Dairy Market Impacts of Us Milk Protein Imports and Trade Policy Alternatives

Abstract

US imports of milk protein products, particularly certain Milk Protein Concentrates (MPC) have increased dramatically since 1995. Whereas in 1995 MPC imports were just 15.9 million pounds, by the year 2000 they had reached 116.1 million pounds—an increase of well over 600% in just five years. In 2000, the farm price of milk in the US had reached low levels by historical standards. The all-milk price that year was $12.40/cwt, down from $14.38/cwt the year before and $15.46/cwt the year before that. These two events, record high levels of MPC imports and low milk prices, led to a suspicion that MPC imports were responsible for the low prices. Although milk prices rebounded in 2001 and MPC imports declined, the issue of milk protein imports has continued to receive a good deal of attention during 2002 and 2003 when farmers faced low milk prices. Thus, the concern persists that MPC imports are generally having a large negative impact on milk prices. This research bulletin provides answers to two main questions: What has been the impact on the US dairy markets of recent increases in MPC imports, and What are the implications of likely policy options in the event that policy makers seek to limit MPC imports or mitigate their impact?