RESTRICTED
WORLD TRADE IDA/W/16
29July1997
ORGANIZATION(97-3178)
International Dairy Agreement
INTERNATIONAL DAIRY COUNCIL
Status Report ontheWorld Market forDairy Products
Note bytheSecretariatIDA/W/16
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INTRODUCTION
Background
TheInternational Dairy Agreement entered intoforce on1January 1995. Itreplaces the
International Dairy Arrangement, which hadoperated since1980. AsofJuly1997, thefollowing were
parties totheInternational Dairy Agreement: Argentina, Bulgaria, Chad, 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 on30September 1997.
Focus ofthereport
Thisreport focuses onsignificant changes andnewinformation available subsequent tothe
preparation oftheJanuary 1997 Second Annual Report ontheWorld Market forDairy Products. It
doesnotreproduce information available inthatreport.
Thepresent report isbased oninformation provided byparties aswellasdocumentation provided
bytheFood andAgriculture Organization (FAO), theOrganisation 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/17.
Thedrafting ofthisreport wascompleted on18July1997.IDA/W/16
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TABLE OFCONTENTS
Page
INTRODUCTION . . . . . . . . . 2
OVERVIEW . . . . . . . . . 4
WESTERN EUROPE . . . . . . . . 7
European Communities . . . . . . . . 7
Norway . . . . . . . . . . 11
Switzerland . . . . . . . . . . 12
CENTRAL AND EASTERN EUROPE . . . . . . 12
Poland . . . . . . . . . . 12
Hungary . . . . . . . . . . 13
Romania . . . . . . . . . . 13
Bulgaria . . . . . . . . . . 14
COMMONWEALTH OFINDEPENDENT STATES (CIS) . . . . 15
Russian Federation . . . . . . . . . 15
Ukraine . . . . . . . . . . 17
OCEANIA . . . . . . . . . . 17
Australia . . . . . . . . . . 17
NewZealand . . . . . . . . . . 18
NORTH AMERICA . . . . . . . . . 20
Canada . . . . . . . . . . 20
United States . . . . . . . . . . 20
LATIN AMERICA . . . . . . . . . 23
Brazil . . . . . . . . . . 23
Argentina . . . . . . . . . . 24
Uruguay . . . . . . . . . . 25
Paraguay . . . . . . . . . . 25
Mexico . . . . . . . . . . 25
ASIA . . . . . . . . . . . 26
Japan . . . . . . . . . . . 26
India . . . . . . . . . . . 27
Korea . . . . . . . . . . . 28
Other Asian countries . . . . . . . . . 29
AFRICA . . . . . . . . . . 30
South Africa . . . . . . . . . . 30
Other African countries . . . . . . . . 31IDA/W/16
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OVERVIEW
1. According toFAO estimates, world milkproduction (including sheep, goatandbuffalo milk)
increased from528million tonnes in1995to532million tonnes in1996. While production continued
tocontract inRussia andUkraine, itrecovered slightly inseveral EastEuropean countries andremained
constant intheEuropean Communities. Output declined marginally intheUnited States, intheface
ofhighfeedprices. Above average growth occurred inBrazil, Argentina, Oceania, andseveral Asian
countries.
Table 1-Major Milk Producers, 1995-97
(million tonnes andpercent)
1995 1996 1997 %change
1996/95%change
1997/96
WORLD 528.3 532.0 ... 1 ...
European Communities 121.3 121.6 121.7 - -
United States 70.6 70.1 70.6 -1 1
India* 66.0 69.0 72.0 4½ 4
Russian Federation 39.2 35.7 34.0 -9 -5
Pakistan 18.0 19.0 20.0 5½ 5
Brazil 17.5 19.3 19.8 10 2½
Ukraine 17.3 15.9 15.0 -8 -6
Poland 11.1 11.2 11.5 1 2
New Zealand 9.8 10.4 10.7 6 3
Australia** 8.7 9.1 9.3 4 2½
Argentina 8.5 8.9 9.2 4 3
Japan 8.4 8.7 8.7 3 ½
Canada 7.8 8.1 8.0 2½ -½
*Year April/June.
**Year July/June.
Note: Data for1997 areprovisional.
Source: FAO; Agra Europe; USDA; ZMP; ABARE; WTO.
2. FAOexpects onlyamodest increase inworld milkoutput in1997. Growth inproduction may
becurtailed byquota policies inmajor producing countries. Inaddition, reductions inexport subsidies
andmarket price support maylimittheexpansion ofexportable dairy product surpluses ontheworld
market.
3. While world production ofskimmed milkpowder grew by2percentto3.5million tonnes
in1996, global cheese production wasalmost stagnant. Asworld consumption ofskimmed milkpowder
didnotexpand, world market prices weakened. Inparticular, reduced demand intheEuropean
Communities wasadepressing factor. IntheUnited States, highdomestic prices, caused bytighter
supplies andexpanding consumption, keptstocks ofskimmed milkpowder andbutter atlowlevels.
Production ofbutter andcheese increased slightly in1996 (Table 2).IDA/W/16
Page5
Table 2-World Dairy Production, 1994-96
(thousand tonnes andpercent)
1994 1995 1996 %change
1996/95
Butter andghee 6,663 6,758 6,787 ½
Cheese 14,161 14,538 14,629 ½
SMP 3,419 3,477 3,541 2
WMP 2,409 2,462 2,439 -1
Source: FAO.
4. Thecheese sector continued todominate international dairy trade in1996. Thevolume of
world cheese exports increased faster thanproduction. Incontrast, world tradeinother dairy products
weakened considerably (Table 3).Alltraditional dairy exporters experienced declines, orstagnation,
intrade performance, withthenotable exception ofAustralia andNew Zealand. Global cheese
consumption isexpected toremain strong, especially inAsia.
5. World trade performance in1996 must bebeenseeninlightofthefactthat1995 wasan
exceptional yearinmany respects. Lastyear, European andOceanian currencies weakened against
theUSdollar andtheJapanese yen,affecting therelative competitiveness ofthemajor exporting
countries. Inaddition, andincontrast to1995, demand from themajor importers fluctuated around
adownward trend, withcheese imports intoJapan being themainexception. Among theinternational
buyers whocontributed tothetrade boom in1995, some adopted self-sufficiency objectives toreduce
theirreliance onimports. Finally, several developing countries, suchasBrazil, India, China, Pakistan
andMexico, expanded theirmilkoutput lastyear.
Table 3-World Dairy Trade, 1995-96
(thousand tonnes andpercent)
Exports Imports
1995 1996 %change
1996/951995 1996 %change
1996/95
Butter andghee 704 625 -11 659 580 -12
Cheese 1,047 1,076 3 1,020 1,040 2
SMP 1,201 1,091 -9 1,224 1,120 -8½
WMP 1,222 1,093 -10½ 1,220 1,077 -12
Source: FAO.
6. World market prices formostdairy products remained under pressure inthefirsthalfof1996.
They stabilized during thethirdquarter of1996 andstarted increasing thereafter asexport activities
revived. Driven byanexpected increase indemand forbutter andmilkpowders, inparticular inthe
EC,prices areforecast tofirmin1997. ZMP expects thatinternational dairy prices fortherestof
1997 mayrecover, although theywould remain atabout 1994 and1995 levels. Incontrast, theNew
Zealand Dairy Board (NZDB) predicts intensified export competition between Europe andOceania,
resulting inasubstantial depressing effect onworld market prices. According toNZDB, afullrecovery
ofinternational prices isnottobeexpected before thethirdquarter of1997.IDA/W/16
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IDA/W/16
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WESTERN EUROPE
European Communities
7. IntheEuropean Communities milkproduction grew marginally from 121.3 million tonnes
in1995to121.6 million tonnes in1996. Favourable weather conditions, lowfeedprices andincreasing
milkyields supported thisgrowth. Milk deliveries reached 113.4 million tonnes lastyear. Despite
aslight increase reported byZMP fortheperiod January-May 1997, milkdeliveries andproduction
aregenerally forecast todecline in1997. Milk support prices remained unchanged forthe1997-98
marketing yearatECU 309.8/tonne.
Table 4-TheDairy Situation intheEuropean Communities, 1996
(thousand tonnes andpercentchange from 1995)
SMP WMP Butter Cheese
Production 1,182 -1½% 908 -6% 1,617 ½% 6,131 2½%
Consumption* 899 -2½% 367 -3½% 1,626 3½% 5,685 2½%
Imports 59 40½% 6 -36% 95 32% 95 14½%
Exports 228 -39% 542 -9% 191 -11½% 526 -½%
Ending stocks 125 793% ... ... 155 121% 116 7½%
*Provisional estimates.
...Notavailable.
Source: WTO; EUROSTAT CD-ROM #6-1997 fortrade data.
8. Following theBSEcrisis, theECmarket forskimmed milkpowder continued tosuffer from
sluggish demand from bothconsumer andcalf-fattening sectors. Asexport markets alsoremained
depressed untiltheendof1996, some intervention purchases tookplace tosustain prices. Although
thefeedincorporation ratewasrestored to50percenttostimulate internal demand forskimmed milk
powder, stocks hadclimbed to125,000 tonnes by1January 1997. Overall, ECproduction ofskimmed
milkpowder contracted by1½percentin1996.
9. Thedomestic prices ofskimmed milkpowder dropped untilAugust 1996, justasproduction
hititsseasonal low. Prices started recovering onlytowards theendof1996 andcontinued firming
upuntilFebruary 1997 (Chart 2).Despite asudden dropinmid-March 1997, SMP prices for1997
were generally expected toremain higher thanin1996, asproduction isforecast todecline. ZMP
confirmed thistrend byreporting a2percentdropinproduction ofSMP during theperiod January-
April 1997 compared tothesame period in1996. Incontrast, production ofwhole milkpowder
increased by7percentduring thefirstquarter of1997, compared withthecorresponding period of
theprevious year.IDA/W/16
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13. Since early 1996, theEuropean Communities started fine-tuning itsexport refunds policy.1
Several approaches tobalance thedistribution ofexport refunds among different product categories
were usedinorder toalleviate theconstraints facing, inparticular, thecheese sector. Forinstance,
refunds weretargeted atmore value-added cheeses, ormade subject totheirfatandmoisture contents,
theirdestination, oracombination ofsuchfactors. Export refunds forcertain cheeses, likeEdam and
Gouda, werecutbyonethirdin1996. Inearly1997, refunds forcertain freshmilkproducts (including
condensed/evaporated milk, buttermilk) werereduced by30percent, butinthecaseofcream were
restored inJuly1997 inthefaceoftightdomestic markets. "Low refund" destinations forcheese
exports, likeEastern Europe andtheformer USSR, were identified. Refunds forcheese exports to
theUnited States weretrimmed by30percent. Moreover, Oceania, Canada, Cyprus, Malta, Turkey,
Norway andIceland, among other countries, were identified asdestinations towhich cheese would
beexported atazerorateofrefund. Incontrast, export refunds forbutter andmilkpowders were
increased. Lately, witheffect from July1997, theECCommission decided toremove allexisting
export refunds oncertain skimmed andpartly-skimmed fresh milkandcream products.
Table 5-EC'sDairy Exports, 1995-96
(thousand tonnes andpercent)
Marketing year
1July1995-30 June 1996Annual
commitment
levelsSubsidized
exportsTotal
exportsSubsidized exports
aspercentoftotal
exports
Butter andbutter oil 487.8* 145.4* 125.9 ...
Skimmed milk powder 335.0 241.0 247.7 97%
Cheese 426.5 420.5 508.7 83%
Other milk products 1,185.4 1,133.1 1,290.1 88%
*Inbutter equivalent.
...Notavailable.
Source: WTO, onthebasis ofdocument G/AG/N/EEC/5.
14. TheECCommissionhastabledproposalsinmid-1997onareformpackageforthedairyregime,
takingintoaccountitsWTOcommitmentsonexportsubsidization,eastwardenlargement,andbudgetary
constraints. Accordingly, theCommission proposes tocutthemilkprice by10percentbytheyear
2005. Thiswould becompensated byanewdairy premium ofECU 145perdairy cow. Themilk
quotas aretobemaintained atthecurrent levels untiltheyear2006. These proposals arepartofthe
Agenda 2000 package which, intheagricultural area, alsocontains proposals toreform thecereals
andmeatsectors aswellasECruralpolicies. Discussions between theCommission andthemember
States concerning theAgenda 2000 areongoing.
15. There hasbeensome discussion within theWTO framework regarding regulations EC300/97
of19February 1997, EC417/97 andEC418/97. These regulations address theuseofdairy products
suchasbutter, butter oil,natural cheese andskimmed milkpowder, inorder tomanufacture cheese
1SeeDairy Annual Report, 1996.IDA/W/16
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forexports under aninward processing arrangement (IPA). While export subsidies aredrawn against
thesebasic components usedinthemanufacture process, cheese exports under theIPAarenotcounted
against theEC'sexport subsidy commitments oncheese. TheECmaintains thatthesystem isconsistent
withitsWTO commitments oncheese, aviewwhich isquestioned byother Members.
Norway
16. Milk output inNorway declined slightly in1996. Thisdropwasaccompanied byasimilar
decline ofdomestic consumption offreshmilkproducts andmilkpowders, while consumption ofcream
andcheese increased. Thebasic support price wasreduced to18.8oreperlitreofmilkfortheperiod
1July1996 to30June1997, from 22.2oreperlitreduring theprevious marketing year.
Table 6-Milk Deliveries andConsumption inNorway, 1992-96
Received bydairies Consumption (million kgs.)
(million litres) Whole, low-fat andskimmed
milkCream andsourcream
1992 1,784 722.8 28.5
1993 1,780 703.2 28.8
1994 1,753 694.6 29.0
1995 1,740 681.5 29.2
1996* 1,709 678.2 30.5
*Forecast.
Source: WTO.
17. Until theendof1996, theNorwegian Dairies Association andtheNational Association of
Norwegian MilkProducers hadbeenincharge ofthesupply management ofthedairymarket, including
theequalization system ofmilkproducer prices, storage, salespromotion, exports, andtheallocation
ofquotas toindividual dairies fortheproduction andguaranteed saleofcheese andmilkpowders.
Asof1997, another body, theNorwegian Agricultural Marketing Board, hasbeenmade responsible
fortheadministration ofthedairy market. Thepriceequalization andquota systems weremaintained.
Pricefixingwasmodulatedaccordingtoproductgroupsandmarkets.Thequotasystemwasimplemented
topreserve theproduction capacity ofselected districts. Thebuying andselling ofquotas willbelimited
within eight pre-defined regions. Greater transparency wasalsointroduced intheestablishment of
contracts between farmers anddairies.IDA/W/16
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Switzerland
18. InSwitzerland, milkproduction increased slightly to3.9million tonnes in1996, while milk
deliveries dropped by1½percent,limiting thefurther expansion ofdairy products output. Tomeet
expanding domestic demand forcheese, imports surged while exports declined by10½percent. Last
year, thedomestic butter market wastightasthesector suffered a7percentdecline inoutput. On
1January 1997, cheese andbutter stocks stood atlower levels thanoneyearearlier.
Table 7-Switzerland: Butter andCheese Production, Consumption, Trade andStocks in1996
(thousand tonnes andpercentchange from 1995)
Butter Cheese
Production 38.3 -7% 130.3 1%
Consumption 43.2 -1% 104.6 5%
Exports - - 57.0 -10½%
Imports 3.5 26% 31.1 6%
Stocks atendofperiod 2.4 -38½% 25.5 -11½%
Source: WTO.
CENTRAL AND EASTERN EUROPE
19. Following theintroduction ofmoremarket-oriented macroeconomic policies andthedeepening
ofprivatization andrestructuring programmes inagriculture, theyear1996wasaperiod ofsustained
economic growth formost countries inCentral andEastern Europe. In1997, growth wasforecast
bytheEuropean Bank forReconstruction andDevelopment (EBRD) torange between 2and9per
centforCentral andEastern Europe asawhole. Overall, agricultural production recovered, favourably
influencing milkproduction inPoland, theCzech Republic andHungary. However, therestructuring
ofthefarmsector willremain achallenge forthose countries which currently experience highrates
ofinflation. Soaring retailprices andrising energy costsdampened domestic consumption andcurtailed
dairy processing lastyearinBulgaria, Romania, and,toalesser extent, Hungary. Inmid-1997,
Romania'saccessiontotheCentralEuropeanFreeTradeArea(CEFTA)openednewtradeopportunities.
Poland
20. Total livestock output inPoland increased by10percentin1996. Milkproduction andaverage
milkyields recovered forthefirsttimesince 1989. ZMP forecasts another 3percentexpansion of
milkproduction in1997. Cattle numbers continued todecline andthetrend wasforaconcentration
ofdairy herds. Theprocessing sector benefited fromincreased milksupplies andresponded tohigher
domestic demand forbutter andcheese byexpanding output. Butter retail prices increased by23per
centlastyear. Given thedepressed world market prices during 1996andreduced import demand from
Russia, Poland 'stotaldairy exports dropped by14percent.IDA/W/16
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Table 8-TheDairy Situation inPoland, 1995-96
(thousand tonnes andpercent)
1995 1996 %change
1996/95
Milk deliveries 6,240.4 6,504.4 4
Production
Butter 122.8 129.7 5½
Cheese 294.7 337.8 14½
Liquid milk 1,250.6 1,295.6 3½
Source: ZMP.
Hungary
21. Unfavourable weather conditions affected Hungarian milkproduction in1996. Milkdeliveries
totalled 1.5billion litres, below thequota established at1.8billion litres. Thisquota wasintroduced
in1996 tocontrol recurrent oversupply situations given continuously shrinking domestic demand.
Percapita consumption ofmilkfellfrom 170litres in1990 to135litres in1995, andwasestimated
tobeonly130litres in1996, according toHungarian sources. Retail prices ofmilkwere forecast
toriseby30percentin1997 duetohigher input prices (mainly feedcosts andenergy prices).
Guaranteed milkprices for1997 weresetatFt43perlitreforextra quality milkandFt40perlitre
forfirstclassmilk, theeligibility toexport subsidies being conditional oncompliance withthose prices.
22. Faced withatightbudget for1997 andWTO constraints onexport subsidization, Hungary
loweredrefundratesonseveralagriculturalproducts(AgraEurope).Refundsforcheesewereeliminated.
Romania
23. TheRomanian livestock sector continued torecover during 1996. Cattle numbers grew by
5percent. Close to95percentoftotalmilkproduction came from private farmers. Inlinewith
growing domestic consumption, milk production isforecast toexpand in1997. Efficient dairy
processing, transport anddistribution, however, were hampered bya30percentrateofinflation,
including soaring energy costs, which effectively limited theoutput ofdairy products lastyear.
Reflecting thisshortage, Romania didnotopenanytariffquota forpowder milkin1996inimplementing
itsWTO market access commitments, butapplied, instead, forunlimited import quantities lower than
thein-quota tariff ratesonatemporary basis.2
2Document G/AG/N/ROM/4.IDA/W/16
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Table 9-Dairy Production inRomania, 1995-96
(thousand tonnes andpercent)
1995 1996 %change
1996/95
Milk powder 14.9 12.2 -18½
Butter 16.1 13.2 -17½
Cheese 44.6 42.6 -4½
Source: WTO; Agra Europe.
24. Minimum producer prices were introduced inMay1996 foralllivestock output, including
milk. Fixed atLei650perlitreofmilkduring aninitial period lasting untiltheendof1996, guaranteed
prices increased toLei750perlitrethereafter andremained effective until30April 1997.
Bulgaria
25. Persisting inflation, currency depreciation andadverse weather conditions contributed to
Bulgaria 'seconomic andagricultural crisis in1996. Grain supplies remained scarce andprices of
foodstuffs, fuelandelectricity increased byover 310percent, adversely affecting production,
consumption andtrade ofdairy products. Stocks ofcheese stood at2,200 tonnes atthebeginning of
1996. They declined to800tonnes attheendof1996 andwere reported tobecompletely depleted
inthecapital. Policy measures designed tostopthecontinuous decline ofcattle numbers andencourage
thedevelopmentofthedairysectorachievednosignificantresults.TheBulgariangovernmentannounced
newpolicy measures inMarch 1997. Price controls wereremoved, except formilkandcow'scheese
where prices were allowed tofluctuate within acertain range.
Table 10-Dairy Production, Consumption andTrade inBulgaria, 1996
(thousand tonnes andpercentchange from 1995)
Production Exports Imports Consumption
Milk powder ... ... 0.4 -33% 2.3 -50% ... ...
Butter 2.1 -5% - -100% 0.4 -50% 2.5 -7%
Cheese 32.6 -22% 4.0 -41% 0.4 -90% 30.4 -23%
...Notavailable.
Source: WTO.IDA/W/16
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COMMONWEALTH OFINDEPENDENT STATES (CIS)
26. Dairy farming intheCommonwealth ofIndependent States (CIS) continued toadjust tonew
market conditions asevident fromtheon-going downsizing ofthelivestock sectors inRussia, Kazakstan,
Ukraine andBelarus. Official statistical reports indicate that50percentofallCISmilkoutput was
produced inprivate farms andsmallholdings. USDA forecasts thataggregate livestock output inthe
region could wellstabilize in1997/98. Slight improvements werealready noticed inbothanimal and
feedproductivity inRussia towards theendof1996. Milkoutput inArmenia, Azerbaijan, Georgia,
Kyrgyzstan andTurkmenistan hadalsostarted tostabilize (Table 11).
Table 11-Milk Production intheCIS, 1995-97
(million tonnes andpercent)
1995 1996 %change
1996/951997 %change
1997/96
CIS 74.5 68.0 -8½ 64.6 -5
Russian Federation 39.2 35.7 -9 34.0 -5
Ukraine 17.3 15.9 -7½ 15.0 -6
Belarus 5.1 4.9 -3½ 4.9 ½
Kazakstan 4.6 3.8 -17½ 3.4 -10½
Uzbekistan 3.7 3.2 -13 2.8 -12
Kyrgyzstan 0.9 0.9 2 0.9 2
Azerbaijan 0.8 0.8 1½ 0.9 1
Turkmenistan 0.7 0.7 1 0.8 2
Moldova 0.8 0.7 -11 0.7 -6
Georgia 0.5 0.5 10½ 0.6 4½
Armenia 0.4 0.4 3 0.5 4½
Tadjikistan 0.4 0.4 -20 0.3 -16½
Source: CISStatistics Committee.
Russian Federation
27. Highcostsofanimal feedandotherinputs contributed toafurther contraction ofcattle numbers,
especially instateandcollective farms where cownumbers declined by11percentin1996compared
to1995. Private farms andsmallholders registered thelowest declines (1to2percent). Milkyields
percowworsened. Bytheendof1996, totalmilkproduction haddropped by9percentto35.7million
tonnes fromtheiryearearlier level. Milkproduction dropped byanother 6percentduring theperiod
January-April 1997, compared tothesame period in1996. Thiswasreflected inlower production
ofdairyproducts, particularly butter. According toAgraEurope, alldairyproduct categories continued
todropatratesbetween 11and25percentinthefirstquarter of1997 compared tothefirstquarter
of1996.IDA/W/16
Page16
28. Consumers 'purchasing power continued todeteriorate, adversely affecting theoverall level
ofdomestic consumption ofmilkanddairy products. Imports ofprice-competitive dairy products,
suchasbutter andcheese, slowed down lastyear. After having beenamajor market forbutter in
1995, Russia imported in1996onlyhalfoftheprevious year'svolume, aspreferences shifted tolower-
pricedandbetterpackagedmargarineproductsasattractivesubstitutes.Importsofmilkpowdersdeclined
aswellby25percent.
Table 12-Russian Imports ofDairy Products in1995-97
(thousand tonnes andpercent)
1995 1996January-March
1997%change
1996/95
Butter 256.7 125.5 69.3 -51
Cheese 78.7 ... ... ...
Milk powder 86.0 64.5 21.4 -25
...Notavailable.
Source: Agra Europe, onthebasis ofinformation provided bytheRussian State Statistics Committee.IDA/W/16
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Ukraine
29. Asevere drought in1996depressed totallivestock output by8percent. At16million tonnes,
Ukrainian milkproduction wasestimated tobe7½percentbelow theprevious year'slevel. Preliminary
forecasts byAgra Europe point toanother 6percentdropin1997. Milk output forthefirstquarter
of1997 fellby20percentcompared withthesame period in1996. AswasthecaseinRussia, the
sharpest fallsincownumbers andmilkoutput lastyearwererecorded forstateandcollective farms.
Incontrast, milkoutput oftheprivate sector increased by4percent, andcontributed 51percentto
totalmilkoutput, upfrom 46percentin1995. Theprojected landreform intheautumn of1997 is
expected toenhance theparticipation ofsmallholders andprivate farmers indairy farming andrelieve
foodshortages. Lastyear, private landownership barely accounted for3percentoftotalland.
30. Theprivate sector 'sperformance didnotalleviate theshortages ofmilkanddairy products
in1996. Stocks ofskimmed milkpowder andfeedstuffs hadbeenlowsince early 1996. Inflationary
pressures further dampened thedomestic consumption ofmilkanddairy products during thefirsthalf
of1997.
OCEANIA
31. In1996, export-led demand continued tostimulate milkoutput inOceania. Australia and
NewZealand confirmed theirroleasmajor players intheinternational dairy scene astheircombined
share ofworld dairy exports maywellhaveapproached 40percentin1996. Ontheinternational
markets, theirposition islikely tocontinue tostrengthen. Inaddition tobeing alow-cost milkproducing
region, Oceania benefits fromtheWTO disciplines onexport subsidization. However, Oceania remains
vulnerable todroughts, andmilkproduction willconsequently continue todepend onprevailing grazing
conditions.
Australia
32. Following a6percentincrease in1995/96 (July-June), milkproduction inAustralia expanded
by3½percentto9billion litres in1996/97, largely duetogood weather conditions andhigher milk
yields percow. InFebruary 1997, hotweather conditions affected themain dairying states. The
Australian Bureau ofAgricultural andResource Economics (ABARE) forecasts a4percentrateof
growth forthe1997/98 marketing year. Most oftheadditional milksupplies areexpected tobe
channelled totheprocessing sector forexports.
Table 13-Milk Production inAustralia, 1995/96-1997/98
(million litres andpercentchange from previous year)
Year (July-June) Milk production Deliveries toprocessors
1995/96 8,716 6% 6,880 8%
1996/97 9,000 3½% 7,155 4%
1997/98 Forecast 9,342 4% 7,487 4½%
Source: ABARE.IDA/W/16
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Table 14-TheDairy Situation inAustralia, 1996/97
(thousand tonnes andpercentchange from 1995/96)
Estimates SMP WMP Butter andButter
oilCheese
Production 270 2½% 125 10½% 155 7% 270 2½%
Exports 210 25% 100 23½% 95 58% 118 -1%
Export/production
ratio92½% 80% 61% 44%
Source: ABARE.
33. Australianmanufacturingoutputprogressedinalldairyproductcategoriesin1996/97.Although
atthetimeofwriting adetailed breakdown ofAustralian exports bydestination in1996/97 wasnot
yetavailable, theprimary destinations ofcheese exports inthepreceding marketing yearwereJapan
andSaudi Arabia. Moreover, theAsian region absorbed 90percentoftotalAustralian milkpowders
exports in1995/96, andthese exports continued expanding substantially in1996/97. Export returns
areforecast toimprove in1997/98. ABARE predicts a3percentincrease inthedomestic manufacturing
milkprice forthesame period.
NewZealand
34. Thenumber ofdairy cows andheifers (2years oldandover) inNewZealand grew by2per
centlastyearandisforecast tofurther expand by4percentin1997. According totheNewZealand
Dairy Board (NZDB), excellent weather conditions resulted inan8percentriseofmilkproduction
in1995/96 (1June-31 May), from9.0to9.8million litres. TheNZDB estimates thatmilkproduction
during the1996/97 season increased by10percent. Preliminary forecasts point toa5percentgrowth
forthedairyseason 1997/98. TheNZDB reduced producer prices forthe1996/97 season from$NZ3.60
tobetween $NZ3.15 to3.20perkg.ofmilksolids. Afurther cutisplanned for1997/98.
Table 15-New Zealand -Dairy Production andExports inCalendar Year 1996
(thousand tonnes andpercentchange from 1995)
SMP WMP Butter AMF Cheese
Production 193 53% 331 3½% 242 26½% 63 19% 263 23%
Exports 167 50% 319 15½% 222 20½% 48 9½% 205 21%
Export/production
ratio86% 96½% 92% 76% 78%
Source: WTO.
35. Aperformant export-oriented industry, thecountry 'sdairy sector supplied about onequarter
ofworld dairy exports in1996, ashare likely toreach 30percentin1997 according totheNZDB.
Three quarters ormore ofdairy output wasexported in1996(Table 15).Partly duetothestrengtheningIDA/W/16
Page19
oftheUSdollar against thenational currency in1996, cheese, butter andskimmed milkpowder gained
export competitiveness. NewZealand exports alsocapitalized onimproved access totheEuropean
Communities andtheUnited States, aswellassustained import demand from Russia andfrom the
promising markets inAsiaandLatin America. Preliminary estimates covering theperiod 1996/1997
(July-June) indicate thatRussian imports ofbutter werecloseto90,000 tonnes. NewZealand 'sexports
ofcheese, butter andwhole milkpowder aresettotakeadvantage ofreduced subsidies ontheglobal
market-place andfurther increase by13,10,and8percent, respectively, in1997.
36. InMarch 1997, NewZealand lodged aformal request forconsultations intheWTO withthe
European Communities inrespect ofthedecisions bytheECandtheUnited Kingdom 'sCustoms and
ExciseDepartmentconcerningNewZealandbuttermanufacturedbytheANMIXbutter-makingprocess.
TheECclassification oftheproduct excludes suchbutter fromeligibility forNewZealand 'scountry-
specific ECtariff quota.
IDA/W/16
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NORTH AMERICA
Canada
37. Canadian milkproduction isforecast todropslightly in1997to7,780 million litres. According
toZMP, milkdeliveries dropped slightly in1996, inlinewithmilkconsumption. Except forbutter,
production inallother dairy categories felllastyear. Canadian official forecasts indicate thatbutter
output maydrop by10percentin1997. Total exports for1995/96 (August-July) amounted to
14,845 tonnes forbutter, 38,444 tonnes forskimmed milkpowder, 13,738 tonnes forcheese and
36,989 tonnes forother milkproducts.
Table 16-TheDairy Situation inCanada, 1995-96
(thousand tonnes andpercent)
Milk
deliveriesMilk
consumptionProduction
SMP Butter Cheese
1995 7,198.7 2,656.4 71.1 92.5 276.7
1996 7,176.5 2,647.5 64.3 93.2 273.5
%change -½ -½ -9½ 1 -1
Source: ZMP.
38. TheCanadian Dairy Commission (CDC) maintained thetarget support priceforindustrial milk
atitscurrent levelduring theperiod February-July 1997 soastosustain market growth. Inorder to
guard against large fluctuations inmilkoutput, Canada revised itsmilkquota regime attheendof
1996. Among other changes, theProvincial governments were made directly responsible forthe
monitoring ofmilksupplies onamonthly, rather thanonayearly, basis.
39. TheSpecial MilkClass System (SMCS), introduced on1August 1995, involves thepricing
ofmilkaccording toend-use. Thisscheme hasbeenamatter ofdebate between Canada andanumber
ofitstrading partners. Theexclusive allocation ofCanada 'stariff-rate quota forbutter totheCDC
hasalsobeenamatter ofdiscussion attheWTO.
United States
40. Theaverage number ofmilkcowsdropped from9,458 thousand headin1995to9,351 thousand
headin1996, andcontinued tofall,during thefirstquarter of1997, to9,265 thousand head. Milk
production dropped by1percentto70.1million tonnes lastyeartriggering acorresponding fallin
milkdeliveries todairy processors. There werenopricesupport purchases ofmilkin1996. Effective
1January 1997, thesupport priceformilkwasreduced by15percent,asstipulated under theFederal
Agricultural Improvement andReform (FAIR) Actof1996.
41. Asofmid-1996, severe weather conditions affected themajor producing regions, disrupting
forage harvests andgeneral feedconditions. Shortages ofmilksupplies ensued. Only bytheendofIDA/W/16
Page21
1996 didmilkoutput resume growth. Theaverage price ofdairy feedconcentrates rosefaster than
theaverage priceofmilk, leading toareduction inthemilk/feed priceratioandhampering thefarmers '
ability tosustain profitable milkyields percow. Farmgate prices started recovering inFebruary 1997
incertain keyproducing regions, buttheoverall situation didnotimprove untilmid-1997. USDA 's
estimates forarecovery ofmilkoutput to70.6million tonnes in1997and71.5million tonnes in1998
willremain conditional ontheavailability ofadequate supplies ofquality forage andconcentrate feed.
42. According toUSDA statistics, approximately 13percentofUSdairy cows weretreated with
bovine somatotropin (BST), amilkyield enhancing hormone, during thefirstquarter of1997. The
adoption ofamaximum residue limit forthisveterinary drug wasdeferred fortwoyears bythe
FAO/WHO Codex Alimentarius Commission atits22nd Session inJune1997.
43. Asscarce milksupplies were primarily channelled tocheese production, USproduction of
allother dairy products contracted lastyear. Intheabsence ofsignificant export markets, mostdairy
product prices alsobecame highly sensitive totheevolution ofmilkproduction andclosely followed
domestic milkprices, which increased untiltheendof1996. Despite thehighprices prevailing
domestically, consumption ofliquid milkandcheese remained briskthroughout 1996. Asmall decline
indomestic salesofcheese andskimmed milkpowder wasregistered inApril 1997, causing thebuild
upofmanufacturers 'stocks anddepressing prices. Prices stabilized inmid-1997 slightly above support
levels. USDA projections for1997indicate aslight decline ofproduction ofalldairyproducts categories
except cheese.
Table 17-TheDairy Situation intheUnited States, 1996
(thousand tonnes andpercentchange from 1995 )
SMP Butter Cheese
Production 482.0 -14 533.2 -7 3,276.8 4
Consumption 455.4 9 531.8 -1 3,371.7 3
Exports 18.4 -69 20.8 -45 32.4 10
Imports 2.5 296 4.8 586 152.4 -3
Stocks end-1996 32.3 -38 6.1 -47 221.1 8
Source: USDA.
44. Thereduction oftheexportable surplus coupled withtheappreciation oftheUSdollar had
anegative impact onexport performance ofmilkpowders andbutter lastyear. Between 1995 and
1996, Algeria andMexico, byfarthemain markets forUSpowders, reduced theirpurchases from
43,040 tonnes and24,340 tonnes, to2,191 tonnes and8,583 tonnes, respectively. Other potential
buyers, suchasEgypt, Saudi Arabia, theRussian Federation and,toalesser extent, Japan, followed
suit. Butter exports suffered fromreduced demand fromtheRussian Federation, Egypt andAlgeria.
These countries reduced theirpurchases by9,354 tonnes, 5,091 tonnes and1,717 tonnes, respectively.
Cheese exports grewby10percentin1996. Thiswasmainly duetoincreased salestoJapan, Canada,
Brazil, Mexico andKorea.IDA/W/16
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Table 18-Dairy Export Incentive Program (DEIP): Actual Sales asof30May 1997,
FY(July 1996-June 1997)
(Inbrackets: Sales inFY(1995/96)
Product Destination Tonnes
Nonfatdrymilk 112countries 55,689
(63,700)
Whole milk powder 97countries 1,789
(4,501)
Butterfat 111countries 4,577
(0)
Cheese 109countries 2,781
(3,275)
Source: Economic Research Service, USDA.
45. Asaconsequence ofthewider gapbetween domestic andinternational prices in1996, imports
ofalldairy products rosesignificantly. Thisincrease alsoreflected newmarket access opportunities
resulting from thephasing-in oftheWTO commitments. Imports ofdairy products during thefirst
quarter of1997 were reported tobehigher thanduring thefirstquarter of1996.
IDA/W/16
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LATIN AMERICA
46. Rising standards ofliving inLatin America stimulated demand formilkanddairy products
in1996. Thissustained theoverall expansion ofmilkproduction andthegrowth ofindustrial milk
processing capacity. Thedairy sector inLatin America generally underwent aconcentration process
andbenefited from national policy reforms andefficiency gains derived from economies ofscale.
InBrazil, tendairies processed halfofthetotalmilksupplies in1996; thenumber ofmedium-sized
milkprocessing unitswasalsoreported tobeontherise. TheInternational Dairy Federation (IDF)
found that80percentoftotalArgentinean milkdeliveries were processed by6plants, thebiggest
twoaccounting forhalfofthetotalmilkdelivered in1996. InUruguay, theNational Cooperative
ofMilk Producers (CONAPROLE) processed 85percentoftotalmilksupplies lastyear.
47. Trade liberalization between MERCOSUR countries, andChile'sandBolivia 'sassociation
agreements withMERCOSUR, arespurring dairy tradeintheregion. Onthesupply side,Argentina,
Uruguay andChile arelowcostmilkproducing countries withamajor export potential, although they
remainvulnerabletoclimaticconditions.Onthedemandside,Mexico,VenezuelaandPeruwillcontinue
tobetheleading importers intheregion. Mexico 'snewtargets tosubstitute 70percentofitsdairy
imports bydomestic production andtoexpand production capacity overthenextfiveyears may,
however, reduce itsdependence onimports inthelonger term. Similarly, Brazil 'sdairyfarming recently
showed some gains inproductivity andthecountry, onceamong theleading importers, cutimports
ofalldairy product categories in1996, despite amarked growth ofdomestic consumption. Thismay
indicate thebeginning ofanewtrend.
Brazil
48. Milkproduction inBrazil expanded by10percentin1996inresponse toincreasing domestic
demand formilkanddairy products. OECD studies show thatextensive farming methods werestill
favoured inBrazilian dairy farming. Halfofthemilkcows aredualpurpose (i.e.meat anddairy)
cattle, butproduce onaverage only35percentoftotalmilkoutput. Thepotential forexpansion of
milkoutput inBrazil willdepend onthefurther specialization ofdairycattle, improvement ofthegenetic
potential ofherds, andtheincreased useofmodern dairyfarming techniques. Incontrast toanextensive
dairyfarming sector, dairyprocessing inBrazil usescapital intensive technology andhasbecome highly
concentrated overthepastfewyears.
Table 19-Production andImports ofMilk andDairy Products inBrazil, 1996
(thousand tonnes andpercentchange from 1995)
Milk Milk powder Butter Cheese
Production 19,288 10% 280 28½% 70 18½% 390 8%
Imports 2,600* -19%* 133 -51% 10 -38½% 34 -64%
*million litres.
Source: WTO; USDA; Agra Europe, based oninformation supplied bytheBrazilian Ministry ofAgriculture.IDA/W/16
Page24
49. Brazil 'simports ofliquid milkslowed down considerably in1996, despite ahigher levelof
percapita consumption ofmilk(Chart 7).Equally, milkpowder imports werehalved, while cheese
imports were reduced bytwothirds. Thismayhaveresulted from increases inimport duties for
non-MERCOSUR countries from 2to6percentto16to30percentfordairy products aswellas
from Brazil 'sincreased levelofself-sufficiency.3
Argentina
50. InArgentina, thefullexploitation ofthegrowth potential ofmilkproduction in1996and1997
wasseverely hampered bytwoconsecutive droughts. Nevertheless, milkproduction increased to8.9
million tonnes lastyear. Thepreviously announced 7percentgrowth estimate for1997 islikely to
berevised downwards. Brazil 'sandRussia 'sreduced demand formilkpowders affected Argentina 's
1996exports tosome extent. Thiswaspartly compensated bylively domestic demand which generated
awave ofinvestment inprocessing equipment andfacilities, mainly fortheproduction ofcheese and
milkpowders.
3Brazil 'sbound rates ofdutyin2004 varybetween 31½and55percentadvalorem .Foradetails, seeTheSummary
oftheResults oftheUruguay Round intheDairy Sector ,1994.IDA/W/16
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Uruguay
51. Milk production inUruguay reached 1million tonnes in1996, and1.07million tonnes are
expected in1997. Asteady annual growth rateof5percenthasbeenprojected bytheMinistry of
Agriculture fortheyears tocome. Atotalamount of9,200 tonnes ofbutter wasexported without
export subsidies lastyear, 55percentupfrom theprevious year.4
Table 20-TheDairy Situation inUruguay, 1996
(thousand tonnes)
Production Consumption Exports Ending stocks
SMP 10.9 3.3 10.8 5.9
WMP 12.7 2.4 9.3 1.2
Butter 12.3 4.3 9.2 6.8
Cheese 1.4 0.1 1.1 0.3
Source: WTO.
Paraguay
52. According toa1995agriculture andforestry survey undertaken bytheParaguayan government,
only7percentofthecountry 'scattle wasreared formilkproduction. Milk yields andproductivity
improved significantly in1995. Thedomestic milkcollection system, however, wasstillconsidered
tobeinneedofreorganization, asonlyanaverage 60percentofmilksupplies were channelled to
milkanddairy processors, theshortfall being usually compensated byimports from MERCOSUR
partners.
Mexico
53. According toZMP, Mexican milk deliveries increased by2½percentlastyear to
7.8million tonnes, halfofwhich wasconsumed inliquid milkform. Inlinewithasimilar move in
March 1996, theretail price ceilings forfresh milkwereincreased by11percentfrom 3.6pesos to
4pesos perlitreinJanuary 1997. TheMinistry ofTrade announced, however, thatthesepricecontrols
would beabolished in1998, inorder tostrengthen theproduction capacity ofthedairy sector.
Meanwhile, according toOECD, livestock support schemes wereimplemented in1996. Theaimof
suchprogrammes hasbeentoprovide production incentives tofarmers, thelong-term government
objective being toreduce Mexico 'sreliance onimports. In1996, imports ofskimmed milkpowder
alone grew by20percent. Total milkpowder imports amounted to160,000 tonnes.
4Seedocument G/AG/N/URY/10.IDA/W/16
Page26
ASIA
54. Whiletherewereregionaldisparities,theAsianDevelopmentBank(ADB)foundthattheaverage
realgrowth ofgross domestic product inAsian developing countries asawhole persisted in1996 at
therateof7½percent. Inflation slowed to6percentfrom 9percentin1995. In1997, afurther
riseinliving standards, purchasing power andfoodconsumption isexpected intheAsian region. ADB's
finding aresupported byarecent study pointing toafoodconsumption increase ofbetween 30and
45percentinEastAsiabytheyear2000, depending onthecountry surveyed.5Strong domestic
demand formilkanddairy products induced theexpansion ofmilkproduction capacities, especially
inIndia, Pakistan, China, Japan andThailand.
Japan
55. Good weather conditions favoured theexpansion ofmilkproduction inJapan. Total milkoutput
reached 8.7million tonnes in1996, a3½percentincrease fromtheyearearlier level. Alarge part
oftheincreased milksupplies wentforindustrial uses(Table 21).Consumption offreshmilkrecovered
slightly, offsetting the1percentdropregistered in1995.
Table 21-Japan: Milk Production, Deliveries andIndustrial Use, 1995-96
(thousand tonnes andpercent)
Milk production Milk deliveries Consumption
(fresh product)Industrial use
1995 8,382 8,249 5,143 3,106
1996 8,656 8,539 5,187 3,352
%change 1996/95 3½ 3½ 1 8
Source: WTO.
56. Declining domestic consumption andrising production contributed tothereversal ofJapan's
import trend forskimmed milkpowder in1996. From 103,000 tonnes in1995, imports decreased
to75,000 tonnes in1996. Ending stocks ofskimmed milkpowder in1996were, however, 7percent
higher compared tothose in1995. Asimilar situation prevailed inthebutter market, albeit withstagnant
consumption, resulting inafallinimports of70percentfrom its1995 level.
57. Japan initiated various volume-based special safeguard actions under Article 5oftheWTO
Agreement onAgriculture inorder tocurbimports inselected dairy products categories: milkand
cream (HS0401.20 and0401.30, from 1October 1996 to31March 1997); buttermilk (from
1November 1996 to31March 1997); andevaporated milk(from 1to31March 1997).6Cheese
imports continued toincrease atthesame paceasconsumption. In1996, Japan became theworld 's
5A.Rae, AStudy ofFood Consumption Patterns inSouth EastAsia,Massey University, New Zealand.
6Forasummary oftheSpecial Safeguard Actions taken byJapan during fiscal year1996under Article 5oftheAgriculture
Agreement see:G/AG/N/JPN/19.IDA/W/16
Page27
number oneimporter ofcheese. Forthefirsttimesince 1993, cheese production alsostepped up.
During thefirstquarter of1997, cheese imports grew by10percentoverthefirstquarter of1996.
Around 70percentofallcheese imports during thatperiod weresourced inAustralia andNewZealand.
Table 22-TheDairy Situation inJapan, 1996
(thousand tonnes andpercentchange from 1995)
SMP Butter Cheese
Production 200 5½% 86 7½% 32 6½%
Consumption 272 -2% 90 - 192 5%
Imports 75 -27% 0.6 -71½% 164 4%
Ending stocks 45 7% 22 -15½% ... ...
Source: WTO.
India
58. Milk production increased by4½percentin1996/97 (April/March), withbuffalo milk
accounting for52percentofthetotalvolume. USDA forecasts thatmilkoutput willreach another
record levelin1997/98. Over 42percentoftotalmilkproduction isnormally consumed inliquid
form, while 35percentisprocessed intobutter andghee. Rising demand forliquid milkinduced
a10percentincrease indomestic milkprices lastyear. Consumption ofliquid milkin1997/98 was
forecast togrow to32million tonnes from 30.5million tonnes in1996/97.
Table 23-Production ofMilk andMilk Powder inIndia, 1994/95-1997/98
Year (April/March) Milk (cow andbuffalo)
(million tonnes)Milk powders
(thousand tonnes)
Total Ofwhich infant formula
1994/95 63.5 185 83.3
1995/96 66.0 195 78.7
1996/97 69.0 210 ...
1997/98* 72.0 ... ...
*Forecast.
...Notavailable.
Source: Government ofIndia; USDA .IDA/W/16
Page28
59. TheIndian dairy sector hasexpanded consistently during thepastfewyears.7Thisexpansion
isattributed tothepattern ofcooperative development andto"Operation Flood", awide-ranging
programme launched in1970bytheNational Dairy Development Board (NDDB) designed toupgrade
milkproduction efficiency andpromote theuseofmodern processing technology.
60. Inattempting tomeetthebasic domestic consumption needs inmilkdeficit areas, NDDB has
encouraged thevertical integration ofthedairy sector. Toachieve thisobjective, NDDB requires that
manufacturers givepriority totraditionally consumed dairy products (i.e.liquid milk, skimmed milk
powder andbutter) overhigher value-added dairy products. Concurrently, theMilkandMilkProducts
Order (MMPO) continues torequire thatprivate processing units withaturnover ofmore than
70,000 litres ofmilkperdayberegistered. Collection ofmilkisrestricted tospecific geographical
zones and"milksheds". Given thewidely scattered pattern ofIndian milkproduction facilities, the
aimofthesystem istosafeguard thesupply potential ofcertain regions. However, according tothe
World Bank, theMMPO inhibits thedevelopment ofefficient private dairy operators. Asoftheend
ofSeptember 1996, outof734applications received, only319were registered.8
61. Except forpackaged dairy foods below 5kgs., allbulkexports ofdairy products areregulated
byacentral government agency, theAgricultural andProcessed Food Export Development Authority
(APEDA). Inviewofgrowing export opportunities inSouth EastAsiaandtheMiddle East, theexport
quota forskimmed milkpowder andinfant formula wassetat22,000 tonnes fortheperiod 1996/97,
while thatforbutter andgheewassetat2,000 tonnes (Indian Dairyman ).
62. Itisdifficult toappreciate India'sexport potential atthisearlystage, inviewofthedevaluation
oftherupee inthemid-1990s andofhighworld dairy prices in1995. However, thegovernment
continues toconsider dairying asanimportant sector from thepoint ofview ofwelfare andsocial
objectives. Government funds were allocated todevelop specific infrastructures, principally witha
viewtostimulate milkyields andincrease thenumber ofartificial insemination centres. Thegenetic
stockofindigenous breeds needs upgrading together withhygiene standards andquality control schemes.
AlthoughIndiastilllacksanefficientglobalmarketingnetworkanddistributionsystem,strategicalliances
andframeworks fortechnical collaboration withleading dairy companies, notably inNewZealand,
arebeing developed.
Korea
63. TheRepublic ofKorea imported 14,000 tonnes ofcheese lastyear, anincrease of27percent
over1995. Domestic cheese processing continued torelyonimported milkpowders. Following a
petition submitted bytheNational Livestock Cooperatives Federation andaninvestigation carried out
byKorea 'sTrade Commission, thegovernment invoked theWTO Agreement onSafeguards claiming
thattherawmilkandmilkpowder industry suffered serious injury asaresult ofincreased imports.
Asof7March 1997, quantitative restrictions wereimposed foraperiod offouryears onselected items
falling within twoHSchapters. Tariff rates willvarybetween 40to39.4percent andbetween
38.8to37.2percent,respectively, forthetwoproduct categories during theimplementation period.
Import quotas were established according totheschedule setoutinTable 24.
7SeeWorld Bank, India Livestock Review: Enhancing Growth andDevelopment ,May 1996.
8Dairy India 1997.IDA/W/16
Page29
Table 24-Implementation ofImport Quotas onDairy Products falling within
HSChapters 0404 and1901
March 1997-February 1998 March 1998-February 1999 March 1999-February 2000 March 2000-February 2001
20,521 tonnes 21,691 tonnes 22,927 tonnes 24,234 tonnes
Source: WTO, documents G/SG/N/10/KOR/1/Suppl.1 andG/SG/N/10/KOR/1/Suppl.1/Corr.1.
Other Asian countries
64. Several Asian countries arebeginning toshare acommon priority: self-sufficiency indomestic
milkproduction. Fuelled byrising living standards, demand formilkanddairy products hasbeen
increasing. Theproduction response hasbeen prompt andnational "push" strategies have been
implemented atthefarmleveltoencourage theexpansion ofdairy herds.
65. InChina,governmentcontrolledmilkpricesatthewholesalelevelwereincreasedby44percent
inAugust 1996 while retail prices roseby33percent. Milk output increased by10percentto
6.7million tonnes lastyearand1997 production isforecast at7.2million tonnes.
66. Between 1990and1994, milkproduction doubled inThailand toreach 326.4 thousand tonnes.
Domestic production currently satisfies 30percentofdomestic consumption. Bycontrast, milk
production inVietNambarely covered 6percentofnational consumption in1996. Withcross-breeding
programmes inplace toimprove thegenetic stock, VietNamreportedly aimsataselfsufficiency rate
of25percentbytheyear2002. Newentrants inthedairy industry were thusrequired toinvest in
milking stations andprovide advisory andtraining services tothefarming sector prior toreceiving
theauthorization tobuild processing plants. InIndonesia ,domestic purchase requirements offresh
milksupplies bydairy processors weretightened during thefirsthalfof1997. Dairy processors were
required topurchase 1litreoflocally produced milkforevery 1.7litreofimported milk, theprevious
ratiohaving been1to2.
67. InseveralAsiancountries,importedrecombinedorreconstitutedmilkpowdersremain,however,
superior intaste, quality andcostefficiency when compared tolocally produced freshmilk. Toreduce
theirdeficits inmilkordairy products supplies, milkpowders areimported inlargequantities, mainly
fromOceania. Malaysia imported 147,000 tonnes ofskimmed milkpowder in1995. ThePhilippines '
imports ofmilkpowders amounted to134,000 tonnes in1996. Inthesame year, Thailand 'sin-quota
imports ofskimmed milkpowder amounted to67,638 tonnes, reflecting animportant deficit inthis
product category.IDA/W/16
Page30
AFRICA
South Africa
68. According totheSouth African Dairy Foundation (SADF), dairying represents thefourth largest
agricultural sector inSouth Africa. Though constrained byclimatic conditions andtheavailability
ofpasture forgrazing, milkproduction anddeliveries havegrown consistently overthepastfewyears
withnogovernment market price support tofarmers. In1995/96, totalmilkoutput amounted to
2.2billion litres. More thanhalfofthemilkdeliveries wereprocessed intofresh products andliquid
milk, 20percentintocheese, and13percentintomilkpowders. TheSouth African dairy sector
continued todisplay mixed features. Thesector isbased onafairly concentrated processing industry.
SADF estimates that90percentofthetotalmilkdeliveries were processed by8percentofSouth
African dairy plants in1995/96. However, FAO reports indicate thatproduction anddistribution in
remote areasarestillhampered bythelackofrefrigeration facilities, forcing small farmers totransform
milkonsitedirectly intocheese andfermented milk. During thefinancial year1996/97, specific drought
reliefschemeswillbeimplemented.Financialassistancewillbeprovidedtolivestockfarmersindrought
disaster areas, suchasrebates onthetransportation ofanimal feedandemergency drinking water to
cattle andhumans.
IDA/W/16
Page31
Other African countries
69. Favourable weather conditions inpartsofAfrica contributed toanexpansion ofmilkproduction
in1996, which ismainly based onnatural grazing andsmall-scale farming. Several countries intensified
theirefforts topromote self-sustaining national milkproduction. Priorities weretoimprove milkyields
andencourage thedevelopment ofefficient milkcollection, processing anddistribution systems through
theimplementation ofartificial insemination orcross-breeding programmes. However, imports of
overseas genetic breeds weresometimes constrained byconcerns overFoot-and-Mouth Disease and
Bovine Spongiform Encephalopathy (BSE).
70. Although milkoutput increased by2percentto850million litres in1996, Morocco suffered
frommilkshortages towards theendofthatyear, reflecting rising domestic demand. Tunisian milk
output increased by7percent. Thegovernment supported producer prices formilkforapproximately
43percentoftotalmilkoutput; theapplied administered price averaged D340pertonne. Egypt
continued torelyonimports ofmilkandmilkpowders. USDA statistics for1996 show thataround
3.2billion litres offluidmilkandcream weresourced from theUnited States alone. Kenya 'sdairy
sector continued tobecontrolled bythestatethrough theKenya Cooperative Creameries which markets
asmuch as90percentoftotalmilkproduction. FAO statistics reveal thatAlgeria 'simports ofmilk
powders lastyear, though important, were lessthanin1995. Milk powder imports amounted to
165,000 tonnes, down from 183,000 tonnes in1995.
