Dairy Trade by Selected Countries
International trade flows for the major dairy products weakened in 1998 with butter showing the largest decline. Global butter exports in 1998 are now estimated at 707,000 tons, 8 percent below 1997 due to significantly lower shipments by the EU. On the import side, reduced imports by Russia and increased imports by the United States are the major significant changes. For 1999, global butter exports are forecast to increase 1 to 2 percent with Australia and New Zealand accounting for the growth.
Total cheese exports in 1998 are estimated at 994,000 tons, down 2 percent from 1997. The rapid growth that occurred in 1997 was mainly due to a surge in Russian imports which is not being repeated in 1998. Total cheese exports may decline again in 1999, since only Japan, of the top 4 importers, is expected to show a small increase.
Preliminary trade data for NDM indicate a modest decline from last years level. Even with increased DEIP activity, the United States will not offset the declines by Oceania and Europe. NDM exports are expected to show further growth in 1999 as imports by Russia and various Asian countries show modest increases.
During 1998, particularly in the second half of the year, U.S. exports of NDM were up sharply due to a pickup in activity under the Dairy Export Incentive Program (DEIP). With low U.S. prices for NDM, DEIP contracts for milk powder boomed. In contrast, sharply increased domestic butter prices induced large imports of butter and anhydrous milk fat during the summer and fall months. Current prospects for butter prices indicate 1999 imports are likely to be reduced but that U.S. butter exports are unlikely to recover to the 1997 level.
As of mid-December, contracts had been accepted for 81 percent of the total (annual plus reallocated) DEIP allocation for NDM, 70 percent for cheese, 52 percent for WMP, but none for butter or butterfat. Yearly allocations are made on a July/June basis.
(For additional information on U.S. dairy exports including some of the other products, see the special article entitled "Exports of Dairy Products from the United States".)
World prices for dairy products were generally lower during late 1997 and early 1998 but a weakening Australian dollar offset much of the impact on farm prices. As a result average farm prices for manufacturing milk were only slightly below those of 1997/98. For 1998/99, the Australian Bureau of Agricultural and Resource Economics (ABARE) forecasts that manufacturing milk prices will rise slightly despite lower international prices and economic difficulties in the nearby Asian markets.
to Australian Milk Producers
|Year||Manu. Milk||Fresh Milk|
Payments from processors to individual farmers also vary marginally as firms operate a range of incentive/penalty payments relating to milk quality, sales volume, and out-of-season supplies.
Australian cheese exports rose 19 percent during 1997/98 and are expected to increase 14 percent 1998/99. Australian cheese exports have increased steadily from only 52,375 tons in 1990 to 149,000 tons in 1997/98. The majority of the increase in exports has gone to Asian markets, with Japan easily the most important.
In 1998/99, cheese exports to Saudi Arabia, Australias second market, rebounded to 12,000 tons after dropping below the 10,000-ton level in 1996/97. Exports to the United States at 7,776 tons were more than a fifth above the year earlier level.
Australian butter exports were down in 1997/98 but are forecast to recover in 1998/99. Most Asian countries are taking less as a result of their individual economic problems.
WMP export sales, following a big jump in 1996/97, were level in 1997/98, and may not change in 1998/99. Despite the lack of growth, sales are following the usual pattern with the Asian markets taking the vast majority of exports.
New Zealand exported 1.3 million tons of dairy products in 1997/98 (June/May), up from 1996/97's record volume of 1.2 million tons. All exports of dairy products manufactured in New Zealand are carried out by the New Zealand Dairy Board, which was established and given monopoly powers by the Dairy Board Act.
The Russian financial crisis, which started in August, created problems for dairy product exporters, particularly the NZDB, since Russia is the worlds largest importer of butter and cheese, and since the NZDB accounted for a major share of Russias imports. Prior to the crisis, the NZDB had planned to raise its 1998/99 sales of butter and cheese (combined) to 80,000 tons but is now trying to find markets elsewhere.
Some of the pressure on butter exports was relieved by high domestic prices in the United States which allowed imports above the TRQ to be economically feasible. According to U.S. import data for January-October, New Zealand was able to capture well over half of those unexpected sales.
Current forecasts from the NZDB indicate that the 1998/99 payout will range from N.Z.$5.50 and N.Z.$5.75 per kg of milkfat, essentially the same as in1997/98. The possibility of a lower payout reflects the decline in international dairy product prices.
Farmgate prices shown below include the NZDB payout plus bonuses added by the various cooperatives.
PRICES AT THE FARMGATE
(per kilogram of milkfat)
In comparison to 1996/97 exports, New Zealands main market changes in 1997/98 included: (a) the decline in butter shipments to Russia, dropping from 80,200 to 58,200 tons. Much of that decline was offset by increased shipments to Iran, the United States, and other smaller markets. (b) Similarly , cheese shipments to Russia were down, but the United States and the EU took more. (c) Shipments of NDM to east Asian markets were down and were not offset by increases(d) Venezuela moved ahead of Malaysia as the top market for New Zealands exports of WMP, while Mexico stayed in the third position. (e) Casein exports increased to 94,000 tons with most of the increase going to the United States, the leading destination. Japan and Germany are also important destinations.
EUROPEAN UNION (EU):
In accordance with its obligations under the Uruguay Round, the EU reduced its per ton export subsidies several times in 1996 and 1997; however, with changing world markets and some stock buildup, subsidy rates were generally increased in 1998. Currently, the EU allows subsidy rates to be prefixed for up to 5 months.
With EU milk production quite stable due to quotas, production and exports of the major dairy products tend to reflect relative market conditions. According to preliminary data, during 1998, EU exports of cheese and butter moved downward largely due to problems in Russia. Both may decline again in 1999 for that same reason. Exports of NDM may also decline in 1998. EU traders complain that current subsidy levels are insufficient to allow them to compete in international markets.
Mexico continues to be far from meeting overall dairy demand, although some larger, modern dairies effectively compete against imported products. As a result, Mexico likely will continue to be a large importer of NDM, and a significant importer of WMP, cheese, butter, and other dairy products. Imports of NDM, and WMP in 1998 and 1999 are expected to be in the 130,000 and the 40,000 ton neighborhood, respectively, for both years.
Under the North America Free Trade Agreement (NAFTA), Mexico is obligated to provide duty-free access for 45,020 tons of U.S. milk powder in calendar year 1998. This duty-free quota rises 3 percent annually. Historically, the Government allocated the entire duty free import quota for NDM to CONASUPO, (a government buying agency) but early in 1998 private companies were given permission to import and as the year has progressed, private trade has grown in importance. Now, some reports are suggesting that CONASUPO may soon be dissolved and its functions taken over by other agencies and/or private firms.
The Mexican market for imported cheese has grown rapidly in recent years, from 3 percent to 8 percent of the total domestic cheese market and over 30 percent of the market for hard and semi-hard cheeses. Another increase in cheese imports occurred in 1998. Barriers to cheese imports are dropping rapidly under NAFTA and by the year 2003, U.S. produced cheese should enter Mexico duty-free compared to a rate of 40 percent for cheese from Europe or Oceania.
Despite sharp a increase in domestic milk production, much of which is produced and consumed outside the commercial sector, Brazil continues to be a major import market, especially for its Mercosur partners, Argentina and Uruguay.
Brazils 1998 imports and consumption of NDM continued rising due to economic growth and demand from social programs run by the various states. Though still small, growing demand from low-fat dairy foods also adds to total demand for NDM.
For 1999, slower economic growth plus another increase in milk production will likely reduce Brazils need for NDM imports.
Domestically produced dairy products (especially whole milk products) are often unpasteurized and must be consumed within a short period of time because they can not be stored for long periods for human consumption. The short expiration period is a big problem in marketing Russian dairy products.
Despite the distribution problem, dairy products remain a significant part of the Russian diet. Calculations based on official statistics show that per capita consumption of dairy products (in milk equivalent terms) decreased from 347 kilograms in 1991 to 252 kilograms in 1995 and has declined further since then. Variations in consumption of milk and products by regions are very significant.
Russia tends to be a large net importer of dairy products, and the value of imports was generally increasing until the August 1998 financial crisis. In 1995, imports of dairy products on a value basis set a record at $U.S.796 million with butter the main import item. In 1996, with lower butter imports, total dairy imports were valued at $U.S.534 million and that total increased to $U.S. 656 million in 1997. Butter is still the major item imported while cheese is a distant second.
This years financial crisis caused sharp increases in the price consumers pay for imported dairy products. As a result of the crisis, import estimates for 1998 and 1999 have been revised downward from earlier expectations.
The Ukraine, owing to its closeness to Russia and the tariff exemptions on imports from the Commonwealth of Independent States (CIS countries) is an important suppliers of milk, cream, and butter to Russia. Preliminary data for 1998, show New Zealand as the leading butter supplier, with Ukraine and Belarus in second and third place respectively. Germany, the Netherlands, and New Zealand are the leading suppliers of cheese.
Cheese consumption maintained an upward trend in 1998, with estimated annual total consumption reaching 215,000 tons, up 5 percent from 1997. The gain was mainly due to increased imports since domestic production of both natural and processed cheese were only marginally above 1997. In 1998, cheese imports from Australia, the leading supplier, are up 4 percent, and those from New Zealand are up 5 percent. U.S. exports continue to show rapid growth but from a much smaller base.
The overall growth in Japans cheese imports is mainly attributed to a combination of factors such as real consumption increases and some switching from meat products to dairy products. Imports from the United States were up, largely owing to increases in both fresh cheeses (cream cheese) and grated (pizza) cheese categories. Smaller individually packed cheese items are said to be the most popular in the marketplace, regardless of whether domestic or imported, natural or processed as real consumption increases and some switching from meat products to dairy products.
Imports from the United States were up, largely owing to increases in both fresh cheeses (cream cheese) and grated (pizza) cheese categories. Smaller individually packed cheese items are said to be the most popular in the marketplace, regardless of whether domestic or imported, natural or processed.