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Market and Trade Developments

Market and Trade Developments. Aggregate milk production in 2003 is about one-half percent above 2002 US$ has depreciated against major exporters 13 pct vs EU€ 17 pct vs AU$ 19 pct vs NZ$ WTO settled a case against Canada’s export pricing; could reduce Canada’s exports

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Market and Trade Developments

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  1. Market and Trade Developments • Aggregate milk production in 2003 is about one-half percent above 2002 • US$ has depreciated against major exporters 13 pct vs EU€ 17 pct vs AU$ 19 pct vs NZ$ • WTO settled a case against Canada’s export pricing; could reduce Canada’s exports • WTO Cancun Ministerial failure; trade barriers persist €

  2. Production Snapshot (25 Sept) • NZ – milk production up 5 pct seasonally; forecast to be up 2-3 pct annually • AU – drought recovery is helping milk supplies; forecast up about 1 pct annually • EU – milk production is down, heat wave affected production, feed availability, milk composition • US – milk production is up over 2002, but tailing off after first half of 2003; herd liquidation with strong beef prices. Product processing is up with milk production.

  3. Utilization Snapshot (25 Sept)2003 FOB Export Prices ($USD/MT) Utilization/Demand remains steady to strong globally; reform in Canada (and EU) keeps world market prices firm

  4. Highly volatile markets – 50 pct fluctuation in price

  5. GLOBAL DAIRY TRADE BARRIERS GLOBAL DAIRY TRADE BARRIERS TARIFFS: 40-90 pct avg; can be 300 pct TRQ’s & Subsidies: prohibitive over quota rate; administration of TRQ; “dump” market OTHER: OTHER: packaging, labeling, testing, inspection, mandatory shelf life requirements, recipe and manufacturing declaration, standards of identity

  6. COMMODITY WDM NDM Butter Cheese NICHE Specialty Products Lactose Ice Cream Concentrates TWO TYPES OF DAIRY EXPORTS

  7. COMMODITY Highly volatile, low margin, fungible standard products; markets distorted by subsidies and barriers NICHE Defined byhigh value, or tariff avoidance; market often defined by regulation and barriers; not a lot of value to commercial producers TWO TYPES OF DAIRY EXPORTS

  8. North America USA – TRQ’s domestic support = gross overproduction of NDM, minimum prices per class, standards of identity Canada – TRQ’s,with over quota tariffs, until recently two-tiered pricing Mexico – growing market; preferential treatment via NAFTA hurts 3rd parties

  9. Asia, Middle East Japan/Korea: growth market for cheese and ice cream; non-tariff barriers Taiwan: fairly open; imports all but fluid milk

  10. GLOBAL DAIRY TRADE BARRIERS GAINS FROM TRADE PRICES: export prices increase 18-40 pct for most products; 40 pct for cheese URUGUAY: could see 84 pct increase in value of cheese exports; 15 pct increase elsewhere NICHE: certain niche products can and are exported without trade agreements; in fact lack of agreements sometimes define the product and market

  11. WTO: Cancun Collapse • Draft Text (#2) • Product specific AMS caps; • Eliminate some export subsidies; • Review Green Box; • Special and Differential • EU’s “GI” Plan • The EU plan would extend GI’s beyond TRIPS register which effects cheese, e.g. feta, parmesan, cheddar, brie • Also add quality descriptions, e.g. double cream, aged) • G21 Countries • Refused to budge on market access and facilitation issues

  12. WTO: Cancun Fallout Fallout is still being calculated Brazil will not open to ag imports - Ricardo Ferreira, rep of GDA/ALG US likely to pursue even FTA’s Keep pressure on Brazil Facilitation/Transparency

  13. Ice Cream Growing export product: US ships 40 million gallons totaling $USD80-100 mln per year Japan, United Kingdom, Mexico, Canada, Hong Kong are top 5 importers

  14. Specialty Products Two key niche markets in Asia served by Fonterra of New Zealand: Stolle Milk – from cows which are immunized to induce the formation of antibodies in their milk, has seen a 50 per cent rise in sales in Taiwan, since SARS (500 MT) Colostrum - first four milkings after calf birth from pasture-fed, non-immunized cows, are well above forecasted levels in China (200 MT)

  15. US Dietary Guidelines US “Food Pyramid” – average diet should have 22 percent more dairy Most would be low fat products – yogurt, low fat cheese Revised in 2005, new focus on weight loss properties of dairy calcium

  16. Specialty Cheese PricesWashington, DC, USA (week of 22 Sep) Cheeses of the World (cut to your order!!!) Chevre De Belley $11.99 Blue D'Auvergne (France) $ 7.99 Caerphilly Wales $ 6.99 Huntsman (England) $ 9.99 Kashkaval $ 7.99 Morbier (France) $ 7.99 Parmesan Reggiano (Italy) $12.99 Parrano Cheese (Dutch) $11.95 Port Salut (France) $17.99 Saint Andre - Triple Cream (France) $12.98 Saint Nectare (France) $ 9.49 Taleggio (Italy) $13.95 Tilsit (Danish) $ 8.49 Avg retail price: $10.83 USD

  17. Price Calculation 300-400 pct mark up FOB processor to retail to cover: • Air freight • Insurance • Document handling of $100 • Duty of 35 percent • No import license for high tier duty • Brokerage, wholesale, distribution

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