Dairy Industry:

Potential for and Barriers to Market Development

RCED-94-19: Published: Dec 21, 1993. Publicly Released: Jan 5, 1994.

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Pursuant to a congressional request, GAO reviewed the development of domestic and international markets for U.S. dairy products, focusing on: (1) how the U.S. dairy industry's export activities compare with those of other major milk-producing countries; (2) opportunities to develop and expand dairy markets; and (3) obstacles to expanding dairy markets.

GAO found that: (1) the United States is the third largest milk producer in the world; (2) the U.S. dairy industry is not taking full advantage of the expanding international dairy market, since it exports less than 2 percent of its dairy products; (3) the United States has a relatively small share in most international dairy markets; (4) Mexico and Pacific Rim countries have the greatest potential for increasing U.S. dairy exports because of their increasing per capita incomes, low milk consumption, and preference for Western-style diets; (5) the U.S. domestic dairy market has some potential for expansion in lowfat and specialty cheeses and processed foods; (6) federal dairy policies that encourage the production of dairy products do not always meet consumer demand, increase U.S. dairy prices above world market prices, and impede expansion and competitiveness in global markets; (7) U.S. dairy prices remain above world market prices despite reductions in dairy price supports; and (8) the U.S. dairy industry needs to change to a more global marketing strategy that focuses on consumers' needs.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The Federal Agricultural Improvement and Reform Act of 1996 emphasized exports of dairy products by making more Dairy Export Incentive Program (DEIP) funds available. The act also broadens the efforts of the promotion programs to include unlimited market development, and grants authority for the industry to form export trading companies.

    Matter: Congress, jointly with the executive branch and the dairy industry, should consider initiating efforts to develop a long-range dairy policy that better recognizes the importance of dairy exports to the continued viability of the industry. Steps could include conducting hearings, gathering information on alternatives to overcome impediments to export development, and analyzing the implications of those alternatives on the industry's current structure.

  2. Status: Closed - Implemented

    Comments: The Federal Agricultural Improvement and Reform Act of 1996 emphasized exports of dairy products by making more DEIP funds available. The act also broadens the promotion programs' efforts to include unlimited market development, and grants authority for the industry to form export trading companies. In addition, USDA has provided the dairy industry $1.6 million to explore and develop export markets.

    Matter: Congress should consider directing the Secretary of Agriculture to facilitate discussions with the dairy industry to help increase its attention to exploring global markets.

 

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