The world dairy sector is in general strengthened by increased import access and restrictions on subsidized production stipulated under the recently concluded GATT agreement. This enables the more competitive producers to expand their dairy industries and gain a greater share in the world export market.
The world dairy prices are expected to strengthen during the projection period. The European Union, in response to restrictions on cheese exports, is expected to shift more of the industrial milk to butter/NFD production, resulting in a relative strengthening of world cheese prices. Butter prices, however, do not fall as rapidly as in the past when large stocks were liquidated, primarily because of low current levels of world butter stocks.
Butter production in the European Union declined sharply in the last decade, as more milk was diverted to cheese production. The GATT-required reduction in exports, along with import access commitments, will inhibit the growth of the cheese industry that had expanded by over 10 percent within the last five years.
The United States, the world's second largest cheese producer, is projected to expand its cheese production from 3.2 mmt to 4.4 mmt by the end of the projection period. However, consumption grows faster, resulting in an increasing import path throughout the projection period.
General expansion in the dairy sector is projected for both New Zealand and Australia, with relative growth in cheese production in response to increasing world prices. Cheese exports from both New Zealand and Australia are projected to nearly double during the 1995 to 2000 period.
Japan is projected to shift away from butter/NFD production to cheese production as cheese production growth continues to far exceed other dairy products: 44 percent between 1995 and 2004 as compared to 5 percent growth in butter production and an 11 percent increase in NFD over the same period. Nonetheless, Japan is also expected to remain the largest cheese importer over the projection period with net imports of over 177 tmt in the year 2004.
The Former Soviet Union has historically been the largest importer of butter and is projected to hold that position over the entire projection period although butter imports subside during the later years. Cheese imports show a moderate growth. Production of all major dairy products is also expected to exhibit moderate growth in the projection period following the economic turnaround after 1997.
Demand for other dairy products, especially whole milk powder, by low-income African and Latin American countries is projected to increase as new processing technology becomes available for enhancing shelf life. Algeria, which was one of the largest dairy importers in the early 1980s, reduced its import demand considerably in the early 1990s. The recent policy change with respect to selected dairy products, which classifies milk as essential food, is expected to increase subsidized imports.