Export Market Participation Important to U.S. Dairy Farmers The U.S. domestic market is a large, but mature market for dairy product sales The export market is growing at a rate at least eight times faster than overall growth in domestic sales
Export Markets Impact on Income 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 But, it was not caused by a drop in world demand In fact, total world dairy imports by all other countries in 2009 were well above 2008 imports on a volume basis
2009 World Market Growth 2009 dairy import volumes grew in all major product categories: Butter: up 7% Cheese: up 2% Skim milk powder: up 9% Whey and lactose: up 18% Whole milk powder: up 9% All products, milk equiv.: up 7%
What Caused the 2009 U.S. Dairy Crisis? Competing exporters aggressively cut prices to maintain export sales and avoid building inventories.
What Caused the 2009 U.S. Dairy Crisis? 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.
Effect of Exports on Milk Prices During August 2009 – July 2010: New Zealand (Fonterra) payout: $14.40/cwt. U.S. Class I mover: $13.80/cwt.
Maintaining U.S. Exports is Critical Due to a combination of: current U.S. dairy policies domestically-focused product standards generally low priority of export marketing U.S. dairy products are commonly “last in – first out” of world export markets.
Maintaining U.S. Exports is Critical “Last In” = U.S. dairy farmers gain the least when world prices are strong “First Out” = U.S. dairy farmers lose the most when world prices drop
Conclusion: 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 The ¢wt Export Assistance program is the only mechanism currently available to U.S. dairy farmers to address this threat in the future.