by Madeline Schultz, content specialist, AgMRC, Iowa State University, schultz@iastate.edu.

Profile revised November 2006.

Supply 

The European Union (EU) leads the world in total fluid milk production. In 2005, the EU produced 132 million metric tons. Other top-producing countries were: (2) India, (3) United State, (4) Russian Federation and (5) China. The top U.S. dairy-producing states are: California, Wisconsin, New York, Pennsylvania, Idaho and Minnesota.

Demand

Some of the leading dairy product importers include the Russian Federation, the EU, Mexico and Japan. Countries with developing economies offer growth prospects for U.S. dairy products. As incomes increase, consumption improves of value-added food such as dairy products.

Demand for value-added dairy products at the international level is influenced by factors related to growth in household incomes and economic conditions. These factors include: (1) increased urbanization and income growth in developing countries, (2) growing power of supermarkets, (3) concentration in the processing sector, (4) different levels of adding value, (5) increasing segmentation of consumption and (6) changes in eating habits.

One example of expanding international markets is the U.S. Dairy Export Council's Halal certification program, which was implemented in 2005. Products are certified in compliance with the religion's food preparation guidelines. This program allows U.S. dairy suppliers the opportunity to market to the 1.3 billion Muslims worldwide. 
 
Imports

The United States imported $2.68 billion worth of dairy products during 2005. Cheese imports accounted for more than $1 billion of the value of all dairy imports. Other imported dairy items were casein, a milk protein used as a food ingredient; milk protein concentrates; butterfat; dairy blends; whey and chocolate preparations.

Exports

The United States exported $1.81 billion worth of dairy products during 2005. Exports account for about five percent of total U.S. milk production, on a milk-equivalent basis. Dairy products that are exported include cheese, whey, lactose protein, ice cream, infant formula, fluid milk and cream, and milk powders. More than 90 percent of U.S. exports in 2005 were commercial, unsubsidized products.

Primary markets for U.S. dairy exports are Japan, Mexico and Canada. Regions considered as secondary markets include China, Korea, Southeast Asia and South America. Export market potential for the United States also exists in the Middle East and the Caribbean.

U.S. dairy exports tend to fall into one of three categories: (1) products that are not priced out of international markets by U.S. tariffs or USDA’s price support program, such as whey and lactose; (2) products that can be exported with subsidy, such as nonfat dry milk, selected cheeses and butter; and (3) selected differentiated dairy products, including fluid milk and cream, ice cream and most cheese.

The United States exports whey and lactose because demand for those products is already met domestically. The United States produces 50 percent more whey and two times the amount of lactose than can be absorbed by the U.S. market.

The United States is the world’s leading whey supplier. By volume, the top three markets for U.S. whey are China, Southeast Asia and Mexico.

The United States also is the world’s number one lactose exporter. Lactose is used in baked goods, dairy products, infant formula, confectionery, pharmaceuticals and animal feed. Japan and Southeast Asia are the leading markets for U.S. lactose.

Since milk can be difficult to transport, store or formulate while in its liquid form, milk processors create milk powder by removing most of the water. According to the U.S. Dairy Export Council, the most common forms of milk powder are skim, whole and buttermilk.

The Dairy Export Incentive Program (DEIP) helps develop export markets while removing dairy products from the domestic market. The USDA program pays cash bonuses that allow dairy product exporters to buy at U.S. prices and sell abroad at lower international prices. The 2006/2007 DEIP had allocation limits of 68,201 metric tons of nonfat dry milk; 21,097 metric tons of butterfat; and 3,030 metric tons of various cheeses.

Mandatory country-of-origin labeling, or COOL, is set to go into effect Sept. 30, 2008. The labeling program was included in the Farm Security and Rural Investment Act of 2002 (2002 Farm Bill). The Agricultural Marketing Service is responsible for enforcing and regulating COOL.

Competitiveness

The United States faces international competition for dairy export sales. About two-thirds of world dairy exports originate from the European Union (EU), New Zealand and Australia. Other key dairy exporters include Poland, Argentina, Canada, Switzerland and Uruguay. 

2005 Top U.S. Dairy Export Products

 Source: U.S. Dairy Export Council

Sources

Dairy Briefing Room, Economic Research Service.

Dairy Products Annual Summary, National Agricultural Statistics Service.

Dairy Import & Export Data, Foreign Agricultural Service, USDA.

International Dairy Foods Association

Livestock, Dairy & Poultry Outlook, Economic Research Service.

Milk Production, National Agriculture Statistics Service.

National Milk Producers Federation

Supply and Demand for Commodity Components: Implications of Free Trade versus the AUSFTA for the U.S. Dairy Industry, University of California Agricultural Issues Center, 2006 - This paper presents a simulation model of world dairy markets and analyzes the effects on U.S. milk markets of both a hypothetical agreement allowing free bilateral trade in dairy products and the actual Australian-U.S. Free Trade Agreement.
 

U.S. Dairy Export Council

USDA Agricultural Baseline Projections, Economic Research Service, February 2006.

U.S. Milk Powders: Abundant, versatile, year-round supply, U.S. Dairy Export Council.

Wisconsin Agricultural Statistics, Wisconsin Agricultural Statistics Service.

 

Profile created February 2003 and revised November 2006.