UW-Madison UW-Madison

Staff Paper No. 382 - Abstract

Prospects for U.S. Dairy Exports

William D. Dobson

Staff Paper No. 382, February 1995, 21p.


U.S. dairy companies and cooperatives have long been minor players in international dairy markets, exporting the equivalent of only 2% to 4% of domestic milk production. There are good reasons for this behavior. Sales opportunities in the large domestic market and prices offered by the USDA under the dairy price support program typically make export markets unattractive to U.S. dairy firms.

However, this situation appears to be changing. U.S. dairy firms are showing interest in developing export markets and other new markets, for reasons noted below:

The 25% decline in U.S. dairy support prices (about 50% in real terms) from 1981 to current levels established in 1990 has made the government a less attractive market for dairy products.
The slower increase in per capita consumption of American and other cheeses in the U.S. suggests that the domestic market for these products is maturing.
The surge in U.S. commercial nonfat dry milk (NFDM) exports in 1988-89 when international prices for NFDM rose to U.S. prices for the product identified the U.S. as a potentially important commercial exporter of NFDM.
Successes scored by a few U.S. firms in selling differentiated dairy products in Japan, Mexico, and other foreign markets.
Expanded use of the USDA's Dairy Export Incentive Program (DEIP) in 1992, 1993, and 1994.
Congressional approval of the (a) North American Free Trade Agreement (NAFTA) in 1993 and (b) GATT agreement in 1994.
These developments create incentives and opportunities for expanded exports of U.S. dairy products. The NAFTA and GATT trade agreements, in particular, signal the beginning of a gradual opening of domestic and international markets for dairy products. Thus, U.S. firms that gain exporting experience are likely to find opportunities in the Mexican market as a result of the NAFTA, especially over the longer-run when problems created by the 1994-95 peso devaluation become less severe. They also would discover that exporting experience would be useful for defensive purposes, equipping them to retain U.S. markets in competition with expansion-minded foreign firms.

This leaflet discusses the quantity and nature of recent U.S. exports of bulk and differentiated dairy products, the competitiveness of U.S. exporters, future exporting opportunities, and how dairy exporting might evolve in the future.
Last updated on Thu, Jun 2, 2005 1:20pm