RESTRICTED
WORLD TRADE IDA/W/12
29July1996
ORGANIZATION(96-3014)
International Dairy Agreement
INTERNATIONAL DAIRY COUNCIL
Status Report ontheWorld Market forDairy Products
Note bytheSecretariatIDA/W/12
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INTRODUCTION
Background
TheInternational Dairy Agreement entered intoforce on1January 1995. Itreplaces the
International Dairy Arrangement, which hadoperated since1980. AsofJuly1996, thefollowing were
parties totheInternational Dairy Agreement: Argentina, Bulgaria, theEuropean Communities (15),
Japan, NewZealand, Norway, Romania, Switzerland andUruguay.
Atitsmeeting on17October 1995, theInternational Dairy Council noted thatthelimited
membership intheAgreement, andinparticular thenon-participation ofsome major dairy exporting
countries, made theoperation oftheminimum price provisions untenable. Inlightofthissituation,
theCouncil decided tosuspend (asof18October 1995) theoperation oftheAnnex totheAgreement,
thussuspending minimum prices foralldairy products therein until31December 1997. Noting that
thetaskoftheCommittee onCertain MilkProducts wasdirectly related totheimplementation ofthe
provisions oftheAnnex, theCommittee wasalsosuspended until31December 1997.
Objective ofReport
Thisstatus report hasbeenprepared bytheSecretariat inaccordance withArticle IV:1ofthe
Agreement andRule29oftheRules ofProcedure. Theaimofthisreport istoprovide abasis for
discussion andadvancement ofthework oftheCouncil atitsmeeting on17September 1996.
Focus ofthereport
Thisreport focuses onsignificant changes andnewinformation available subsequent tothe
preparation oftheNovember 1995 First Annual Report ontheWorld Market forDairy Products.
Itdoesnotreproduce information available inthatreport.
Thepresent report isbased oninformation provided byparties aswellasdocumentation provided
bytheFood andAgriculture Organization (FAO), theOrganization forEconomic Co-Operation and
Development (OECD), theWorld Bank, theUNEconomic Commission forEurope (ECE), the
International Dairy Federation (IDF), Agriculture Canada, theUnited States Department ofAgriculture
(USDA), Zentrale Markt- undPreisberichtstelle (ZMP), theAustralian Bureau ofAgriculture and
Resource Economics (ABARE), Agra Europe andother selected national andprivate sources.
Thereport should bereadinconjunction withthestatistical information circulated intheSummary
Tables, contained inIDA/W/13.
Delegations wishing tosuggest modifications orcorrections, ortoprovide additional information,
areinvited tomake submissions totheSecretariat, preferably inwriting, assoonaspossible. Such
submissions might cover boththepresent report andthestatistical information mentioned above. The
drafting ofthisreport wascompleted on19July1996.IDA/W/12
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TABLE OFCONTENTS
Page
INTRODUCTION . . . . . . . . . 2
WORLD DAIRY MARKET HIGHLIGHTS . . . . . 5
OVERVIEW BYPRODUCTS . . . . . . . 6
WORLD MILK PRODUCTION AND CONSUMPTION . . . . 6
MILK POWDERS . . . . . . . . . 7
BUTTER AND ANHYDROUS MILK FAT . . . . . 9
CHEESE . . . . . . . . . . 11
INTERNATIONAL DAIRY PRICES . . . . . . 12
DAIRY PRODUCTION AND POLICIES INSELECTED COUNTRIES
AND REGIONS . . . . . . . . . 13
WESTERN EUROPE . . . . . . . . 13
European Communities (15) . . . . . . . . 13
EFTA -Norway andSwitzerland . . . . . . . 16
CENTRAL AND EASTERN EUROPE, CISAND
BALTIC REPUBLICS . . . . . . . . 17
OCEANIA . . . . . . . . . . 23
Australia . . . . . . . . . . 23
NewZealand . . . . . . . . . . 24
NORTH AMERICA . . . . . . . . . 25
Canada . . . . . . . . . . 25
United States . . . . . . . . . . 26
LATIN AMERICA . . . . . . . . . 28
ASIA . . . . . . . . . . . 30
Japan . . . . . . . . . . . 30
India andChina . . . . . . . . . 31
AFRICA . . . . . . . . . . 31
Note: Inthisreport: "tons" means "metric tons". Figures maynotadduptototals duetorounding.
Allpercentexpressions arerounded tothenearest ½percent.IDA/W/12
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Page
TABLES
Table 1-Major Skimmed Milk Powder Exporters . . . . . 7
Table 2-Major Skimmed Milk Powder Importers . . . . . 7
Table 3-Major Whole Milk Powder Exporters . . . . . 8
Table 4-Major Whole Milk Powder Importers . . . . . 8
Table 5-Major Butter Exporters . . . . . . . 11
Table 6-Major Butter Importers . . . . . . . 11
Table 7-Major Cheese Producers . . . . . . . 11
Table 8-International Dairy Prices . . . . . . . 12
Table 9-EC(15)-Milk Deliveries . . . . . . . 13
Table 10-EC(15)-Dairy Production andWholesale Prices . . . . 13
Table 11-EC(12)-Consumption, Trade andStocks . . . . . 14
Table 12-EC(15)-Export Restitutions forSelected Dairy Products . . . 15
Table 13-Norway andSwitzerland -Butter andCheese . . . . 17
Table 14-Milk Production inCentral andEastern Europe . . . . 17
Table 15-Dairy Consumption inPoland, 1994-95 . . . . . 18
Table 16-Dairy Production, Consumption andTrade inHungary, 1995 . . 19
Table 17-Dairy Production inRomania, 1994-95 . . . . . 19
Table 18-Dairy Production, Consumption andTrade inBulgaria, 1995 . . 20
Table 19-Milk Production intheCIS . . . . . . 21
Table 20-Russia -Production andImports ofDairy Products . . . 22
Table 21-Australia -Milk Production . . . . . . 23
Table 22-Australia -Dairy Production, Consumption andExports . . . 23
Table 23-NewZealand -Milk Deliveries . . . . . . 24
Table 24-NewZealand -Dairy Production, Consumption, Exports andStocks . 24
Table 25-Canada -Milk Production andLiquid Sales . . . . 25
Table 26-Canada -Dairy Production, Consumption andTrade . . . 26
Table 27-United States -Milk Production andConsumption . . . . 27
Table 28-United States -Dairy Production, Consumption, Trade andStocks . 27
Table 29-Brazil -Production ofMilk andDairy Products in1995 . . . 28
Table 30-Argentina -Dairy Products Output, Consumption andTrade in1995 . 29
Table 31-Japan -Milk Production, Deliveries andUse . . . . 30
Table 32-Japan -Dairy Production, Consumption, Imports andStocks . . 30
GRAPHS
Graph 1-Major Milk Producers, 1991-96 . . . . . . 6
Graph 2-Major Butter Producers, 1991-95 . . . . . . 9
Graph 3-Butter Trade, 1991-95 . . . . . . . 10
Graph 4-EC(15)-Export Restitutions forSelected Cheeses . . . 16
Graph 5-Production andTrade ofDairy Products inPoland, 1993-95 . . 18
Graph 6-Production andExports ofDairy Products inArgentina, 1987-95 . . 29IDA/W/12
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WORLD DAIRY MARKET HIGHLIGHTS
At529million tons,world milkproduction in1995remained atthe1994level. Milkproduction
intheEuropean Communities andtheUnited States increased slightly and,atahigher rate,
inOceania.However,theseincreaseswereoffsetasoutputintheCommonwealthofIndependent
States (CIS) andEastern Europe continued todecline. In1996, theprospects areforanincrease
inworld milkproduction, driven byfurther expansion indeveloping countries andOceania.
IntheCISandEastern Europe, milkproduction isexpected tostabilize. Atthefarmlevel,
there appears tobeatendency forthenumber ofmilkproducers todecrease while average
dairyherdsizeisincreasing. Thedairyprocessing industry tendstobecome moreconcentrated.
World production ofskimmed milkpowder declined in1995, whereas production ofwhole
milkpowder increased. World exports ofbothpowders increased. InJanuary 1996, stocks
ofskimmed milkpowder intheEuropean Communities andtheUnited States werelow.Prices
werestrong during thefirstthree quarters of1995, reflecting tighter supplies, butdipped in
thelastquarter oftheyearandinthebeginning of1996 asdemand slackened.
Worldproductionofbutterandbutteroilincreasedmarginallyin1995discontinuingalong-term
downward trend. Exports ofbutter andbutter oilrecovered in1995 asdemand, particularly
fromRussia, theNearandtheFarEast, wasstrong. Bytheendof1995, highprices andlow
stocks werekeyfeatures oftheworld butter market. However, prices decreased inthefirst
halfof1996 duetoweaker demand.
Cheese production continued itsworld-wide upward trend. Production ofcheese isexpanding
more rapidly thanmilkproduction which reflects aprogressive shifttowards theproduction
ofvalue-added products. World cheese trade alsoincreased in1995, withtheEuropean
Communities andOceania consolidating theirroleastheworld 'sleading cheese exporters.
Price increases forcheese during 1995 were lesspronounced when compared toother dairy
products. However, incontrast toprices ofmilkpowders andbutterfat, cheese prices have
remained firmin1996 asdemand from major importers hasbeenstrong.
From early 1995 tomid-1996, export restitutions forselected cheeses intheEuropean
Communities were cutsubstantially insuccessive steps.
IntheUnited States, anewfarmlaw(theFederal Agricultural Improvement andReform (FAIR)
Act)wasapproved inApril 1996. TheFAIR Actfunds theUSDairy Export Incentive Program
(DEIP) uptothelimits imposed bytheUSexport subsidy reduction commitments under the
Uruguay Round Agreement onAgriculture.IDA/W/12
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MILK POWDERS
Skimmed Milk Powder
4. World production ofskimmed milkpowder in1995isestimated tohavedeclined by1percent
to3.3million tonsfollowing asimilar dropin1994. Production declined inOceania andinCentral
andEastern Europe whereas itremained stable intheEuropean Communities (15)andexpanded in
North America.
5. World consumption ofskimmed milkpowder alsocontinued todecline in1995, asworld prices
remained high. However, therecovery ofworld trade inskimmed milkpowder wassustained and
exports reached 1.06million tons, anincrease of16percentover1994. Exports from Europe and
North America increased whereas those fromOceania decreased. Withregard toskimmed milkpowder
imports in1995, Mexico, Algeria andJapan remained themain import markets.
6. On1January 1996, skimmed milk powder stocks inthemain producing countries were
substantially lower thanoneyearearlier. Government-held stocks intheUnited States (Commodity
Credit Corporation) andintheEuropean Communities wereparticularly lowatthebeginning of1996
andtheyremained lowwellintotheyear. Forecasts indicate thatwhile nosubstantial increase inpublic
stocks intheUnited States isexpected, falling prices within theEuropean Communities mayresult
inyear-end stocks being higher thanin1995. Anadditional factor which maycause skimmed milk
powder stocks intheEuropean Communities toaccumulate could bereduced feeddemand from the
ECvealcalfsector.
7. Inthefirstthree quarters of1995, theworld market formilkpowders wasrelatively tight,
withanincrease indemand facing reduced export supplies, particularly forskimmed milkpowder.
Reported prices ofskimmed milkpowder inthethirdquarter of1995werenearrecord levels ranging
between US$2,150 andUS$2,380 pertonf.o.b. However, inDecember 1995, themarket priceoutlook
wassomewhat weaker duetodisruptions faced incertain major markets suchasAlgeria. According
topriceranges reported bytheZentrale Markt- undPreisberichtstelle (ZMP), during thefourth quarter
of1995, indicative export prices declined slightly totherange ofUS$2,000 toUS$2,300 pertonf.o.b.
They further decreased inthefirsthalfof1996 mainly duetoweak demand. Export prices ranged
between US$1,900 toUS$2,200 pertonf.o.b. inthefirstquarter andUS$1,750 toUS$1,950 perton
f.o.b. inthesecond quarter of1996.
TABLE 1
MAJOR SKIMMED MILK POWDER
EXPORTERSTABLE 2
MAJOR SKIMMED MILK POWDER
IMPORTERS
1995 Estimates 1995 Estimates
(Thousand M.T.) (Thousand M.T.)
EC(12)1361 Mexico 110
Australia2150 Algeria 105
NewZealand 111 Japan 103
Poland 80 Philippines 90
United States 59 Brazil 85
Thailand 78
Malaysia 75
Indonesia 50
1Excluding ECintra-trade.2ForAustralia 1995/96 figures. Source: WTO; FAO; ABARE; Agra Europe.IDA/W/12
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Whole Milk Powder
8. World production ofwhole milk powder increased in1995 byafurther 1percentto
2.3million tons. Production increased inOceania while itdeclined marginally intheEuropean
Communities (15)andremained stable inNorth America.
9. World whole milkpowder exports increased in1995by3percentto1.2million tons. Whole
milkpowder imports bydeveloping countries havebeenincreasing since theendof1990. Principal
purchasers ofwhole milkpowder in1995 were Algeria, Brazil andVenezuela.
10. Reportedpricesofwholemilkpowderinthethirdquarterof1995remainedfirmrangingbetween
US$2,200 andUS$2,480 pertonf.o.b. During thefourth quarter of1995, indicative export prices
reported byZMP declined slightly totherange ofUS$2,200 toUS$2,400 pertonf.o.b. Export prices
continued todecline inthefirsthalfof1996 duetoweak demand andranged between US$2,000 to
US$2,300 pertonf.o.b. inthefirstquarter andUS$1,750 toUS$2,050 pertonf.o.b. inthesecond
quarter of1996.
TABLE 3
MAJOR WHOLE MILK POWDER
EXPORTERSTABLE 4
MAJOR WHOLE MILK POWDER
IMPORTERS
1995 Estimates 1995 Estimates
(Thousand M.T.) (Thousand M.T.)
EC(12)1592 Brazil 120
New Zealand 275 Algeria 110
Australia285 Malaysia 60
Venezuela 50
Philippines 40
Thailand 35
Mexico 35
1Excluding ECintra-trade.2ForAustralia 1995/96 figures.
Source: WTO; FAO; ABARE.IDA/W/12
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TABLE 5
MAJOR BUTTER EXPORTERSTABLE 6
MAJOR BUTTER IMPORTERS
1995 Estimates 1995 Estimates
(Thousand M.T.) (Thousand M.T.)
New Zealand 184 Russia 246
EC(15)1133 EC(15)171
Australia280 Egypt 45
US338 Algeria 20
Poland 18 Mexico 15
1Excluding ECintra-trade.2ForAustralia 1995/96 figures.3Exports ofbutter andmilkfatinbutter equivalent.
Source: WTO; FAO; ABARE.
CHEESE
15. World production ofcheese (allkinds, including curd) increased by2percent to
15.3million tonsin1995, following a1percentincrease in1994. Withworld cheese demand expected
toremain strong, production inthemainproducing countries isexpected torisein1996, andatahigher
ratethanmilkproduction.
TABLE 7
Major Cheese Producers
1995 Estimates
(Thousand M.T.)
EC(15) 5,980
United States 3,151
Brazil 400
Argentina 381
Egypt 340
Canada 277
Australia1253
Russia 240
New Zealand 213
Switzerland 129
1ForAustralia 1995/96 figures.
Source: WTO; FAO; ABARE; Agra Europe.16. World cheese consumption isestimated
tohavegrown by2percentin1995, inlinewith
thelong-term trend since the1980s. Thistrend
isexpected tocontinue inthecoming years.
Higher prices areunlikely tocurtail thefuture
rateofgrowth indeveloped countries. In
developing countries, consumption isclosely
related toincome levels anddietary patterns.
Cheese demand isexpected toincrease
particularly markedly inthedeveloping countries
ofEastAsia.
17. Total world cheese trade increased in
1995 by6percent toslightly above
1.1milliontons.Themajorimportregionswere
Western Europe, Asia, North America andthe
Middle East. Import demand from Russia
remained brisk. Themajor cheese exporters
continued tobetheEuropean Communities (15)
andOceania. On1January 1996, stocks of
cheese inthemain producing countries were
lower thanoneyearearlier andareexpected to
belowattheendof1996.IDA/W/12
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18. In1995, astheworld cheese market remained firm, prices increased albeit lessthanthose of
butter andskimmed milkpowder. Reported prices ofCheddar cheese inthethird quarter of1995
ranged between US$2,150 toUS$2,500 pertonf.o.b. They remained firminboththefourth quarter
of1995 andthefirsthalfof1996.
INTERNATIONAL DAIRY PRICES
19. Prices foralldairy products strengthened during 1995. Principal factors behind these
developments include strong international demand, thelackofanysubstantial increase inexport supplies
andtheweakening oftheUnited States dollar against some European currencies. BoththeEuropean
Communities andtheUnited States havereduced theamount ofsubsidy paidpertonofdairy products
exported.
20. Since theendof1995, international prices foralldairyproducts, except cheese, haveweakened,
reflecting, during thefirstpartof1996, demand rather thansupply factors. Anadditional element
hasbeenthestrengthening oftheUnited States dollar against some European currencies. Average
prices fordairy products during 1996 areexpected tobelower thanthose in1995, except forcheese,
butsubstantially above those in1993and1994. Cheese prices areexpected tostayatabout their1995
level.
21. Regarding thelonger-term outlook fordairy products, forecasts made bytheOECD suggest
thatthecontinuation ofquota policies andlower realsupport prices inmany countries mayleadto
lower production growth. Theimplementation oftheUruguay Round Agreement andlower stocks
willbring about areduction insubsidized exports. Consequently, world demand islikely tooutpace
world supply andleadtogenerally higher world prices fordairy products overthemedium term.
TABLE 8:INTERNATIONAL DAIRY PRICES* (1994-96)
(US$ permetric tonf.o.b.)
Product1994 1995 1996
January-
DecemberJanuary-
MarchApril-
JuneJuly-
SeptemberOctober-
December**January-
March**April-
June**
Skimmed milkpowder 1,425-2,000 1,900-2,250 1,950-2,300 2,150-2,380 2,000-2,300 1,900-2,200 1,750-1,950
Whole milkpowder 1,380-2,000 1,900-2,250 1,900-2,450 2,200-2,480 2,200-2,400 2,200-2,300 1,750-2,050
Anhydrous milkfat 1,400-2,230 2,100-2,580 2,300-2,700 2,350-2,750 ... ... ...
Butter 1,100-1,850 2,000-2,430 2,000-2,500 2,100-2,550 2,500-2,700 2,200-2,500 1,600-2,000
Cheddar cheese 1,650-2,100 1,900-2,400 1,950-2,275 2,150-2,500 ... ... ...
*Ranges asreported byIDAparties through thethird quarter of1995.
**For fourth quarter 1995 andfirsthalfof1996: ZMP.IDA/W/12
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DAIRY PRODUCTION AND POLICIES INSELECTED COUNTRIES AND REGIONS
WESTERN EUROPE
European Communities (15)
TABLE 9:EC(15)-MILK DELIVERIES
('000metric tons; ()=%change from previous year)
199411995 19962
Milk deliveries 111,400 (0%) 112,900 (1%) 112,700 (-0%)
1Forthepurposeofbettercomparability,the1994figureispresentedonthebasisofEC(12)plusAustria,
Finland andSweden;2Forecast.
Source: ZMP.
22. AccordingtoZMP,milkdeliveriesintheEuropeanCommunitieswereapproximately1percent
higher in1995, compared to1994, andattained alevelofabout 113million tons. Amarginal decrease
isforecast forthewhole yearof1996. Deliveries decreased byabout 1percentinthefirstquarter
of1996 asmany farmers hadtoseekways toreduce output inorder nottoexceed theirallocations
forthe1995/96 (April toMarch) quota year. Largely duetofavourable weather conditions andthe
lowleveloffeedprices, milkproduction in1995wasestimated tobeslightly higher thanintheprevious
year, reaching 125million tons(FAO estimate). Production in1996isexpected toremain unchanged,
reflecting quota restrictions onoutput. Dairy cownumbers areestimated tohavedeclined in1995
byabout 2percent. Milkyieldpercow,however, isestimated tohaveincreased byabout 2percent
offsetting thedecline incownumbers. Theoutlook for1996 isforafurther decline by1percent
indairy cownumbers, again being offset byanincrease inmilkyields.
TABLE 10:EC(15)-DAIRY PRODUCTION AND WHOLESALE PRICES
Production Stocks Selected prices
1995
'000m.t.%
changeMay 1996
'000m.t.June 1996
perkg.%
change
Milk for
consumption 29,775 (+0%) - n.a.
SMP 1,215 (0%) 19 DM3.81 (-11%)
WMP 968 (-0%) - DM4.76 (-8%)
Butter 1,621 (2½%) 77 DM6.10 (-5%)
Cheese 5,980 (2%) - Hfl5.60 (0%)
Source: Production ofdairy products -WTO; other -ZMP.IDA/W/12
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23. Increased milkproduction intheEuropean Communities in1995 wasreflected inhigher
production ofthefreshmilkproducts, butter andcheese, while milkpowder production remained stable.
Attheendof1995, thebutter market continued tobefirmandpublic stocks wereatlowlevels. Except
forcheese, consumption ofdairyproducts intheEC(12)isestimated tohavedecreased in1995. Strong
demand forsubsidized butter usedinthepastry andice-cream sectors ledtothese subsidies being
reduced. According toAgraEurope, thevolume ofbutter usedinthedairy products industry in1995
wasabout 430,000 tonsforEC(15). In1994, thedairy industry oftheEC(12)alone consumed
448,000 tons. With increased exports toRussia, totalECexports ofbutter increased substantially
in1995. Thestrength ofexport markets forbutter washighlighted byfrequent reductions inexport
refunds. Inthefirsthalfof1996, asdomestic demand weakened, prices declined andbutter wassold
tointervention agencies (intervention buying wasnegligible in1995). International demand also
weakened andexport refunds forbutter wereincreased inlateApril inorder toencourage exports and
relieve pressure ontheinternal market (seeTable 12).
TABLE 11:EC(12)-CONSUMPTION, TRADE AND STOCKS1
('000metric tons; ()=%change from corresponding period ofprevious year)
SMP WMP Butter Cheese
Consumption
estimate 1995894 (-10%) 361 (-3%) 1,481 (-2%) 5,256 (2%)
Exports
estimate 1995361 (150%) 592 (½%) 133 (48%) 504 (-2½%)
Imports
estimate 199540 (25%) 8 (60%) 71 (11%) 80 (-32%)
Stocks end-1995 14 (-81%) - - 70 (-41%) 108 (7%)
1Note thatIDAfigures fortrade were reported forEC(12).
Source :WTO.
24. Similar tobutter, attheendof1995, theskimmed milkpowder market wasfirmandpublic
stocks wereatlowlevels. Exports ofskimmed milkpowder increased substantially in1995. Itis
estimated thattheuseofskimmed milkpowder bythecalf-feed sector decreased byalmost 9percent
in1995to592,000 tons(EC12figure), andanevensharper dropisexpected in1996. Since theend
of1995, theskimmed milkpowder markets havefaced acrisis. Duetoweak internal demand, prices
declined more steeply thanthose forbutter. According toAgra Europe, issues related toBovine
Spongiform Encephalopathy (BSE) aggravated thesituation. Theslaughter anddestruction ofveal
calves ofBritish origin which werekeptintheNetherlands, Belgium andFrance significantly reduced
vealcalfnumbers andthereby demand formilkreplacers. Substantial volumes ofskimmed milkpowder
arelikely tobesoldintointervention inthecurrent storage period (1March-31 August). Asof
14June1996, theexport refund forskimmed milkpowder hasbeen increased by12percentto
ECU 550perton.Stocks werereported at49,000 tonson27June1996and,according totheZMP,
year-end stocks ofskimmed milkpowder could reach 100,000 tons.
25. On20March 1996, theGovernment oftheUnited Kingdom announced thatthere maybea
possible linkbetween several newcases ofCreutzfeldt-Jakob disease andbeefconsumed during the
late1980s which gaverisetowidespread fears thatBSEcanbetransmitted through thefoodchainIDA/W/12
Page15
tohumans. Despite astatement fromboththeWorld Health Organization andthe"Office International
desEpizooties (OIE)" totheeffect thatmilkandmilkproducts could nottransmit thedisease, milk
consumption aswellas,tosome degree, trade indairy products wasaffected.
26. Cheese markets wereweaker in1995compared to1994duetoincreased competition between
manufacturers formarket share within theEuropean Communities. Increases inproduction appear
tohavebeendriven, among other factors, bytheneedtomaintain world export market share, aswell
astosustain capacity utilization intheindustry. During 1995 anduptomid-1996, export refunds
werecutseveral times (seeGraph 4).Steps werealsotaken tomove tozeroexport refunds forselected
cheeses exported tocertain destinations. Inaddition, theissuance ofexport licences forcheese was
suspended several times. Under theUruguay Round Agreement onAgriculture, subsidized cheese
export volume ceilings decline from 406,700 tonsin1995 to386,400 tonsin1996 (EC(12)figure).
There iscurrently some debate onthefuture oftheECdairy regime within theEuropean Communities,
particularly inlightoftheUruguay Round commitments inrelation tocheese. TheCommission is
likely topresent proposals inearly1997onfuture development ofthedairymarket regime. Theexisting
dairy quota system isduetoexpire intheyear2000.
27. Intervention prices fortheperiod 1July1996to30June1997wereleftunchanged at"green"
ECU 3,282 pertonforbutter andECU 2,055 pertonforskimmed milkpowder. Thetarget price
ofmilk wasalsoleftunchanged at"green" ECU 309.8 perton(ECRegulation 1118/96 dated
26June1996). Marketing years fordairy havebeenchanged from April-March toJuly-June.
TABLE 12:EC(15)-EXPORT RESTITUTIONS FOR SELECTED DAIRY PRODUCTS
(Green ECU perton)
Butter SMP WMP
1February 1995 1,811 703 1,179
26January 1996 1,600 490 980
26April 1996 1,750 490 980
14June 1996 1,750 550 980
Note: Asof1February 1995, theswitch-over mechanism wasabolished. Cuts inexport refunds between
1February 1995 and26January 1996 arenotshown.
Source: Official Journal oftheEuropean Communities.IDA/W/12
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TABLE 13:NORWAY AND SWITZERLAND -BUTTER AND CHEESE
('000metric tons; ()=%change from corresponding period ofprevious year)
Norway Switzerland
Butter (1995)
Production 14.0 (-12½%) 41.2 (21%)
Consumption 13.0 (0%) 43.7 (15%)
Exports 5.0 (25%) - -
Imports - - 2.8 (-8%)
Stocks atendofperiod ... ... 3.9 (5½%)
Cheese (1995)
Production 82.0 (1%) 129.0 (-4½%)
Consumption 60.0 (3½%) 99.8 (-2%)
Exports 18 (0%) 63.8 (7½%)
Imports 2.4 (0%) 29.3 (-3%)
Stocks atendofperiod ... ... 24.6 (-18%)
Source: Switzerland: WTO.
Norway: OECD estimates.
CENTRAL AND EASTERN EUROPE
TABLE 14:MILK PRODUCTION INCENTRAL AND EASTERN EUROPE
(million metric tons, ()%from previous year)
1994 1995 %Change
1995/94
Poland 12.1 11.1 (-8)
Romania 5.5 5.7 (3½)
Hungary 1.9 1.9 (1)
Bulgaria 1.3 1.3 (2½)
Czech Republic 3.3 3.1 (-6)
Slovak Republic 1.2 1.1 (-3½)
Source: WTO; ZMP; OECD.
30. InPoland ,although agricultural output roseby16percentin1995, milkproduction and
deliveries wentondeclining. However, higher producer prices introduced inmid-1995 triggered a
positive response from thedairy sector andtheimproved profitability wasreflected bya6percentIDA/W/12
Page18
increase inbutter production, compared to1994. In1996, additional support funds, representing an
increase ofmore than24percentover1995, were allocated tothelivestock sector formarket
intervention. Despite economic growth in1995, ahighrateofinflation dampened domestic consumption
asretail prices fordairy products reportedly increased by40percent. Demand forbutter alone fell
by22percentin1995 andconsumers 'preferences shifted tovegetable fatsasamore affordable
substitute. Intervention purchases ofbutter increased to17,000 tons, andbutter exports roseby
31percent.
TABLE 15:-DAIRY CONSUMPTION INPOLAND, 1994-95
1994 1995 %Change
1995/94
Liquid milk (l/head/year) 88.08 83.88 (-5)
Butter (kg./head/year) 4.92 3.36 (-22)
Condensed andpowdered
milk (kg./head/year)0.36 0.24 (-33½ )
Source :Agra Europe.IDA/W/12
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31. Total agricultural production inHungary isestimated tohavegrown by3percentin1995,
while livestock output roseforthefirsttimesince1988, according toanOECD study. Milkproduction
remained roughly atthesame levelasin1994, ataround 1.9million tons.
TABLE 16:DAIRY PRODUCTION, CONSUMPTION AND TRADE INHUNGARY, 1995
('000metric tons)
Production Exports Imports Consumption
SMP 6.6 3.2 1.2 4.2
WMP 4.7 1.3 0.2 3.5
Butter 14.1 2.8 0.2 11.6
Cheese 54.5 11.0 2.1 44.0
Source: WTO.
32. According toAgra Europe, in1996 milksupport prices forpremium quality milkandfirst
classmilkrosefromFt26toFt30perlitreandfromFt23toFt28perlitre,respectively. Inaddition,
wholesalers willbesubsidized attherateofFt1.5perlitreandFt1.0perlitre,respectively, forthe
twocategories ofmilk. Retail prices forliquid milkrosetoFt60perlitreasaresult ofhigher input
costsincurred bydairyprocessors. Consequently, Hungary recently faced declining consumer demand
fordairy products. Domestic sales ofbutter forthefirstquarter of1996 were reported tobe
22½percentbelow 1995 levels. Toavoid aneventual excess supply ofdairy products arising from
reduced consumer demand, anewmarket regulation scheme setupaproduction quota for1996 just
below the1995 production level.
33. Milkproduction inRomania increased by3½percentin1995. Since August 1995, Romania
hasaccelerated theimplementation ofitslandreform policies andtheprivatization ofitsfoodprocessing
industry, eventhough recent OECD andWorld Bank surveys indicate thataheavy monopoly structure
stilldominates theagricultural sector inRomania. Partly astheresult oftherecent adjustment package,
over90percentofRomania 'sdairy cows arenowprivately owned andlivestock numbers have
recovered. Bytheendof1995, thetransformation ofthedairy sector hadtranslated intoamoderate
increase inbutter, cheese, andmilkpowders production.
TABLE 17:DAIRY PRODUCTION INROMANIA, 1994-95
('000metric tons, and()=%change)
1994 1995 %Change
1995/94
SMP 4.6 4.9 (6½)
WMP 9.0 10.0 (11)
Butter 13.4 16.1 (20)
Cheese 41.5 44.6 (7½)
Source: WTO.IDA/W/12
Page20
34. Special incentives tocounter thedecline incownumbers inBulgaria wereintroduced in1995,
anddairy producers benefitted fromminimum guaranteed prices. Although dairy cows andmilking
sheep numbers continued tofallin1995 andearly 1996, these policy measures proved successful as
totallivestock numbers increased. During thefirsthalfof1995, cheese production seemed torecover
fromthesharp fallsrecorded during theprevious corresponding period. However, asprivate cheese
producersfacedquality-controlproblems,registrationwasmadecompulsoryforbothimportsandexports
ofdairy products from Bulgaria. According toAgra Europe, dairies were required tocomply with
stricter hygiene regulations, adopted attheendof1995, inlinewithEuropean Communities 'standards.
Despite these newoperating constraints, bytheendof1995, ECpreferential import quotas hadbeen
fullyutilized, inparticular withrespect towhite cheese inbrine andyellow cow'smilkcheese.
35. Apart from persisting inflation, several policy measures havenegatively affected consumer
demand fordomestic aswellasimported dairy products in1995and1996. InJuly1995, newcustoms
duties onmilkpowder, butter andcheese wereimposed insupport ofthedomestic dairy sector. As
ofJune1996,Bulgariaintroducedatemporary5percentimportsurchargetoadvertbalance-of-payments
difficulties andthedepletion ofitsforeign exchange reserves. Furthermore, tight milk supplies
contributed toa4percentriseintheprices ofdairy products.
TABLE 18:DAIRY PRODUCTION, CONSUMPTION AND TRADE INBULGARIA, 1995
('000metric tons)
Production Exports Imports Consumption
SMP ... 0.4 2.7 ...
WMP ... 0.2 1.9 ...
Butter 2.0 0.1 0.8 2.7
Cheese 41.7 6.8 4.1 39.4
Source: WTO.
36. In1995, thetotalvalue oflivestock production intheCzech Republic increased by4percent,
compared to1994. Thedairy sector showed signs ofstabilization asmilkdeliveries in1995 totalled
2.12billion litres, just2percentlessthanin1994. TheCzech Statistical Office estimated milk
production levels at3.07billion litres for1995, and730million litres ofmilkwere announced for
thefirstquarter of1996. Agra Europe reported anincrease inimports fornearly allcategories of
dairy products in1995, except butter, asaresult ofrising consumers 'purchasing power in1995.
Imports ofcheese (mainly processed cheese), amounting to3,390 tons,roseby50percentcompared
to1994. Ontheother hand, theexport performance ofbutter recovered, witha40percentincrease
to25,441 tons, representing more thanathirdoftotalbutter production, estimated at72,270 tonsin
1995. Exports ofskimmed milkpowders totalled 60,000 tons. Inthefirsthalfof1996, while the
exportablesurpluscontinuouslywidenedanewsubsidyregulationwasintroduced.Thesubsidyregulation
implicity recognizes thehigher production costsincurred bydairy farmers: candidate dairy exporters
aretherefore eligible tothesubsidy iftheypaytheestablished minimum pricetomilkproducers. This
minimum guaranteed price wasraised from Kc6toKc6.3perlitreofmilk.IDA/W/12
Page21
37. Thestabilization programme implemented bytheSlovak Republic ledtoa2percentincrease
intotallivestock production in1995. Cattle numbers began tostabilize, asindicated byalower rate
ofdecline. Milkproduction fellby3½percentin1995, from1.16to1.12billion litres. Withrising
milkyields percow, amilksurplus hasalready beenannounced for1996. Export subsidies willbe
made available fornatural cheeses, milkpowder, butter, longlifemilkandsheep milkproducts.
COMMONWEALTH OFINDEPENDENT STATES
TABLE 19:MILK PRODUCTION INTHE CIS
('000metric tons)
1994 1995 %Change
1995/94
CIS 79.2 74.2 (-6½)
Russian Federation 42.8 39.3 (-8)
Ukraine 18.2 17.2 (-6)
Belarus 5.6 5.1 (-9)
Kazakhstan 5.3 4.5 (-16)
Source :Agra Europe; Russian Statistics Committee; OECD.
38. InRussia ,thecontraction ofthelivestock sector persisted in1995, mainly duetoasevere
drought andexpensive feedsupplies. Thissituation, combined withlowmilkyields, ledtoan8percent
fallinmilkproduction, to39.3million tonsaccording totheRussian Statistics Committee. Milk
production figures asreported byAgra Europe forthefirstquarter of1996 totalled 6.5million tons,
a7percentdropcompared tothesame period in1995. Early forecasts for1996 and1997 bythe
Russian Ministry ofEconomics indicate afurther decline inlivestock numbers, despite anadditional
allocation ofgovernment agricultural subsidies tomilkandmeatproducers in1995.
39. Themove towards greater macro-economic stability andaneventual recovery ofrealincomes,
wasaccompanied bycontinued realappreciation oftheruble. Theconsumers 'purchasing power
deterioratedandprice-competitiveimportsofbutterandcheesesurged.Butterimportsin1995amounted
to246,200 tons, anincrease bymore than43percent.Thepaceofbutter andmilkpowders imports
slowed considerably during thefirstthree months of1996, compared withthecorresponding period
in1995. Butter imports amounted to23,500 tonscompared with99,200 tonsduring theperiod January-
March 1995. Similarly, milkpowders imports totalled 13,300 tonsinJanuary-March 1996, compared
to20,000 tonsduring thesame period in1995.IDA/W/12
Page22
TABLE 20:RUSSIA -PRODUCTION AND IMPORTS OFDAIRY PRODUCTS
('000metric tons)
1994 1995 %Change
1995/94
PRODUCTION
Butter 488.0 418.9 (-14)
Cheese 275.0 240.0 (-12½)
WMP 110.0 120.0 (9)
SMP ... 530.0 ...
IMPORTS
Butter 171.3 246.2 (43½)
Cheese 76.0 85.0 (12)
Milk powders 37.4 ... ...
Source: Russian Statistics Committee; Agra Europe; ZMP; FAO.
40. Withaheavily indebted farmsector, dairy farmers throughout theCIScontinue towork under
depressed conditions. Current policies intheCISstrive togradually liberalize theagricultural sector.
Reports bothfrom USDA andAgra Europe estimate thatstructural adjustment isfarfrom being
completed. Theprivate sector intheCISnowaccounts forhalfofthetotalproduction ofmilk, holds
35percentofallcattle and46percentofallcows. However, OECD surveys highlighted that
80percentofagricultural landinRussia andUkraine isstillmanaged byState orcollective farms.
Thedairy sector intheCISremains vulnerable toexternal factors likedroughts, scarce feedsupplies,
andrising prices ofkeycommodities. Despite aprogressing privatization programme inUkraine ,
milkproduction in1995 wasestimated tobe6percentbelow theprevious year'slevel, anddropped
byanother 5percentto2.8million tonsinthefirstquarter of1996 compared tothesame period in
1995. Kazakhstan suffered asevere drought in1995, followed byfeedshortages anda16percent
decline inmilkproduction. Compared to1994, Belarus recorded a5percentdecline ingross
agricultural output anda12percentdecline inmilkproduction in1995.
BALTIC REPUBLICS
41. Livestock production intheBaltic Republics continued itslong-term decline in1994andearly
1995. With effect fromApril 1996, Lithuania increased itstariffs onfarmproducts fromallorigins
except theEuropean Communities, according toAgra Europe. Tariffs onmilkanddairy products
inparticular havethusincreased from20percentto30percent. Forbutter alone, theapplied tariff
increased from45percentto50percent. Infaceofdeclining agricultural production in1995, Estonia
increased itstariffs onfarm products, including dairy products. These tariffs were nottoexceed
10to15percent, according togovernment sources.IDA/W/12
Page23
OCEANIA
Australia
42. Inresponse tofavourable conditions oninternational markets, milkproduction continues its
steady increase inAustralia. According toABARE, milkproduction in1995/96 wasestimated at
approximately 8.7billion litres, anincrease of6percentcompared totheprevious season. Yields
weremarginally upandcownumbers increased byover5½percentduring thisperiod. Bothcow
numbers andyields areexpected tocontinue toriseduring the1996/97 season.
TABLE 21:AUSTRALIA -MILK PRODUCTION
(million litres, ()%change from corresponding period ofprevious year)
1993/94 (July-June) 8,077 (n.a.)
1994/95 (July-June) 8,206 (1½%)
1995/96 (July-June) Estimate 8,700 (6%)
1996/97 (July-June) Forecast 9,100 (4½%)
Source: ABARE.
43. According totheAustralian Dairy Corporation, cheese production (mainly Cheddar) hasgained
inimportancerelativetootherdairyproducts.Thisisduetoincreasedopportunitiesonboththedomestic
andinternational markets, particularly inAsiawhere demand isgrowing vigorously. Approximately
90percentoftotalretail cheese sales inAustralia areofdomestic origin. Imports haveremained
relatively steady. Incontrast, thevalue ofdairyexports ofcheese increased significantly inthe1995/96
season compared totheprevious season, andafurther increase isforecast for1996/97. According
toABARE, thevalue ofAustralian dairy exports rosebyclose to30percentin1995/96 compared
totheprevious season.
44. Theaverage Australian manufacturing milkpricein1995/96 rosebyapproximately 30percent
to26.3cents (Australian dollar) perlitre. However, manufacturing milkprices areforecast tofall
by4percentto25.2cents perlitrein1996/97, reflecting anexpected weakening inworld prices.
TABLE 22:AUSTRALIA -DAIRY PRODUCTION, CONSUMPTION AND EXPORTS
('000metric tons, ()%change from corresponding period ofprevious year)
1995/96
EstimateSMP WMP Butter and
Butter oilCheese
Production 198 (½%) 110 (6%) 140 (4%) 253 (8%)
Consumption135 (-10%) n.a. (-) 57 (3½%) 146 (3½%)
Exports 150 (-14%) 85 (15%) 80 (-7%) 125 (8%)
Source :ABARE,1OECD.IDA/W/12
Page24
NewZealand
45. During theinitial partofthe1995/96 dairy year(beginning on1June), milkproduction in
NewZealand washampered byadverse weather conditions inmany dairying regions. Estimates made
atthebeginning oftheyearhadpointed toanincrease inproduction ofabout 2to3percent,compared
tothe1994/95 season. However, generally goodweather conditions intheremaining partoftheseason
andagrowing dairy herdareexpected toresult inasignificantly sharper riseinproduction forthe
whole ofthe1995/96 dairy season. Cheese exports areestimated tohavestepped upin1995/96 as
NewZealand cheese hasgained improved access totheEuropean Communities. TheNewZealand
Dairy Board reports thatfollowing negotiations inDecember 1995 withtheEuropean Communities,
regarding theenlargement oftheEuropean Communities, quotas designated exclusively forsupply
byNewZealand aretobeincreased by16percentto11,000 tons,primarily tobesupplied withCheddar
cheese. Asaresult oftheUruguay Round, access totheUSmarket isalsosettoincrease forprimarily
Cheddar cheese overtheimplementation period, from 3,950 tonsin1995 to8,200 tonsbytheyear
2000.
46. Incomparison withtheproduct mixinthe1994/95 season, production ofbutter isestimated
tohavedecreased by7percentandthatofskimmed milkpowder by10percentin1995/96. Whole
milkpowder production islikely toremain steady. Incontrast, cheese production isestimated tohave
increased by11percentin1995/96.
TABLE 23:NEW ZEALAND -MILK DELIVERIES
(million litres, ()%change from corresponding period ofprevious year)
1993/94 (June-May) 8,600 (13%)
1994/95 (June-May) 8,640 (½%)
19951(calendar year) in'000metric tons 8,744 (n.a.)
Source: New Zealand Dairy Board (NZDB);1WTO.
TABLE 24:NEW ZEALAND -DAIRY PRODUCTION, CONSUMPTION,
EXPORTS AND STOCKS
('000metric tons, ()%change from corresponding period ofprevious year)
Calendar year
1995SMP WMP Butter Cheese
Production 126 (-10%) 319 (5%) 191 (-5½%) 213 (11½%)
Consumption n.a. (-) n.a. (-) n.a. (-) 30 (-2%)
Exports 111 (-25½%) 275 (-10½%) 184 (-4%) 169 (6%)
Source: WTO.
47. Thefinalprice formilksolids forthe1994/95 season forproducers wasNZ$3.00/kg. The
advancepriceofNZ$2.65/kg.forthe1995/96seasonwasincreasedtoNZ$3.15inearlyDecember1995.
Thefinalpriceformilksolids forthe1995/96 season forproducers wasNZ$3.60 perkg.,anincrease
by20percentcompared totheprevious season. Theopening advance price forthe1996/97 season
isNZ$2.70 perkg.,withanestimated finalpay-out ofNZ$3.15-NZ$ 3.20perkg.,adecrease byabout
12percentover1995/96 duetoweakening international prices.IDA/W/12
Page25
NORTH AMERICA
Canada
48. In1995, theCanadian dairy economy recovered. Itisestimated thatmilkproduction, aswell
astheproduction ofother dairy products except forcheese, increased. Milk production isexpected
tohavereached approximately 7.8million tonsin1995, anincrease of1½percentovertheyearbefore.
Except forwhole milkpowder, domestic consumption ofdairy products declined in1995while exports
rosemarkedly reflecting agrowth intheindustrial market fordairy products. Important butter export
markets forCanada during 1995include Egypt andMorocco. However, non-traditional export markets
arebecoming moreimportant, particularly markets inSouth America. Major buyers ofCanadian cheese
in1995 were theUnited States, theUnited Kingdom andBrazil.
TABLE 25:CANADA -MILK PRODUCTION AND LIQUID SALES
('000metric tons; ()=%change from previous year)
1994 1995 (provisional) 1996 (forecast)
Production ofcow'smilk 7,741 7,849 (1½%) 7,839 (-0%)
Deliveries todairies 7,246 7,357 (1½%) 7,350 (-0%)
Source: WTO.
49. Canada hasmade anumber ofchanges initsdairy policy sparked bytheUruguay Round.
TheCanadian Dairy Commission (federal government agency) maintains itstarget prices forindustrial
milk,whichwereincreasedasof1August1995(reviewedinFebruary).Subsidypaymentsforindustrial
milkaretobereduced by15percentinAugust 1996andgradually phased outoverthenextfiveyears,
beginning August 1997. Inlinewiththesystem ofpricing milkaccording toend-use, anewclass
ofmilk(Class 5)wasalsointroduced on1August 1995. Thislower-priced milkwillbeusedto
manufacturedairyproductsforexportandtoprovidemilkingredientsforfurtherprocessingfordomestic
orexport markets. Themilkprovided under thenewsystem issoldtoprocessors bytheirrespective
provincial milkboard oragency. Returns from these sales arepooled across allprovinces sothat
producers share thegains. Yetanother programme implemented inAugust 1995 wastheOptional
Export Program fordairy. Thisprogramme wasimplemented toallow theadditional production of
milkfornewexport market opportunities identified byexporters. Tobeeligible fortheprogramme,
exports mustconstitute anewexport initiative andaddtotheexport activity ofthedairyindustry without
disrupting milksupplies forthedomestic market.IDA/W/12
Page26
TABLE 26:CANADA -DAIRY PRODUCTION, CONSUMPTION AND TRADE
('000metric tons; ()=%change from corresponding period ofprevious year)
SMP WMP Butter Cheese
Production
Estimate 199571.0 (19½%) 18.3 (4%) 92.3 (4½%) 277.0 (-1½%)
Consumption
Estimate 199527.1 (-13%) 18.3 (21½%) 80.7 (-3½%) 284.9 (-2½%)
Exports
Estimate 199543.8 (30½%) 2.8 (-57%) 6.3 (190%) 13.7 (61%)
Imports
Estimate 19951.9 (-69½%) 2.2 (-48½%) 0.5 (34½%) 21.4 (-½%)
Stocks
endofperiod12.3 (20½%) 0.2 (-72%) 14.3 (70½%) 39.9 (-0%)
Source: WTO.
50. Subsequent totheUruguay Round, theUnited States haschallenged theapplication ofCanadian
tariffs onimports ofdairy products fromtheUnited States regarding theircompatibility withtheNorth
American FreeTrade Agreement (NAFTA). On14July1995, aformal complaint wasbrought under
NAFTA 'sdispute settlement procedures andapanel wassetup.According topress reports, ayear
laterinJuly1996, theUScomplaint wasdismissed.
51. Aspartofanagreement announced on5December 1995 between Canada andtheEuropean
Communities inthecontext oftheenlargement oftheEuropean Communities, Canada willincrease
itsimport reserve forECcheese from 60to66percentoftheglobal quota (from 12,247 tonsto
13,472 tons). Inaddition, theEuropean Communities willincrease tariffratequota access forCanadian
agedCheddar cheese from 2,750 tonsto4,000 tons.
United States
52. Milk production intheUnited States isestimated tohaverisen toabout 70.7million tonsin
1995, about 1½percentupfrom theprevious year. Favourable prices in1996 formilkanddairy
products areexpected toinduce asimilar, ifnotslightly increased, riseinproduction forthewhole
yearof1996. During thefirstquarter of1996, milkproduction isestimated tohaveincreased byover
3percentcompared tothesame period in1995. Milk yields during 1995 benefitted fromincreased
useoftheyield-enhancing hormone BST(bovine somatotropin). Thiscontributed totherisein
production despite amarginal decrease incownumbers. Thelatter areexpected tocontinue tofall
byabout 1percentin1996. According totheUSDA, about 10percentofmilkcows wereonaBST
regimen inearly 1996, which waslessthanintheprevious year. Uncertainty among producers with
respect toitsprofitability maybeoneunderlying reason forthis.
53. In1995, butter production contracted despite attractive world market prices (byapproximately
3percent), toanestimated 572,000 tons. Arebound isprojected for1996, andshould butter prices
remain strong during theyear, milksupplies maybedrawn away from cheese production. TheUS
cheese sector, boosted bygrowing supplies ofmilkandstrong demand, continues itsupward trend.
In1995, cheese production grew byapproximately 3percentcompared to1994andstronger growthIDA/W/12
Page27
isforecast for1996. Cheese exports areexpected toremain atabout the1995 record level. USDA
figures show thatJapan surpassed theUnited States astheworld 'slargest importer ofcheese in1995.
Reflecting thegrowing milksupplies, skimmed milkpowder production continued itsupward trend
in1995 andisexpected todolikewise in1996. Skimmed milkpowder andbutter prices increased
towards theendof1995 andthendropped inDecember andinthebeginning of1996. Prices began
torecover bymid-1996.
54. Exports ofmajor dairy products under theDairy Export Incentive Program (DEIP) werelarger
inthefirsthalfof1995 thaninthesecond half. Higher world market prices, especially forbutter,
reduced theneedforexport incentives andmost DEIP allocations were notusedinthelastquarter
of1995. Subsidized sales ofdairy products inthefirsthalfof1996 were notexpected tobeofan
order ofmagnitude sothattheUnited States would reach thelimits ofitsWTO export subsidy
commitments forthefirstyearofimplementation. Thebulkofexport subsidy allocations under the
DEIP isforskimmed milkpowder, withthemajor export destination remaining Mexico.
55. TheFederal Agriculture Improvement andReform (FAIR) Actwasapproved inApril 1996.
Support prices formilkaresettobephased outoverafour-year period andtobereplaced inyear
2000 withaloanprogramme. With regard toexport subsidies, theActfunds theUSDairy Export
Incentive Program (DEIP) uptothelimits imposed bytheUSexport subsidy reduction commitments
under theUruguay Round Agreement onAgriculture.
TABLE 27:UNITED STATES -MILK PRODUCTION AND CONSUMPTION
('million metric tons; ()=%change from previous year)
1994 1995 1996 (forecast)
Production ofcow'smilk 69.8 (2%) 70.7 (1½%) 71.9 (1½%)
Fluid milkconsumption 26.7 (0%) 26.6 (-0%) 26.6 (0%)
Source: USDA.
TABLE 28:UNITED STATES -DAIRY PRODUCTION, CONSUMPTION,
TRADE AND STOCKS
('000metric tons; ()=%change from previous year)
SMP Butter Cheese
Production estimate
1995564 (+0%) 572 (-2½%) 3,151 (3%)
Consumption estimate
1995410 (-1%) 523 (-8%) 3,263 (2%)
*Exports
estimate 199559.2 (21%) 37.7 (-52%) 29.5 (31%)
*Imports
estimate 19950.36 (-85%) 0.34 (0%) 152 (0%)
Stocks end-1995 40 (-32%) 10 (-72%) 175 (-12%)
Source: USDA, *FAS.IDA/W/12
Page28
LATIN AMERICA
56. Development prospects fordairy farming, processing andtradeinLatin America aregrowing
steadily asrising standards ofliving inanumber ofcountries continue tostimulate demand formilk
anddairy products. According toFAO estimates, milkproduction intheregion roseby2percent
toreach 48million tonsin1995. Thecommercial presence ofseveral multinationals intheregion
hasbeenakeyfactor ingenerating investment andjointventure opportunities aswellastransferring
know-how andtechnology tothedairy sector. Thecurrent trend towards price liberalization and
reduction ofgovernment control indairy farming alsocharacterizes theLatin American region.
57. Brazil ,adominant milkproducer intheregion, achieved a5percentincrease inmilkproduction
in1995, to17.5million tons. Milk production isforecast toreach 18.2million tonsin1996.
TABLE 29:BRAZIL -PRODUCTION OFMILK AND DAIRY PRODUCTS IN1995
('000metric tons, (%)change from 1994)
Production Milk SMP Butter WMP Cheese
1994 16,700 23.9 41.9 132.3 350.0
1995 17,735 50.0 59.1 150.0 400.0
1995/94 %change 5% 109% 41% 13% 14%
Source: WTO.
58. Rising incomes haveboosted import demand fordairy products. Imports ofskimmed milk
powder more thandoubled during 1995, toreach 85,000 tons. While theEuropean Communities and
Poland havebeenamong Brazil 'straditional suppliers ofdairyproducts, theirsignificance isdecreasing
astheMercosur (Southern Cone FreeTrade Agreement) implementation progresses. Trade flows for
dairy products toandfrom Argentina, Uruguay andParaguay havethuspicked up.
59. Argentina 'smilkoutput increased by10percentin1995to8.5million tons. Expanded exports
inskimmed milkpowder, cheese andbutter inparticular, ledtolower stock levels in1995. Imports
ofallcategories ofdairy products fellduring thesame period asArgentina attained self-sufficiency
andconfirmed itsroleasanetexporter ofdairy products. Thesingle mostimportant destination for
Argentinean totaldairy exports wasBrazil, withParaguay ranking second. However, withregard
tocheese, itisnotable that43percentoftotalcheese exports in1995 weredestined totheEuropean
Communities. Continued growth inthedairy sector isforecast for1996asmilkprocessing industries
haveinvested heavily toupgrade thelogistics andmarketing networks thatarenecessary tomeetthe
rising domestic andexport demand forbutter, cheese andmilkpowders.IDA/W/12
Page29
TABLE 30:ARGENTINA -DAIRY PRODUCTS OUTPUT, CONSUMPTION
AND TRADE IN1995
('000metric tons, (%)change from 1994)
1995 SMP WMP Butter Cheese
Production 40.6 (51%) 138.8 (34%) 47.1 (8%) 380.7 (1%)
Consumption 31.7 (49%) 114.1 (26%) 43.3 (-6%) 395.0 (8%)
Exports 11.6 (27%) 28.7 (17%) 5.2 (330%) 11.6 (-12%)
Imports 0.8 (-83%) 5.4 (-22%) 0.9 (-57%) 3.6 (-41%)
Source: WTO.
60. Stimulated byhigher producer prices, milkproduction inUruguay reached 960,000 tonsin
1995, up10percentfrom 1994. More thanhalfthetotalvolume ofprocessed milkwasexported
intheformofcheese, butter, butter oilorcasein in1995. Onlyanegligible amount ofbutter, totalling
5,944 tons, wasexported withgovernment subsidies during 1995.
61. MilkoutputinMexicoincreasedby4percentin1995to7.6milliontons.Governmentforecasts
suggest acontinued upward trendin1996. Government assistance programmes havebeenimplemented
torenew thedairy herds andovercome certain inefficiencies atthefarmlevel. Attheprocessing level,
rising production costshampered theprofitability ofthedairy sector in1995. USDA reports indicate
that,asofMarch 1996, government-controlled retail prices forfreshmilkwereincreased from2.75to
3.60pesos perlitretostabilize profit margins. Despite asharp currency devaluation, totalMexican
imports ofmilkpowders in1995, asreported byFAO, stillamounted to145,000 tons.IDA/W/12
Page30
ASIA
Japan
62. Milkproduction inJapan in1995totalled about 8.4million tons,almost unchanged from1994.
ThesizeoftheJapanese dairy herd declined bysome 7percentbetween February 1993 and
February 1996 (Japanese Livestock Industry andPromotion Corporation). However, according to
FAO, milkoutput for1996 isexpected toremain atabout lastyear'slevel. Inpartasaresult ofthe
highproportion ofconcentrated feedused, milkyields inJapan areamong theworld 'shighest, averaging
6,200 kgs.percowperyear. Consumption ofdrinking milkin1995 wasdown byanestimated
1½percentto5.1million tonsduemainly toastrong decline indemand during thesummer.
TABLE 31:JAPAN -MILK PRODUCTION, DELIVERIES AND USE
('000metric tons, ()%change from 1994)
Milk
productionMilk
deliveriesConsumption
(fresh product)Industrial
use
1995 8,380 (-0%) 8,252 (+0%) 5,152 (-1½%) 3,100 (3½%)
Source: WTO.
63. During 1995, Japan increased substantially itsimports ofskimmed milkpowder andcheese.
Skimmed milkpowder imports wereat103,000 tons,almost 20percentabove imports in1994. The
hotsummer of1994 cutmilksupplies causing stocks ofskimmed milkpowder tobereduced tolow
levels. Insupport ofgrowing domestic consumption, cheese imports increased by9percentto
153,000 tons. Themain suppliers ofcheese were Australia, theEuropean Communities and
NewZealand.
TABLE 32:JAPAN -DAIRY PRODUCTION, CONSUMPTION, IMPORTS AND STOCKS
('000metric tons, ()%change from previous year)
1995 Estimate SMP Butter Cheese
Production 190 (3½%) 80 (0%) 28 (-9½%)
Consumption 277 (-10½%) 92 (-4%) 181 (6%)
Imports 103 (20%) 2 (-33½%) 153 (9%)
Stocks 42 (61½%) 26 (-28%) n.a.
Source: WTO.IDA/W/12
Page31
India andChina
64. According toFAO, milkproduction inthedeveloping countries ofAsiaincreased by3percent
to117million tonsin1995. InIndia -thelargest producer among developing countries andtheworld 's
thirdlargest producer aftertheEuropean Communities andtheUnited States -cowandbuffalo milk
production isestimated tohaveincreased by3percentin1995to65million tonswithafurther increase
forecast for1996. Chinese milkproduction in1995 wasestimated at6.5million tons, a6percent
increase from 1994. Milk production isforecast tocontinue toriseinChina, where consumption of
milkanddairy products isrelatively low.
AFRICA
65. AccordingtoFAO,weatherconditionsinAfricaduringthefirstquarterof1996wereconsidered
generally favourable forpasture growth, indicating thatmilkproduction fortheregion asawhole may
increase in1996. IDFsources indicate thatAfrica 'sshare ofworld milkproduction for1995 was
approximately3½percent(19milliontons).SeveralcountriesinAfricahaveprogrammestoencourage
domestic milkproduction, frequently aimed atreplacing imported milkandmilkproducts. Within
theAfrican region, there isamovement away from State involvement inthedairy sector. Thishas
ledtoState-run milkplants being transferred totheprivate sector andhasoften beenassociated with
anincrease intheprice paidtothefarmer and,consequently, anadded incentive toproduce.
66. Algeria continues tobeoneoftheworld 'slargest importers ofdairy products -particularly
formilkpowders andbutter -withtwothirds ofdomestic demand being metbyimports. According
toFAO, in1995, Algeria imported 105,000 tonsofskimmed milkpowder, 110,000 tonsofwhole
milkpowder and,20,000 tonsofbutter andghee, despite internal economic difficulties. Forecasts
bytheUSDA for1996 point atimports of120,000 tonsforbothskimmed milkpowder andwhole
milkpowder. In1995, Algeria wasthemost important destination forUSdairy exports under the
DEIP forthefourth consecutive yearanddemand forimported dairy products isexpected tocontinue
toincrease. Among other measures, plans topromote milkproduction through changes inmilkpricing
policy haverecently beenannounced. Onemanifestation ofthesechanges wastheraising ofretailprices
formilkinApril 1996 by25percent.
67. InEgypt ,cowandbuffalo milkproduction hasremained stable at2.5million tonsin1995.
Itisestimated thatEgypt imported 25,000 tonsofskimmed milkpowder, 20,000 tonsofwhole milk
powder, 45,000 tonsofbutter and18,000 tonsofcheese in1995(FAO figures). TheUSDA forecasts
Egypt 'sbutter andcheese imports for1996tobe35,000 tonsand15,000 tons,respectively. Domestic
production ofcheese increased byapproximately 2percentin1995to340,000 tons,compared to1994.
Afurtherincreaseincheeseproductionbyabout½percentisforecastfor1996.Percapitaconsumption
ofcheese iscurrently around 6to7kgs.perhead. Egypt wasthethirdmost important destination
forUSDEIP salesin1995.
68. InSouth Africa ,FAO estimates totalmilkproduction for1995 ataround 2.5million tons,
representinganincreasebyjustunder2percentcomparedto1994productionlevels.TheIDFestimates
that,in1995, production ofbutter decreased byabout 7½percentto11,000 tonswhile thatforcheese
decreased sharply byabout 60percentto42,000 tons. Asforskimmed milkpowder, production in
1995 alsodecreased compared to1994, byabout 7perpercent. Production ofwhole milkpowder
apparently stabilized withonlyaslight increase ofabout ½percentcompared to1994.