Recession and melamine scandal hit US dairy exports

By Caroline Scott-Thomas

- Last updated on GMT

Related tags: Dairy exports, Milk

US dairy exports have been hit by lower global demand on the back of worldwide recession and the Chinese melamine scandal, according to a report from the Babcock Institute.

Following a boom in US dairy exports during 2007 and 2008, export volume this year is forecast to shrink by 25 to 50 per cent from a record $4bn last year, the report said.

The lower estimation is said to be a result of a number of factors on both supply and demand sides. In terms of supply, after unfavourable weather and flat supply over the past two years, New Zealand dairy exports are expected to be up by six to eight per cent in 2009, causing large quantities of dairy products to come on to a contracting world market.

Demand for dairy has dropped following the Chinese melamine scandal – particularly in Asia – while the period of economic growth experienced in the region has also rapidly reduced in line with the global economy.

As incomes had increased in developing countries, demand for protein, including dairy, had increased too.

“Strong economic growth in both developed and developing countries increased appetites and the ability to pay for dairy products,”​ the report said, but added, “The export boom came to a screeching halt at the end of 2008.”

After years of static US exports, sales volume increased from $1bn to $1.8bn between 2003 and 2006, then hit $3bn in 2007, before soaring to $4bn last year.

“In 2008, the US sold more than ten per cent of the milk solids produced overseas as dairy products,”​ the report said.

However, in November, the volume of US non-fat dry milk exports was down 56 per cent on November 2007 levels; whey exports were down 52 per cent and butter exports 45 per cent.

The report concluded that larger cuts will have to be made in the milk supply in order to balance supply and demand to provide farmers with profitable prices.

Related topics: Markets

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