May 18, 2004
News Release 04-044
Inv. No. 332-453
ITC ISSUES REPORT ON CONDITIONS OF COMPETITION FOR MILK PROTEIN
PRODUCTS IN THE U.S. MARKET
Imports of milk protein concentrate, 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 the U.S. International Trade Commission in its newly released report Conditions of
Competition for Milk Protein Products in the U.S. Market.
The ITC, an independent, nonpartisan, factfinding federal agency, conducted its investigation at
the request of the Senate Committee on Finance. As requested by the Committee, the report
examines the competitiveness of a variety of milk protein products in the U.S. market, focusing
on milk protein concentrate (MPC), casein, and caseinate. The report also reviews the market for
those products compared with other milk proteins, including whole milk, skim milk, dried whole
milk, dried skim milk, whey, dried whey, and whey protein concentrates. The Committee
requested that the investigation cover the period 1998-2002. Highlights of the report follow:
- 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, benefitting from low global tariffs and few quotas, as
well as relatively high prices of competing, traditionally traded milk-protein products.
- 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 (EU) through production and export assistance. There is
little government intervention in the dairy markets in Australia and New Zealand.
- Analysis of recent trends in imports of MPC indicates that U.S. imports from the EU
during 1998-2002 were heavily influenced by dairy policies in both the EU 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 EU and make it unlikely that the conditions that contributed to the increase in
imports from 1998-2000 will be repeated in the future.
- 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 40-49 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.
- 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). Over
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). 56 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.
- 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.
- In response to mounting government skim milk powder (SMP) stocks, the U.S.
Department of Agriculture twice reduced the support price of SMP and raised the butter
support price during 2001-2002. These tilt adjustments are significant policy changes
because lowering the support price for SMP 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-35 percent to the growth
of government SMP stocks during 1996-2002; however, the extent to which these imports
affected the USDA decision to adjust the butter/SMP tilt is not clear.
Conditions of Competition for Milk Protein Products in the U.S. Market (Investigation No. 332-453), USITC Publication 3692, May 2004) is available in the Publications section of the ITC's
Internet site at www.usitc.gov. A CD-ROM version or printed copy may be requested by calling
202-205-1809 or by writing to the Office of the Secretary, U.S. International Trade Commission,
500 E Street SW, Washington DC 20436. Requests may be faxed to 202-205-2104.
ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade
and are generally conducted at the request of the U.S. Trade Representative, the Senate
Committee on Finance, or the House Committee on Ways and Means. The resulting reports
convey the Commission's objective findings and independent analyses on the subjects
investigated. The Commission makes no recommendations on policy or other matters in its
general factfinding reports. Upon completion of each investigation, the ITC submits its findings
and analyses to the requestor. General factfinding investigation reports are subsequently released
to the public, unless they are classified by the requestor for national security reasons.
-- 30 --