Increasing milk product imports hurt U.S. farmers
WASHINGTON — Just as U.S. dairy farmers face their worst economic crisis in years, the plants they supply are turning again to foreign countries for milk.
Imports of milk protein concentrate and other dairy ingredients have been climbing, posting double-digit percentage gains in 2008 as food companies seek non-U.S. sources for milk byproducts.
The uptick in imports — rather than overly productive U.S. farms — is partly to blame for tumbling milk prices paid to farmers, one farm group said Wednesday. The group, the National Family Farm Coalition, also blamed a lack of competition among milk buyers and a "broken pricing system" by which the federal government helps determine how much farmers are paid for milk.
Congress, too, shares the blame, the group said, for letting a few big players dominate the milk industry, possibly in violation of laws protecting competition and fair markets.
"The politicians bear no cost for saying they're for farmers but voting against them," said John Bunting, a dairy farmer in Delaware County and an NFFC member who has called for greater government intervention.
Dairy companies use milk protein concentrate, caseinates or other high-protein dairy ingredients in many products, including cheese and energy bars. Among other attributes, they can help increase the amount of cheese made from every pound of milk, industry sources say.
But MPC is made chiefly in foreign countries, as U.S. companies have yet to find a way to make it consistently profitable here. The MPC sometimes replaces nonfat dry milk powder, which is readily available in the United States and is, in fact, being stored by the U.S. government by the tens of millions of pounds.
Thus, critics say, when companies such as Kraft Foods, which runs its largest cream cheese plant in Lowville, defend the use of MPC, they are really defending the use of milk from outside the United States, instead of buying more from U.S. farms.
"Importing MPCs into the U.S. is the same as importing milk, except that MPCs are loaded into box trailers at the dock for transportation to plants. No one notices," Mr. Bunting wrote in a report for the NFFC.
Imports of high-protein MPC climbed by 37 percent in the third quarter of 2008, the U.S. International Trade Commission reported. Other types of MPC held steady, and imports of caseinates — another high-protein dairy ingredient — shot up by 43 percent, to 88,400 metric tons.
Mr. Bunting said that if the 16 million pounds of MPC imported into the United States in December were converted back into milk, it would fill trucks stretching 65 miles.
Importers argue that the imports help keep dairy plants in business to buy farmers' milk, and that they have few alternatives given the lack of an MPC industry here.
Indeed, the nation's largest farmer-owned cooperative, Dairy Farmers of America, holds U.S. dairy import licenses for several products and works closely with the largest New Zealand dairy cooperative, Fonterra. New Zealand is a major exporter of dairy products, including MPC, to the United States and other countries.
Food companies continue to fight efforts to curtail imports, including opposing a bill in New York by state Sen. Darrel J. Aubertine, D-Cape Vincent, that would prevent companies from labeling as cheese or yogurt any product made with MPC or added caseinates.
Many plants in New York use such ingredients, reported New York Farm Bureau, which represents farmers and also opposes the legislation — because it could discourage growth of an MPC industry in the state, officials said.
The NFFC also blamed lack of competition among milk buyers and the federal government's reliance on cheese prices at the Chicago Mercantile Exchange to set minimum milk prices plants must pay farmers around the country.
"Reasonable people have a solid basis for concluding that pricing dairy farm milk from the whims of the small handful of players at the CME is not in the public's interest," Mr. Bunting wrote. "In the meantime, no one hears from policy makers calling for an investigation or a change in the dairy pricing system."
The NFFC's case goes against the conventional wisdom from economists that the economic downturn and declining demand have sent prices dropping. Milk prices paid to farmers have dropped about 50 percent from record highs, to less than the cost of production.
"Dairy economics are actually pretty simple, especially right now: demand has fallen off a cliff, and with it farmers' prices," said Christopher Galen, spokesman for the National Milk Producers Federation. "To downplay the fundamental relationship of supply and demand, and the widely understood fact that the economy is really hurting right now and has dramatically affected sales both domestically and internationally, is to ignore the Holstein in the room."
