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Robust Exports Support Milk Prices


Exports are a critical component of U.S. milk prices. In a mere 20 years, the U.S. dairy industry has gone from exporting less than 3% of its milk production, all subsidized through the now-defunct Dairy Export Incentive Program, to commercially shipping the equivalent of 18% of its milk production to foreign markets. Without these exports, milk prices would have been dramatically lower over the past two decades and farm exits would likely have occurred at an even faster rate. Much of the dairy industry’s export success can be attributed to the efforts of the U.S. dairy industry as well as to two wildly successful—and underfunded— government programs.


Farm organizations, including dairy groups, have asked Congress to double the funding for the Market Access Program (MAP) and the Foreign Market Development (FMD) Program. Not only have inflation and administrative costs cut deeply into the value of current funding, but both programs have operated at the same funding level for well over a decade, with MAP funding stuck at $200 million since 2006 and FMD at just over $34 million since 2004. At the same time, demand for these funds has increased.


MAP is a partnership between USDA’s Foreign Agricultural Service (FAS) and agricultural trade associations to share the costs of marketing and promotional activities to help build commercial export markets for U.S. agricultural products. FAS partners with non-profit commodity or trade associations representing agricultural producers and processors through the FMD Program to help create, expand, and maintain longterm export markets by promoting products overseas. Earlier this year, bills were reintroduced in the House and Senate with bipartisan support to double the funding in both programs. As farm bill negotiations progress, efforts to include additional funding for these programs in the twice-a-decade legislation could also accelerate.


Despite a virtual standstill on implementing new free trade agreements, U.S. dairy exports set a fresh high for volume and value in 2022, the third straight year of record-high volume and the second year running for all-time high values. Export volume on a milk-solids equivalent increased 5% to 2.4 million metric tons (MT) last year, also an all-time high. Last year was also the first year that the value of dairy exports breached the $9 billion mark at $9.6 billion, a 25% jump from 2021.

With the help of MAP and FMD funding, the dairy industry has made great inroads into markets around the world, including the Philippines, South Korea, and others. Yet despite this success, consolidation in the dairy industry continues to occur at a rapid rate. Since 2003, dairy farm numbers have dropped by 60%, from 70,375 to 27,932 last year, yet milk production continues to increase. Last year, 1,910 dairies called it quits, a 6.5% decline.


Without a market for this milk, dairy farm attrition likely would have occurred even more rapidly. Jaime Castaneda, executive vice president for policy and strategy at the National Milk Producers Federation said that exports, no doubt, account for a critical part dairy producers’ incomes, and without them, producers would be hurting even more. “It is clear to me we need more exports and more opportunity to put products overseas,” Castaneda said, adding that he hopes Congress will double the funding for MAP and FMD and that FAS will distribute the funds more equitably by increasing dairy’s share of the total pie.


CME spot markets closed the week mixed, with block Cheddar prices gaining 4.5¢ and barrels up 0.25¢ on the day. Spot butter closed 0.25¢ lower today, while nonfat dry milk (NDM) held steady, and whey ended the day 0.75¢ higher


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dailydairy.com

March 24, 2023


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