US Dairy Suppliers Look to Protect Market Share

US - Global dairy prices are off 20-30 per cent from their spring 2011 peaks as swelling milk production worldwide has turned supply deficits into surpluses. As a result, rising inventories are expected to keep downward pressure on international dairy markets in the second half of 2012, according to presenters at the US Dairy Export Council’s (USDEC) spring Board of Directors and Membership Meeting May 2 in Chicago.
calendar icon 11 May 2012
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The meeting attracted a record turnout – a reflection of the broad understanding of the need to operate more effectively in international markets.

Current soft conditions are “a painful re-affirmation that market cycles will continue, even as demand, over time, outstrips supply,” said USDEC president Tom Suber. “In fact, it’s this period of temporary retrenchment that many of our work programmes are intended to address.” USDEC marketing, technical and research activities are supported by US dairy producers through their checkoff programme.

Mr Suber urged US suppliers to protect volume and market share gains accrued in 2010- 11. “We can’t take the hit and balance the world market through our own inventories every time supply and demand run into an imbalance,” he said.

Speakers at USDEC’s 16th annual spring board meeting emphasised that although challenges to US global dairy growth remain, ongoing USDEC trade policy and market access efforts continue to bear fruit.

The March implementation of the South Korea FTA, the upcoming entry into force of US FTAs with Colombia and Panama, progress on regaining market access to Russia (spurred by its accession to the WTO), and further steps to iron out the Chinese health certificate all bode well for US dairy export efforts. The imminent launch of eTDE, a system for electronic transmittal of export documentation, will facilitate smoother transactions.

USDEC is also leading US dairy industry efforts to extract maximum benefit from the Trans-Pacific Partnership (TPP) free-trade agreement talks. The negotiating text includes provisions to tame the spread of non-tariff trade barriers that currently hinder trade. On the other hand, sharing a free-trade agreement with the artificially distorted dairy industry structure in New Zealand is problematic, Mr Suber said.

“USDEC supports TPP, especially as the prospect grows for the inclusion of Japan and Canada. Yet, it’s also gratifying that the US government is paying close attention to our concerns over the unbalanced market advantage the New Zealand government has provided to Fonterra,” he explained.

“Fonterra has tried to trivialize this issue, but its special pricing privileges – which would in fact increase under proposed structural changes in New Zealand – enable Fonterra to cherry-pick the highest value markets. Wide-open, unrestricted bilateral trade between New Zealand and the United States is simply inappropriate under that set of rules.”

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