MPCs Aren’t Dairy’s Biggest Problem
Aug 18, 2009
By Jim Dickrell
At the risk of being labeled the anti-Christ, I’m here to report that dairy imports—most notably milk protein concentrates (MPCs)—are not the reason U.S. domestic milk prices are where they are.
And, by the way, I’m not the only one reporting this bit of non-news. USDA, the National Milk Producers Federation and the U.S. Dairy Export Federation all acknowledged as much in congressional testimony this past month.
For starters, I’d like to report a few numbers on dairy imports that were released by USDA’s Foreign Agricultural Service last week. Through June, imports of MPCs were down a collective 12% from the same six-month period in 2008. In fact, MPC imports have not been this low for five years, and six of the last seven.
Casein imports, both casein and caseinates, are down a whopping 38% through June. They haven’t been this low this decade. Admittedly, cheese imports are up slightly—1.2%. But that, in part, is due to the fact that cheese imports last year were at their lowest level this decade.
Taken together, MPCs, caseins, cheese and butterfat imports are down 12.7% January through June compared to last year.
And the other amazing thing is that the total tonnage of these imports has very little variation year-to-year since 2001—regardless of whether U.S. milk prices are $10 or $20. There’s a certain level of demand for these products—year in, year out. If they were price-sensitive, you’d think you’d see ebbs and flows with our wildly swinging milk prices.
Mark Stephenson, a Cornell University dairy economist, did some analysis on MPCs this past spring and came to this conclusion: “[Dairy] imports vary quite a bit month-to-month but they are not trending upward in any significant fashion—particularly as a percentage of U.S. production of milk.
“A case could be made that they ‘displace’ or ‘augment’ about 0.8% of U.S. milk production,” Stephenson says. “The milk that is displaced by MPC imports in the United States is the amount of milk from about 70,000 cows.”
But they displace that amount of milk when milk prices are at their current level, or when they exceed $20, as they did in 2007 and 2008.
MPC opponents say that is only half the problem, however, because one pound of MPC can displace several pounds of milk solids in the cheese vat. True. Except no one knows how many MPCs currently being imported are being used for cheese and how many are going into specialty products where they can only be used because of their unique properties.
The latest information anyone has on MPC use is now five years old: It was produced by the International Trade Commission in 2004. At that time, about 62% of MPC imports were used in cheese, 24% in sports and specialty drinks and the remainder in other products.
For the sake of argument, assume imported MPCs are displacing 150,000 U.S. cows today. But they were displacing even more last year (with higher MPC imports), when milk prices were at $20.
The fact is that U.S. exports have fallen dramatically from a year ago (click here for export report). Through June, our dairy exports were $1.04 billion, down 51% from 2008.That’s where the problem lies--due to the global recession, changing currency values and a resurgence of milk production in New Zealand.
Senator Chuck Schumer (D-N.Y.) introduced legislation in late July to create tariff rate quotas of MPC and other dairy protein imports. And yes, the National Milk Producers Federation is supporting that legislation.
That’s all good politics. But it could create its own new set of trade-related problems as we negotiate those tariffs with our World Trade Organization partners. That’s especially true now, as the U.S. economy tries to claw its way out of our current Great Recession.
The bottom line, folks, is that if the U.S. dairy industry is to grow and prosper, it must continue to grow market share overseas. As it does, it must be willing to tolerate some level of imports here at home.
—Jim Dickrell is editor of Dairy Today. You can reach him via e-mail at email@example.com.
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