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Accurate analysis of U.S. dairy trade not simple.

Article Excerpt
Domestic prices for cheese and butter escalated significantly' during the spring months of 2004. In addition, world prices have also strengthened. A perceived shortage of domestic U.S. milk production has escalated commodity prices, which may have affected international prices as well as U.S. trade patterns. U.S. imports and exports of major dairy products for the first five months of 2004 will be discussed below.

Commodity prices

U.S. grade AA butter prices rose from $3,157 per metric ton in January 2004 to a peak of $4,895/mt in April (Figure, p. 18). Prices have subsided somewhat in May and June but are expected to rise again in the fall. Global prices have risen steadily from $1,575/mt in January (northern European Union) to $1,900 by June.

U.S. domestic cheddar cheese prices also showed a price spike this spring, rising from $2,880/mt in January to a peak of $4,781/mt in April (Figure). U.S. Class III futures prices suggest that cheese prices will weaken somewhat in August and then rise again in September. World cheddar cheese prices strengthened throughout the year, rising from $2,400/mt in January to $2,700 by June.

Of interest here is what impact these higher dairy commodity prices have on imports and exports of U.S. dairy products. They also raise a number of questions. For example, did stronger market conditions allow the U.S. to export more dairy products? Did the shortage of domestic milk production allow the U.S. to import more select dairy products than it normally does?

Trade overview

U.S. trade data are currently available for the first five months of 2004. Thus, we only have a limited picture of U.S. imports and exports of major dairy commodities or products that contain a significant quantity of dairy products. A summary of U.S. dairy trade is provided in Tables 1-4 based on a new trade accounting methodology recently published in the Journal of Dairy Science (Bailey, 2004).

This methodology is based on two approaches. First, it aggregates dairy products according to major categories (i.e., butter equivalents or whole milk...