James Dunn Professor of Agricultural Economics Pennsylvania State University
description
Transcript of James Dunn Professor of Agricultural Economics Pennsylvania State University
![Page 1: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/1.jpg)
The past, present and future of trade in dairy products:
Insights into the impact of reduced protection and increased
globalization on once-protected industries.James Dunn
Professor of Agricultural EconomicsPennsylvania State University
![Page 2: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/2.jpg)
Changes in World Economy• Population growth (esp, Africa & S.
America)• Economic growth (China, India, etc.)• Globalization• Freer trade – WTO, NAFTA, etc.• Better transportation• Global banking system• Internet
![Page 3: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/3.jpg)
Some Dairy Trade History
• Originally cows• Still happens – grad student from
Columbia• Frozen embryos – 200 to Kazakhstan• Semen – world market
![Page 4: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/4.jpg)
Transportation
• Refrigerated rail car – ice• Milk train• Refrigerated trucks• Refrigerated containers• Container ships
![Page 5: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/5.jpg)
Railcar Using Ice
![Page 6: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/6.jpg)
Milk Train in Wales
![Page 7: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/7.jpg)
Farm Pick-up
![Page 8: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/8.jpg)
Refrigerated truck
![Page 9: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/9.jpg)
15,000 containers
![Page 10: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/10.jpg)
Milk Collection in Ukraine
![Page 11: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/11.jpg)
![Page 12: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/12.jpg)
Demand growth
• China• Southeast Asia• Middle East• Africa• South America• Biggest drivers of trade growth – more
people & more prosperity
![Page 13: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/13.jpg)
Dairy Policy Traditionally
Most developed countriesClassified pricing
Higher drinking milk price Cheaper price for productsPrice discriminationSome countries really discriminated –Australia
& Canada
![Page 14: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/14.jpg)
1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
Price Discrimination
PD'
Pc'P*
QD' Qc'QD=Qc
DD
Dc
![Page 15: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/15.jpg)
Price Discrimination
• Must keep markets separate • Tools
– Quota for drinking market– Pooling – everyone receives a weighted
average of prices
![Page 16: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/16.jpg)
More Policies
Protection from imports – which would undercut price
Subsidized exports – or surplus undermines program
![Page 17: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/17.jpg)
Dairy Policy Recently
Lower domestic supportUruguay round simplified trade barriersLower trade barriersFewer export subsidiesFewer quotas
![Page 18: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/18.jpg)
US Policy Summary
• Meaningful supports until mid 1980s• Support reduced and has been trivial since
1988• Some export subsidies• Classified prices and regional pooling
![Page 19: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/19.jpg)
1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010$0
$4
$8
$12
$16
$20
$24$/cwt.
Class IIISupport
Class III Milk Price and Support Price1977-present
![Page 20: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/20.jpg)
European Union Policy Summary
• Quotas • Big surpluses sold into intervention• Export subsidies• Expansion issues• WTO issues• Quotas to end in 2015 – then what?
![Page 21: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/21.jpg)
EU Expansion & Trade
• Before expansion EU had surpluses, but had to allow limited access because of WTO agreements
• Much of this access went to countries now on the inside – e.g., Poland
• With expansion, these countries contribute to a greater surplus, but EU must allow access to some other countries
![Page 22: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/22.jpg)
Australian Policy Summary
• Each state had own rules• Some had quotas for fluid milk, others
pooling• Very high fluid premium
– 52 cents vs 21 cents - 13% in US• Competition policy review• Bought out quota – ended fluid premiums• Ended domestic support levy
![Page 23: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/23.jpg)
New Zealand Policy Summary
• Very controlled and subsidized until mid 1980s
• Then subsidies ended• In 2001 NZ Dairy Board ended and
Fronterra Cooperative emerged as the largest exporter in the world
![Page 24: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/24.jpg)
Canadian Policy Summary
• Market sharing quotas• Milk pooling - Eastern & Western pools• Classified pricing• Price supports for butter & skim-milk
powder• Extremely high prices and expensive
quota - $20,000/cow
![Page 25: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/25.jpg)
1967 1972 1977 1982 1987 1992 1997 2002 20070
500
1,000
1,500
2,000
2,500
3,000
3,500M
il $
2009 dollars
US Dairy Exports1967-2010
Source: USDA, BLS Deflated by PPI Dairy
![Page 26: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/26.jpg)
2000 2002 2004 2006 2008 20100
100
200
300
400
Mil
$
importsexports
US Dairy Trade2000-10
Source: USDA
![Page 27: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/27.jpg)
1990 1993 1996 1999 2002 2005 2008$0
$200
$400
$600
$800
mil
2009
$
importsexports
US Dairy Trade with Mexico1990-2009
Source:USDA
![Page 28: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/28.jpg)
1990 1993 1996 1999 2002 2005 2008$0
$100
$200
$300
$400
mil
2009
$
importsexports
US Dairy Trade with Canada1990-2009
Source: USDA
![Page 29: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/29.jpg)
Nor Amer
EU
Other EurLatin Amer
Oceania
Asia
SE AsiaMiddle East
Africa
Share of World Milk Production 2008
Source: FAO
![Page 30: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/30.jpg)
Nor AmerEU
Other Eur
Latin Amer
Oceania
Asia
SE Asia
Middle East
Africa
Share of World Population 2008
Source: FAO
![Page 31: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/31.jpg)
US
EU
NZ
AUST
Others
Share of World Cheese Exports2009
Source: USDA
![Page 32: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/32.jpg)
US
EU
NZ
AUSTOthers
Share of World Butter Exports2009
Source: USDA
![Page 33: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/33.jpg)
US
EU
NZ
AUST
Others
Share of World NFDM Exports2009
Source: USDA
![Page 34: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/34.jpg)
US
EU
NZ
AUST
Others
ARG
Share of World WMP Exports2009
Source: USDA
![Page 35: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/35.jpg)
1993 1997 2001 2005 20090
300
600
900
1,200
1000
met
. ton
sWorld Trade in Cheese
1993-2009
Source: USDA
![Page 36: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/36.jpg)
EU46%
NZ22%
US10%
AUST9%
Others13%
1995
EU31%
NZ28%
US10%
AUST9%
Others22%
2008
Exporters of Dairy Products1995-2008
![Page 37: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/37.jpg)
Future of Dairy Trade
• Population & income growth in China and India – also more dairy consumption
• Population growth in Africa and Latin America – not much income
• Further globalization• More new products• Fewer trade barriers? • Less support for agriculture?
![Page 38: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/38.jpg)
What about European Union• Quotas end in 2015 & are ratcheting up now• Industry will relocate• Movement to Poland, Slovenia, etc.• Less in UK & France, Greece, Portugal, etc.• Limits in Netherlands – environmental rules (like
Chesapeake)• Without quotas, lower costs, more exports to
Ukraine & Russia• How big will the industry be?
![Page 39: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/39.jpg)
1990 1995 2000 2005 20100
0.25
0.5
0.75
1
1.25
1.5
milk/cowpopulationcowsfarms
Milk/Cow, Population, & Cows 1990-2010
![Page 40: James Dunn Professor of Agricultural Economics Pennsylvania State University](https://reader036.fdocuments.in/reader036/viewer/2022062323/56816284550346895dd2f3b4/html5/thumbnails/40.jpg)
Concluding Comments
• If US doesn’t export the industry will continue to shrink every year
• Canada is in the same situation, only worse, because of proximity to US
• Free market world price (if there was a free market) would probably be about US price