Programme Will Help US Grow As Major Dairy Exporter

The US is on pace to export 13 per cent of its milk production in 2011 – the highest portion ever – and many overseas markets for dairy products are expected to continue growing at a faster rate than the US market. Thus, any changes to current dairy policy “must not place the US farmer at a competitive disadvantage,” according to NMPF board member Les Hardesty, a dairy producer from Windsor, Colorado.

In order to make the US more competitive globally, the multi-faceted approach of FFTF eliminates the Dairy Product Price Support Programme, Mr Hardesty said.

Currently, the price support programme acts as a government-funded buyer of last resort for commodities including cheese, butter and nonfat dry milk powder. But the programme also can act as a disincentive to export, when, during periods of low price, product manufacturers have greater incentive to sell surplus commodities to the government, rather than on the world market.

Such was the case in 2009, when US dairy exports dropped and government price support purchases surged.

“Once this programme is eliminated, markets, during periods of surplus, will clear more quickly,” Mr Hardesty said. This will be in contrast to what happened in 2009, when global dairy sales didn’t drop, but the US portion of those sales did, because products were sold to the government, rather than commercially.

Some critics have alleged that Foundation for the Future’s Dairy Market Stabilisation Programme (DMSP), if and when it activates, will so greatly reduce domestic production that exports will be choked off. But Mr Hardesty disputed that, saying that the DMSP “only activates when margins are extremely low, and would not be active when domestic or international demand is sending strong signals for more milk output.”

Also, the Foundation for the Future proposal contains a provision that prevents the DMSP from kicking in if US prices are 20 per cent or more above world prices for cheddar cheese and skim milk powder. This clause will ensure that any market stabilising slowdowns in milk production don’t unintentionally distort the relationship between US and world prices, creating an imbalance that could incentivize more imports, and/or hinder exports.

“American dairy farmers have invested millions of dollars in building and fostering an export capability, through the creation and continued funding of both the US Dairy Export Council (USDEC), and the Cooperatives Working Together programme,” Mr Hardesty noted.

“We are fully aware that foreign sales of US made dairy products are crucial to the current and future health of our industry, and don’t want policies that would detrimentally affect our export capabilities.”