I normally don't like to do this - that is whinge about what the rest of the world is doing to upset the fragile applecart that is the Australian and New Zealand dairy industries - but the news from the US of A this week really was too much to bear...
CWT reactivating Export Assistance program for cheddar cheese sales, Dairybusiness, Dairyline.com, 18 March 2010
From the day before...
USDA May Show First Milk Production Uptick In Eight Months, Cattlenetwork, 17 March 2010
Now maybe this is just a bit of muscle flexing and posturing ahead of the Trans Pacific Free Trade talks (US dairy lobby attacks Fonterra 'monopoly', Andrea Fox, Dominion Post, 20 March). If so we can all have a good laugh about it. But if not then really, in the words of one of your more colourful tennis players, "You cannot be serious".
To be very fair, we loved your CWT cow culling program because in our view the answer to the US milk and dairy commodity price problem (and ours) is to wind back production, and you did, sort of.
From Xcheque Charts: Year on year percentage change in US cow numbers and milk production
This chart shows the dramatic cull of US cows in the past 12 months but the not so dramatic fall in milk production. In recent months the fall in milk production has slowed and we are now back to last years' production level. It looks to us like producers have taken the opportunity of the CWT program to cull their old stock and freshen up with new, better producing heifers.
Dare we suggest that the NMPF and US farmers stop and think carefully about the consequences of providing financial incentives for American cheese exports to Australia and our traditional markets. We know for example that the US shareholders of a very large multinational cheese processing company might be very upset if their brands in Australia and New Zealand were tarnished by accusations of subsidised American cheese in their products and the effect this is having on the local milk price. The local media do tend to make a meal of these things - as demonstrated in Tasmania recently. The WTO might also have something to say if an export subsidy program is operating outside of current international agreements.
Now if it is just a case of stepping up to compete with us in international markets, taking US dairy commodity prices as a basis, then bring it on! There are 20,000 dairy farmers in Australia and New Zealand just itching to achieve that price level as a basis for their long term milk price. And while you are at it, why don't you open up your home market so that we can really make the game interesting.
So Jerry, mate, stick to the fundamentals of supply and demand - when there is too much milk in the market and prices are too low the answer is to PRODUCE LESS MILK, not to sell it somewhere else (we've already got some).
