The world's biggest dairy exporter, Fonterra, says it would see "considerable value" in a review of United States policies on dairy subsidies.Fonterra has its own joint-venture milk protein concentrate plants in the United States, and is one of
The world's biggest dairy exporter, Fonterra, says it would see "considerable value" in a review of United States policies on dairy subsidies.
Fonterra has its own joint-venture milk protein concentrate plants in the United States, and is one of the largest exporters of American skim milkpowder (SMP) through Dairy America, a consortium of nine United States cooperatives.
A senior trade consultant at Fonterra, Ken Geard, of Wellington, said the US currently had a complex set of support and pricing policies which affected both domestic and international markets
"The US industry has considerable potential to develop and supply more innovative products," he said. "As a participant in the US industry we see considerable value in a review of existing policies".
He was commenting on a call by Jerry Kozak, of the USA National Milk Producers' Federation, for American farmers to move away from the existing US dairy product support price programme (DPPSP).
Mr Kozak questioned whether the programme made the best use of US Government resources to establish a safety net to help farmers cope with periods of low prices.
He said in a statement that the subsidy was not effective, partly because it was a disincentive to product innovation.
Price support payments also distorted what the American industry produced, so that there was too much non-fat dry milk, and not enough protein-standardised skim milk powder, as well as specialty milk proteins such as milk protein concentrate.
America did not manufacture its own milk protein concentrates until Fonterra expanded its Portales plant -- a joint venture -- to make the low-lactose ultra-filtered milk, which manufacturers prefer as an ingredient in chilled and frozen dairy foods.
Mr Kozak said the price levels the support payments targeted were no longer relevant to US farmers, and that discontinuing the DPPSP would eventually result in higher milk prices for US dairy farmers.
Instead, the American industry should provide a safety net for poor margins, which would allow for quicker price adjustments.
New Zealand farm lobby group Federated Farmers agreed that the money being spent by US taxpayers was not the most effective way of helping its dairy farmers.
"Subsidies always distort market places and a big part of the distortion is to slow down or stifle innovation," said the federation's dairy chairman, Lachlan McKenzie.
It appeared the USA product mix could be changed faster without the influence of some of these programmes, and the practice of buying up surpluses had had a huge effect on world prices.
"We have evidence from New Zealand and overseas that production levels are cut back faster when markets send lower price signals," said Mr McKenzie. "This inevitability leads to a faster recovery of prices as product comes into short supply".
New Zealand farmers could support a change which did not distort prices in export markets.
