Nov 14, 1984

DECLINING TRADE AND RISING PRODUCTION OF DAIRY PRODUCTS-

GENEVA, NOVEMBER 12 (IFDA) -- While world production of dairy products increased in 1983, international trade declined for second consecutive year, according to a GATT report on the world market for dairy products governed by the international dairy arrangement.-

Eighteen countries are members of the arrangement, which fixes minimum export prices for some of the dairy products.-

In the Third World, Argentina and Uruguay export whole milk powder and butter fat. Argentina also exports cheeses.-

The prices in dollars per metric tonne are 600 for skimmed milk powder, 950 for whole milk powder, 600 for buttermilk powder, 1.440 for anhydrous milk fat, l.200 for butter, and 1.000 for certain cheeses.-

World production of milk reached a new record level of 500 million tonnes in 1983, an increase of four percent over 1982.-

GATT says that while world production of skimmed milk powder and butter would continue to increase in 1984, albeit at a much slower pace, and of cheese at the same or faster rate than in 1983, the level of stocks and the problems of their disposal "are having a disquieting effect on the world market situation".-

At the end of 1983, world stocks of skimmed milk powder, butter and cheese were "very greatly" in excess of their levels a year earlier. And according to some estimates, total stocks of dairy products in the OECD countries were approximately 25 million tonnes of milk equivalent at the end of 1983, and actually exceeded the level of world exports of dairy products in that year.-

According to current forecasts, world milk production could stabilise in 1984, but to redress "existing serious imbalance" in world dairy markets, much more than mere stabilisation of milk production is required, according to GATT.-The braking of the upward trend in production in 1984 is largely due to restraint programmes recently inaugurated in the EEC and in the U.S.A., two of the world's largest producers.-But these decreases are matched by continuing increases in production in the USSR and in several southern hemisphere countries, consequent to cessation of drought conditions.-And while the decreases in production in the EEC, U.S.A., and several countries might be accentuated by higher costs of feed and feed concentrates, it was doubtful whether any significant correction of market imbalance would be evident in 1984.-

Beyond 1984, there were a number of conflicting factors that make assessment of possible trends difficult.-

There would be sharper decrease (...) 8, 1985 in the EEC, and a significant decrease in cow numbers in several countries.-

On the other hand, the milk diversion programme in the U.S.A. is due to end in March 1985, and if no new measures are introduced, there was a risk of rise in production again.-

Also current indications of lower prices for feed and feed concentrates on world markets could stimulate production in a number of countries.-

And if normal weather continues, there was no reason to expect a significant reversal of production trends in the Soviet Union, certain countries of southern hemisphere, or in countries such as India.-According to estimates, world production of skimmed milk powder, butter and cheese increased in 1983 by 9.7, 8.5 and 2.5 percent respectively compared to 7.0, 5.0 and 2.8 percent respectively in 1982.-

In 1984, skimmed milk powder and butter fat are expected to increase at about two percent each, while cheese production could increase at about the same or faster rate.-International trade in dairy products amounted in 1983 to 22-23 million tonnes of milk equivalent, as against 24.5 million in 1982 and 27 million in 1981.-Food aid shipments rose to more three million in 1983.-

While exports from the EEC declined for the third consecutive year, at an estimated 10-11 million tonnes export the EEC remained the world's largest exporter of dairy products.-

Imports of Third World countries fell from 17 million tonnes to 16 million in 1982. Half of the Third World imports are accounted for by the petroleum exporting countries.-

On the basis of continued world economic recovery in 1984, GATT projects "some improvement" in overall demand for milk and dairy products, but with import demand "unlikely to grow significantly".-

Despite measures taken or planned, available supply will again be greater than real demand in 1984.-

While import demand from the Third World could be expected to recover progressively, and the Soviet Union would continue to be a major outlet specially for butter, great uncertainty continues to surround the international market for dairy products.-

Along with uncertainties about development of import demand by USSR and Eastern European countries, there were also the unfavourable effects of drop in earnings of the oil-producing countries.-

The very large stocks of dairy products and the problem of disposal were a further factor of uncertainty for international trade.-

A considerable proportion of international transactions, GATT adds, takes place on special terms.-Various countries are making efforts to promote increased consumption including subsidisation of their use for animal feed in the EEC and disposal of surplus stocks in the U.S.A., and in some countries by maintaining the price relationship between vegetable fats and butter fat by taxing the former.-

In 1983, the downward trend of international prices of dairy products continued, even accelerating in certain dairy products. Prices continued to weaken in first quarter of 1984, stabilising in the second quarter, and declining again in the third.-

On October 16, the EEC has announced its intention to export stocks of old butter at lower than the minimum price, and for sale of "christmas butter" for direct consumption at "reduced" prices within the Community.-