Milk Research Essay

Milk is ancient as mankind itself; many centuries ago humans learned how to consume the milk of other mammals following the domestication of different species of animals. These included cows, sheep, buffaloes, goats and camels, all still used today for human consumption. This development occurred independently in several parts of the world starting in Southwest Asia perhaps as early as 8000-6000 BC. In 1863 a great invention, the pasteurization, allowed to kill harmful bacteria in milk and milk products while in 1884 an American inventor, Hervey Thatcher, invented the first glass milk bottle (called â€Å"Thatcher’s Common Sense Milk Jar). The first plastic-coated bottles were introduced commercially in 1932. CONSUMPION WORLDWIDE Today there are more than 6 billion consumers of milk and milk products throughout the world even if the role of milk in the traditional diet is greatly different among regions; the majority of the consumers are in the developing countries but milk and its derivatives have not been a traditional food in tropical countries as they have been in northern regions of the world (Europe and North America). The reason for that is primary the difference in temperatures and in the possibilities of refrigeration. It is estimated that 12 to 14 percent of the world population, more than 750 million people, live within dairy farming households; for all these reason and for its prospective important role in improving nutrition, particularly in developing countries, milk is a good medium to reduce poverty and malnutrition in the world. As said before the total milk consumption, as fluid milk and its products, per person is not homogeneously distributed in the world even if the trend descript before is going to change and the market for milk is expanding in several places worldwide: over the past two decades, all developing country regions have seen an expansion in per capita consumption of dairy products. Increasing affluence in developing countries has led to a rise of milk consumption in recent years and these growing markets have attracted investment by multinational dairy firms; however, production in the majority of these countries remains on a small scale. Per Capita consumption of Milk and Milk products in various countries, 2006 data. | Country| Liquid Milk Drinks (Litres)| Cheeses (kg)| Butter (kg)| Finland| 183. 9| 19. 1| 5. 3| Sweden| 145. 5| 18. 5| 1. 0| Ireland| 129. 8| 10. 5| 2. 9| Netherlands| 122. 9| 20. 4| 3. 3| Norway| 116. 7| 16. 0| 4. 3| Spain (2005)| 119. 1| 9. 6| 1. 0| Switzerland| 112. 5| 22. 2| 5. 6| United Kingdom (2005)| 111. 2| 12. 2| 3. 7| Australia (2005)| 106. 3| 11. 7| 3. 7|. Canada (2005)| 94. 7| 12. 2| 3. 3| European Union (25 countries)| 92. 6| 18. 4| 4. 2| Germany| 92. 3| 22. 4| 6. 4| France| 92. 2| 23. 9| 7. 3| New Zealand (2005)| 90. 0| 7. 1| 6. 3| United States| 83. 9| 16. 0| 2. 1| Austria| 80. 2| 18. 8| 4. 3| Greece| 69. 0| 28. 9| 0. 7| Argentina (2005)| 65. 8| 10. 7| 0. 7| Italy| 57. 3| 23. 7| 2. 8| Mexico| 40. 7| 2. 1| N/A| China (2005)| 8. 8| N/A| N/A| | | | | Source: International Dairy Federation, Bulletin 423/2007. | PRODUCTION In 2010 the largest producer of milk and milk products was India followed by USA, China, Germany, Pakistan and Russia. The 27 countries of the European Union together produced about 138 million tones of milk in 2011. India is also the largest consumer of milk, yet neither exports nor imports milk. On the other hand New Zealand, The EU 27 member states, Australia and the US are the world’s largest exporters while China and Russia are the world’s largest importers of milk and milk products. Dairy and other livestock products have a high income-elasticity of demand, especially at low income levels. This means that increases in income leads to large increases in demand for these products. This analysis explains why milk and dairy consumption has increased so much in developing countries, as the GDP per capita has grown, and help to understand the production pattern that we see in these years. In fact, developing country growth in demand for and consumption of milk has been matched by increasing production and their production growth has significantly outpaced that of developed countries. Since the late 1980s a great part of the production growth has been concentrated in the developing countries. However, there are differences between developed and developing countries; most milk in developing countries is still produced in a small scale system with little or no mechanization or new technological innovations, although large-scale units can be found also in developing countries. The real growth pole of milk production in the developing countries has been South Asia, which has seen continuous and sustained growth in production. Today, India alone is responsible for almost a third of developing country production and 16% of global production. Latin America and the Caribbean is the second-largest regional producer, but with production having expanded at a slower rate than in South Asia. East and Southeast Asia, and especially China, has seen production grow at an extremely rapid pace over the past decade, but the region’s production levels are still far short of those of South Asia and Latin America. To summarize, the major milk production regions are: * South Asia: 23 percent of global production, mainly India and Pakistan. * EU-25: 21 percent, mainly Germany and France. * USA: 12 percent. * CIS: 10 percent, mainly the Russian Federation and Ukraine. * Latin America: 10 percent, mainly Argentina, Brazil, Colombia and Mexico. * East and Southeast Asia: 8 percent, mainly China and Japan. * Africa: 5 percent ? the largest milk-producing countries are Egypt, Kenya, South Africa and Sudan. * Oceania: 4 percent. * Near and Middle East: 4 percent, mainly Iran and Turkey. Production of the top five countries Cow milk dominates global commercial production: in 2011 FAO estimates that 85% of all milk worldwide was produced from cows. United States is the biggest cow milk producer, accounting for 14. 6% of world production, followed by India and China. For the last fifty years, the dairy sector in most developed countries has shifted towards bigger herd size and significantly higher annual milk production per cow. According to the International Committee for Animal Recording (ICAR) the herd size in developed countries in the period between 2001 and 2007 went from 74 to 99 cows per herd in 17 countries covering Europe, Asia, Australia and North America. However, there is a large variation among countries, ranging from 19 cows per herd in Norway to 337 on average in New Zealand. Annual milk production in the same period increased from 7,726 to 8,550 kg per recorded cow in these countries. The highest average production was obtained in Israel, amounting to 12,546 kg per cow, and the lowest in New Zealand with 3,974 kg per cow. This reflects different production systems. The system in New Zealand is based on all year grazing in contrast to Israel, where the system is based on in barn feeding with energy-rich total mixed rations. PRODUCTION OUTLOOK FOR NEXT YEARS World milk production in 2012 is forecast to grow by 2. 7 percent to 750 million tons. Asia is expected to account for most of the increase, with output in India forecast to rise by 5. 2 million tons to 12. 7 million tons. Dynamic domestic demand is the main engine stimulating growth, as India is largely absent from the international market for dairy products. An increased output is also expected in China, Pakistan and Turkey as the demand continues to increase. High rates of growth in production are expected in New Zealand and Australia as well, in order of 9% and 4% respectively. In the European Union the growth in milk output is expected to moderate in 2012–13 in response to lower profitability but production is projected to increase over the medium term. While the EU milk quota will increase by 1 per cent a year through to 2013–14 before complete removal of quotas from 1 April 2015, the quotas are unlikely to be a binding constraint on production. Over the past two years EU milk production was 6 to 7 per cent below the overall quota and production is expected to remain below quota until 2014–15. For what concern the trade of milk, Asia will continue to be the main market, with additional demand expected to come from countries such as China. Elsewhere, imports by Egypt may also grow, as could by Mexico and Venezuela. However, imports by Brazil may decrease, due to rising domestic milk production. Great increase in availabilities from pasture-based production in Argentina, New Zealand and Uruguay could stimulate their exports to rise by 12,8 and 5 percent respectively. The other principal trading countries as Australia, Belarus, the EU and the United States are anticipated to maintain their sales levels. INTERNATIONAL TRADE OF MILK AND MILK PRODUCTS Global trade in dairy products has increased significantly in value and volume terms over the last decades. Between 1980 and 2008, the volume of total dairy exports (expressed in milk equivalents) more than doubled, from 41. 7 million tons to 92. 2. Also the share in volume terms of production that enters international trade increased, from 8. 5 percent to 12. 6 percent for dairy products, (whit an annual growth in exports of 2. 9%), reflecting the increasing degree of openness to trade of the sector and influenced by heavy use of export subsidies, which supported shipments of developed countries’ dairy exports. However, due to the non-durable nature of dairy products, the share of output that is traded internationally still remains relatively low. The major part of dairy products are consumed within the country of production and do not be traded. In fact a few countries have a milk-surplus (Argentina, Australia, New Zealand, USA, Uruguay, countries of the EU and Eastern Europe while in most regions imports exceed exports, like in Algeria, China, Japan, Mexico, the Philippines and Russia. It is estimated that only around 6% of milk is traded across borders. Milk is mainly traded in the form of butter, milk powder and cheese, but also as concentrated milk, casein and butter oils. The EU and New Zealand are the biggest exporters of dairy products; major importers include China, Mexico, Japan, Algeria, Russia, Philippines and Saudi Arabia. Producer prices for milk differ significantly around the world: Latin America, South Asia and New Zealand are low cost producers; countries such as the EU and US are high cost producers like Switzerland, Norway and Canada. Over 90% of milk production in New Zealand is exported, and therefore milk prices in New Zealand provide a good indication of the prices on the world market. Traditionally, the milk price in New Zealand was about half the European milk price even if today EU milk prices are not that much above the New Zealand benchmark. International dairy trade pattern has traditionally been composed of exports from developed countries (EU, New Zealand, Australia, USA) to developing countries (China, Mexico, Algeria, Russia, Philippines, Saudi Arabia). New Zealand exports mainly to Asia, while EU exports mainly to Russia, North Africa and the Middle East. Although milk production is growing rapidly in many developing countries, so is domestic demand; thus only a few developing countries, probably in Latin America (Argentina, Brazil) are expected to become significant exporters of dairy products in the near future. TOP EXPORTERS Oceania: New Zealand and Australia (Oceania) presence on the international dairy markets has increased considerably after the elimination of domestic support and deregulation, but also after reduced market participation of some traditional exporters (notably from the EU). The global export market share of Oceania has risen from 20% in the 1980s to more than 40% today. The region has become an important driver of global dairy markets. NEW ZEALAND. In New Zealand the production of milk has been constantly raising until 17,895 tons in 2011. New Zealand produces about 2% of total world production at around 16 billion liters every year (New Zealand dairy production has risen 77% over the past 20 years) but, unlike most other countries, around 95% of its dairy production is exported rather than consumed by the domestic market. New Zealand is the major exporter of butter, with almost 44% of global exports and the major overall net exporter of dairy products whit a share of 35% of total trade. New Zealand is also an important exporter of skim and whole milk powders, contributing about 27% and 38%, respectively, of world trade. New Zealand dairy exports go to 151 countries; the key markets are China, the US, Japan and the EU. Production of milk, New Zealand New Zealand’s key export destinations AUSTRALIA Over the past two decades Australian milk production has been well above that volume required for domestic consumption, so that a significant proportion is destined for export markets. The share of total production exported has ranged from 40% to 60%. In the last three years Australia exported around 45% of its milk production which is the lowest proportion since the mid-1990s; so although Australia accounts for an estimated 2% of the world’s milk production, ranks third in terms of world dairy trade, with a 10% share, behind the European Union and New Zealand. Japan is the single most important export market for Australia, accounting for 19% of exports by value. Australian exports are concentrated in Asia, which represented 72% of the total dairy exports value of A$2. 4 billion in 2009/10. Australia’s top five export markets by volume in 2009/10 were Japan, Singapore, China, Indonesia and the Philippines. The fastest growing export market for Australia has been China. Production of milk, Australia EUROPEAN UNION European union accounts for 32% on the total trade of dairy products. The largest dairy products manufacturing sectors in terms of value added generated in 2006 were found in France (EUR 3. 2 billion), Germany (EUR 2. 6 billion) and Italy (EUR 2. 5 billion); together these three States contributed almost half (48. 1 %) of the EU-27’s value added. The dairy products manufacturing sectors of the United Kingdom and Spain were also relatively large; they accounted for a combined 18. 4 % of EU-27 output in 2005. Output grew at a faster rate than the EU-27 average in the three largest dairy producing countries during the ten-year period through to 2007. The strongest rates of growth, however, were recorded for Poland (on average rising by 4. 5 % per year) and Latvia (3. 0 % per year). Main trading partners of EU exports UNITED STATES The U. S. dairy industry is the sixth largest in the world in terms of milk production and represents more than 10% of the total world milk production in 2010. In terms of trade, around 13 percent of U. S. milk production was sold overseas in 2010. The total production is 193 billion pounds. In 2010, U. S. exports of cheese, total whey products, lactose and other dairy products were valued at $3. 71 billion, up 63 percent from the prior year. Export volume totaled 3. 04 billion pounds of U. S. U. S. dairy imports increased 2 percent in 2010 to $2. 60 billion. On a volume (total solids) basis, imports were the lowest since 1997. Export volume was more than four times the level of imports. Mexico, Southeast Asia and Canada are the main destinations for U. S. dairy products. In 2010, 12. 8% of U. S. milk production was sold overseas. On the other hand, New Zealand, Canada and Italy are the top three countries selling dairy products to the U. S. IMPORTERS Value of dairy products imports worldwide Major dairy products importers CHINA China has become a significant importer since 2009; for example it accounts for around 25% of world trade in whole milk powder (2011). This increase in imports has been driven by strong growth in domestic demand for dairy products and consumer concerns about the safety of domestically produced. Over the medium-term, China is expected to remain a significant importer of dairy products with a projected rise in milk production unlikely to match the expected growth in domestic demand. Chinese milk production has partially recovered since 2008 and is forecast to rise by 5% in 2012 to around 32. 2 million tons. While New Zealand is expected to remain the largest exporter of milk powders to China, the United States has the potential to expand its exports of skim milk powder to this market over the medium-term. China is likely to remain an important market for Australian exports of whole milk powder and cheese. RUSSIA Russia is expected to remain a significant importer of dairy products with further growth in domestic demand and limited increases in milk production. In 2011 Russia imported 130 000 tons of butter and 315 000 tons of cheese. TRADE POLICIES Developed countries have tended to protect and subsidize agricultural producers through various trade and agricultural policy instruments. Milk has been no exception and has indeed been one of the agricultural product which has seen the highest level of subsidies and protection, measured by the nominal rate of assistance (NRA). The NRA is an indicator that measures the percentage by which government policies have raised gross returns to farmers above what they would have been without government intervention. TRADE POLICIES (IMPORT) Many countries introduced measures to limit dairy imports. Brazil in 2004 decided to extend for an indefinite time the minimum export price requirement for imports from Argentina and Uruguay which was put in place in 2001. The extension was supported by Brazilian milk producers and opposed by the dairy industries of Argentina and Uruguay. In 2002, Colombia introduced a ban on imports of milk powder that was continued until April 2004. The government is following a policy of prohibiting imports and encouraging exports to support the national dairy sector. In recent years, difficulties have arisen with trade in milk powder with Venezuela which is a traditional market for Colombia. TRADE POLICIES (EXPORT) Following the fall in international prices from 2001, a number of countries raised subsidies on exports, in order to allow their domestic industries to compete on the world market. In the case of the EU and the United States, subsidies rose significantly during most of 2002. Towards the end 2002 and for 2003, the level of export subsidies by the United States fell as international prices rose. In the EU, export subsidies remained high principally as a result of appreciation of the Euro. BILATERAL AND MULTILATERAL TRADE ARRANGEMENTS Australia and Thailand finalized a Free Trade Agreement in 2005 which cut tariffs for Australian dairy products. The agreement maintains restricted quota entry for dairy products but progressive access to Australian exports are allow over a 20 years period. United States concluded free-trade agreements with several Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) and the Dominican Republic. The countries involved will gain greater access to the US market, while many US exports will receive duty free treatment. Chile has signed a number of bi-lateral free trade agreements which include market access quotas for dairy products. These were signed with the United States, the European Union, and the Korean Republic. The agreements provide for annually increasing duty-free quota access and progressively reduced duties on out-of-quota exports. Russia and New Zealand signed a bilateral trade agreement in 2003. The agreement sets maximum levels for tariffs on dairy imports and provides security for New Zealand’s dairy access should Russia join the WTO. POLITICAL ISSUE: THE EU DAIRY REGIME Milk production comprises around 13% of the EU’s total agricultural production. The EU’s export surplus is small, around 5% of total production but accounts for around one-third of total world exports. The EU milk price is supported through high tariffs and export subsidies. High tariffs mean that the EU market for dairy products is effectively closed to imports from third countries. Reliance on export subsidies has been reduced in recent years as world market prices for dairy products have firmed and the EU specializes more in the export of higher-value cheese. However, they were temporarily re-introduced in 2009 as a mechanism to support milk prices in response to the very low prices in that year. Since 1984, the volume of milk produced in the EU has been limited by a quota although in recent years EU production has been below the quota ceiling. This quota arrangement is due to be eliminated from 2015. Simulations of the consequences of liberalizing the EU dairy market have been complicated by the simultaneous existence of high supported prices (which stimulate production) and the quota policy (which limits production). Some studies concluded that EU liberalization (defined as eliminating both protection and quotas) would result in increased EU production and net exports; others find that the protective effect of import tariffs outweighs the supply-constraining effect of quotas and that full liberalization would result in lower EU production and net exports. It seems now that the two policy changes will not occur simultaneously. The decision to abolish quotas from 2015 is now an EU commitment, while tariff changes will not happen now. The most recent simulation study of quota abolition for the Commission, estimates that it will lead to an increase of milk production of 4-5%, with a consequent fall in internal EU prices of around 10% (IPTS 2009). Other observers note that many Member States no longer are filling their quotas. With lower internal prices and demand growth within the EU, they expect quota abolition in 2015 to have only a limited impact on EU milk supply (OECD/FAO 2010). Quota elimination without reducing or removing the protective effect of EU tariffs means that EU dairy production will be higher, and consumption of dairy products lower. This will amplify the EU milk surplus and depress the level of EU imports, and thus depress world market prices below the level they would otherwise be. EU high value cheese exports have a global market, but milk powder exports are sold mainly to developing countries (North Africa, Middle East and Sub-Saharan Africa). In many African countries, EU competition has been criticized for undermining dairy development. Imports of milk powder were seen as responsible for the failed attempts to establish dairy plants to provide the national market with milk, butter and other basic products. On the other hand someone says that EU imports increase the availability of dairy products and benefit consumers who might not otherwise be able to access to dairy products. In many African countries domestic supply cannot satisfy the growing domestic demand. Products based on imported milk powder often target a different market segment to that served by the local informal dairy sector. Processing plants built initially to handle imported powder can also act as a stimulus to the development of a local dairy industry. The truth might between these two opinions: given the actual local production and the low purchasing power of people, imported milk and dairy products are in the short term the only possible way to provide population’s request. High costs of production and inefficient marketing channels make local fresh milk more expensive than imported one. At the same time the existence of cheap dairy imports discourages processing plants from investing in local milk collection. By only reducing EU dairy exports to Africa African dairy production would not be immediately free because there are an increasing number of other low-cost exporters ready to enter the market. However, the availability of EU surplus powdered milk on the world market remains unfair competition, limiting the growth of the dairy sector in developing countries and undermining the incentives for farmers to boost local production to keep track with the growing demand. SOURCES * http://www. fao. org/index_en. htm * http://faostat3. fao. org/home/index. html * http://www. usda. gov/wps/portal/usda/usdahome * http://www. clal. it/en/ * http://www. ifcnnetwork. org/en/start/index. php * http://www. globaldairytrade. info/Home. aspx * http://www. milkproduction. com/ * http://www. dairyco. org. uk/ * http://www. dairynz. co. nz/page/pageid/2145859475/International_Visitors * http://www. euromilk. org/eda/index. aspx * http://www. dairyaustralia. com. au/ *.