did.<br />
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  19. 19. Effect of Exports on Milk Prices<br />During August 2009 – July 2010:<br /> New Zealand (Fonterra) payout: $14.40/cwt.<br /> U.S. Class I mover: $13.80/cwt.<br />
  20. 20. Maintaining U.S. Exports is Critical<br />Due to a combination of:<br />current U.S. dairy policies<br />domestically-focused product standards<br />generally low priority of export marketing<br />U.S. dairy products are commonly “last in – first out” of world export markets.<br />
  21. 21. Maintaining U.S. Exports is Critical<br />“Last In” = U.S. dairy farmers gain the least when world prices are strong<br />“First Out” = U.S. dairy farmers lose the most when world prices drop<br />
  22. 22. When Exports Drop So Do Prices<br />
  23. 23. When Exports Drop So Do Prices<br />
  24. 24. Conclusion:<br />The biggest threat to the milk price received by every dairy farmer in the United States is interruption of the commercial flow of U.S.-produced dairy products into the export markets<br />The ¢wt Export Assistance program is the only mechanism currently available to U.S. dairy farmers to address this threat in the future.<br />
  25. 25. ¢wt and 2010 U.S. Exports<br />
  26. 26. ¢wt Impact on Milk Prices<br />¢wt export assistance has generated a substantial increase in producer prices:<br /> Scott Brown: $0.17/cwt in 2010<br /> Roger Cryan: $0.18/cwt in 2010<br />
  27. 27. ¢wt Export AssistanceReturn on Investment<br />Revenue generated per dollar invested in Export Assistance<br /><ul><li> Bids accepted 2003 through September 30, 2010
  28. 28. Includes product scheduled to ship in 2010</li></li></ul><li>For more information on the<br />¢wt Export Assistance program<br />go to<br />
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