Milk protein concentrate displaces 318 million pound of U.S. milk

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WASHINGTON – Imports of milk protein concentrate (MPC), casein, and caseinate may have displaced 318 million pounds (on a protein basis) of U.S.-produced milk protein products over the 1998-2002 period, according to a recent report.

The U.S. International Trade Commission recently issued Conditions of Competition for Milk Protein Products in the U.S. Market.

The commission conducted its investigation at the request of the Senate Committee on Finance.

Highlights of the report include:

Technology. The market for milk protein products is changing with the development of technologies that have reduced costs and increased the production of more specialized dairy products, tailored to the specific needs of customers.

Such products include MPC, specialized casein and caseinate products, whey protein concentrate, and whey protein isolate.

Global trade in these products is growing, benefiting from low global tariffs and few quotas, as well as relatively high prices of competing, traditionally traded milk-protein products.

Government. The competitiveness of the U.S. dairy industry has been affected by the high level of government intervention, mainly through federal price support and milk marketing orders.

U.S. government programs have created disincentives for the domestic production of MPC, casein, and caseinate.

There is also significant government support in the dairy markets in the European Union through production and export assistance.

There is little government intervention in the dairy markets in Australia and New Zealand.

Dairy policies. Analysis of recent trends in imports of MPC indicates that U.S. imports from the European Union during 1998-2002 were heavily influenced by dairy policies in both the European Union and United States.

These policies induced the large increase in imports from 1998 to 2000.

Policy changes in 2001 and 2002 contributed to the significant drop in U.S. imports of MPC from the European Union and make it unlikely that the conditions that contributed to the increase in imports from 1998-2000 will be repeated in the future.

Percents. A survey of milk protein importers generated new data on the protein content of imported milk protein products during 1998-2002.

The three largest categories of U.S. imports of MPC are MPC with a protein concentration of 40 percent to 49 percent (MPC 40-49), almost exclusively imports of MPC 42; MPC 70-79; and MPC 80-89.

The protein content of MPC imports changed during the 1998-2002 period.

In 1999 and 2000 there was a sharp increase in imports of low-protein MPC (mostly MPC 42).

However, in 2001 and 2002 imports of low-protein MPC declined significantly.

During the 1998-2002 period imports of high-protein MPC (especially MPC 70-79) increased consistently.

Usage. A survey of milk protein product purchasers provided information on how these products are used in the U.S. market.

MPC purchases are dominated by two end-use applications: processed cheese products (62 percent) and specialty nutrition products (24 percent).

More than 90 percent of all MPC used in the production of processed cheese products was MPC 70-79 (mainly MPC 70).

Almost all MPC purchases for use in specialty nutrition (sports, medical, geriatric nutrition) had very high-protein concentration (80 percent or greater).

Fifty-six percent of all MPC purchased in 2002 was MPC 70-79 used in the production of processed cheese products.

Low-protein MPC (MPC 40-59) was primarily used in dairy products other than processed cheese products, such as cultured products and frozen desserts.

Displaced. On a protein basis, imports of MPC, casein, and caseinate may have displaced 318 million pounds of U.S.-produced milk proteins between 1998 and 2002.

Annual estimates of the volume of U.S.-produced milk proteins displaced by imports ranged from a low of 41 million pounds in 1998 to a high of 82 million pounds in 2000.

Skim milk powder. In response to mounting government skim milk powder stocks, the USDA twice reduced the support price of skim milk powder and raised the butter support price during 2001-2002.

These tilt adjustments are significant policy changes because lowering the support price for skim milk powder results in reductions in certain class milk prices that, in turn, result in lower farm-level prices.

The commission estimated that imported milk proteins may have contributed about 25 percent to 35 percent to the growth of government skim milk powder stocks during 1996-2002; however, the extent to which these imports affected the USDA decision to adjust the butter/skim milk powder tilt is not clear.

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