IDFA Clashes with Farmers Over Tariffs

October 10, 2001

The International Dairy Foods Association says it "strongly opposes" a request by the National Milk Producers Federation (NMPF) to USDA to increase tariffs on imported butter, butteroil and butter substitutes. In a letter to USDA Under Secretary J.B. Penn, NMPF asked USDA to exercise immediately World Trade Organization (WTO) safeguard rights on butter and butteroil imports, claiming that "imports [of these products] in July and August 2001 reduced U.S. dairy farm income by $70 million during those two months by lowering butterfat prices in domestic markets."

"This is a request that is totally unjustified," said IDFA Chief Economist Bob Yonkers. "Nothing has changed in the world markets to warrant such a request. The only change this year has been to the domestic dairy market, where the supply of milk is down from last year while the demand for dairy products continues to grow. Imported butter and milkfat helped meet growing product demand this year, even at a higher price due to existing import tariffs."

Specifically, NMPF requested that USDA switch the WTO safeguard mechanism from a price-based trigger to a volume-based trigger. With such a switch, safeguard duties would rise about 30%. Imports of both cheese and butter are already subject to safeguard duties when import prices drop to specific designated levels, IDFA says.

According to Yonkers, "The real issue is the enormous increase in butter and milkfat prices that consumers and dairy processors have had to contend with this year. Butter prices for January through September are fully 60% higher than for the same period last year. This increase translates directly into a 60% increase in milkfat costs under the federally regulated minimum milk pricing system. The result has cost consumers, and has virtually eliminated operating margins for many dairy processors, especially ice cream manufacturers."

He continued, "Butter and milkfat prices so far this year are even higher than the previous record set in 1998. Just as in 1998, dairy processors must now supplement the inadequate domestic sources with imported products. These imports come at a high cost, as the import tariff on such products is already more than 100% of the world butter price. The NMPF request, if granted, would add nearly 30% to these already high import tariffs, and would result in the inability to meet U.S. consumer demand for products that contain butter and milkfat."