Overview of U.S. Dairy Product Trade. Kenneth W. Bailey Penn State University

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1 Overview of U.S. Dairy Product Trade Kenneth W. Bailey Penn State University

2 Impact of Trade on the U.S. Global demand for protein is very strong EU and Australian output curtailed U.S. is residual supplier Exports of nonfat dry milk and dry whey are very strong U.S. prices rising $/lb $/lb Weekly Nonfat Dry Milk Price, West Week Weekly Dry Whey Price, West Week Ken Bailey -- Penn State University 2

3 Major Milk Producing Countries, 26 EU 25 U.S. India China Russia Brazil New Zealand Ukraine Australia Argentina 14, 12, 1, 8, 6, 4, 2, Ken Bailey -- Penn State University 3 1 MT

4 EU Policy and Its Impact on the U.S. New countries added to EU Strict quotas enforced Reduce the amount of powder and butter going to intervention program Reduce export subsidies Eliminate casein production subsidies Move to green payments (single farm payment) The point: less global trade! Ken Bailey -- Penn State University 4

5 Rest of the World Australia: in another 3-year drought New Zealand: limited by land China: demand growing faster than supply Russia: domestic milk quality and production limited Brazil: demand outstripping suppy Ken Bailey -- Penn State University 5

6 World Turning to U.S. for Protein World prices higher than U.S. prices U.S. now setting global skim milk powder price U.S. supply for powder and dry whey limited $/lb International Skim Milk Prices 26 Jan Feb Mar Apr May Jun Jul Aug Europe Sep Oct Nov Western US Ken Bailey -- Penn State University 6

7 How to Summarize Trade Add up quantities Add up values Estimate the component content of each HTS line of trade: Milk fat Protein Lactose/minerals Ken Bailey -- Penn State University 7

8 Penn State Trade Database Classes: Cheese Milk Fats Dry milk proteins Food preparations Fresh dairy products Lactose/whey Components: Milk Fat Protein Lactose/whey 16, 14, 12, 1, 8, 6, 4, 2, Cheese Estimated Components from Dairy Imports: Jan - Oct 26 DryMilkProt FoodPrep FreshDairy LactWhey MilkFat Lactose MilkFat Protein Ken Bailey -- Penn State University 8

9 Summary of Milk Fat Imports: Jan-Oct 26 2, Milk Fat Imports: Jan - Oct Imports from traditional butter sources reduced Imports from food preparations are higher Implication: adequate supplies of domestic butter 15, 1, 5, 25 8,339 18,334 5, ,789 12,156 5, , 15, 12, 9, 6, 3, Butter Butter Sub Anhydrous MF Cream Pow der Food Prep Imports: Jan - Oct Anhydrous MF Cocoa Preps Infant Formula 25 32, ,424 1,38 1, , ,626 1,544 2, Dairy Preps Ken Bailey -- Penn State University 9

10 Summary of Dry Protein Imports: Jan Oct 26 8, Dry Protein Imports: Jan - Oct Imports of dry proteins are mixed Total protein, however, is down Implications: global supplies are down 6, 4, 2, 25 9,67 35,334 58,41 22,562 12, ,694 44,473 43,739 25,577 11, , 1, 75, 5, 25, Chp 35 MPC Chp 4 MPC Casein Caseinate WPC Estimated Components from Dry Protein Imports: Jan - Oct Protein Milk Fat Lactose ,976 4,873 22, ,32 4,16 24,535 Ken Bailey -- Penn State University 1

11 Summary of Cheese Exports: Jan Oct 26 U.S. is not a major exporter of cheese Exports of Fresh and Other cheese was up in 26 3, 25, 2, 15, 1, 5, U.S. Cheese Export Data: Jan - Oct Fresh Grated Blueveined Processed Other 25 5,55 15, ,967 17, ,9 15, ,834 25,372 Ken Bailey -- Penn State University 11

12 Summary of Dry Protein Exports: Jan Oct 26 6, Dry Protein Exports: Jan - Oct Exports of whey protein concentrate very strong Dry skim milk exports holding strong Implications: U.S. setting global prices, domestic prices rising 5, 4, 3, 2, 25 1, 26 Casein Caseinate WPC ,791 29, ,352 53,526 Dry Protein Exports: Jan - Oct 3, 25, 2, 15, 1, 25 5, 26 Albumin Dry Whole Milk Dry Skim Milk 25 7,3 6,42 253, ,823 8,31 259,382 Ken Bailey -- Penn State University 12

13 Summary of Lactose and Dry Whey Exports: Jan Oct 26 U.S. exports of lactose and dry whey very strong Dry whey export demand is raising domestic whey prices 25, 2, 15, 1, 5, 35, 3, 25, 2, 15, 1, 5, Lactose/Whey Exports: Jan - Oct Lactose Liquid Whey Dry Whey ,553 1, , , ,134 U.S. Exports of Dry Whey Ken Bailey -- Penn State University 13

14 Summary of Net Trade U.S. imports and exports protein in similar amounts U.S. a major importer of milk fat U.S. a big exporter of lactose Implications: Have adequate supplies of milk fat Exporting all the protein we can produce 7, 6, 5, 4, 3, 2, 1, Estimated Components from Dairy Trade: Jan - Oct 26 Protein Milkfat Lactose Imports Exports Ken Bailey -- Penn State University 14

15 Implications for the U.S. Market Global markets more profitable than the Dairy Price Support Program Exports of skim milk powder and dry whey creating domestic shortage Prices of these products rising Cheese prices are being bid up Class III and IV prices are on the rise Ken Bailey -- Penn State University 15