US milk pools distorting global dairy costs - EDA

By Neil Merrett

- Last updated on GMT

Related tags: Milk producers federation, Milk

As debate rages in the US over possible amendments to the funding of milk pools, the developments could have major implications for the price paid by global processors on consumption products compared to goods like powders and butter.

Trade groups such as the National Milk Producers Federation have recently attacked federal marketing schemes like funding pools that they say exempt larger producers that also bottle their products from paying into the system.

Claims that a growing number of farmer/producers in the country are looking to bottle their milk is reducing funds available through the pool to support production of milk powder, leading to concern from international groups.

Doctor Joop Kleibeuker, secretary general of the European Dairy Association (EDA), told DairyReporter.com that although centralised milk pooling schemes in the US were not used in Europe, their affects were increasingly being felt in global marketplace.

Kleibeuker stressed that the EDA had long opposed this milk marketing order scheme that it claims is ‘the most effective form of state trading enterprise’​ in the global market. The association said that it was concerned that such a system could provide a competitive advantage to processors of milk powders over other types of dairy manufacture.

Exemption support

Some cooperative groups such as Aurora Organic Dairy suggested that although it was exempt from paying into the pools, the company’s position as both producer, processor and bottler meant that it was open to additional cost risks from it operations, in claims cited by the Reuters news agency.

Kleibeuker said that the US pool funding system was designed to ensure that the same price is payable to farmers for their milk in the country whether for consumable products or ingredients.

Pooling system

When introduced in the 1930s, the system was used in order to ensure higher prices paid for class one consumption products like liquid milk did not go directly to a single producer, but instead to support manufacturing of various classes of goods.

However, with the ongoing evolution of the US dairy market, witnessed in a growing number of national cooperatives that operate both as farms and bottlers, milk pools may be threatened, potentially encouraging production of lower cost goods like powders.

The EDA said that it supported maintaining the exemptions for processors as it would likely weaken the effectiveness of the scheme.

This article has been amended from its original publication on 8 April 2009.

Related topics: Markets, Fresh Milk

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