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Dairy Trade Environment

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The International Policy Environment

Many countries within the Organisation for Economic Development & Co-operation (OECD) assist their dairy industries by supporting domestic prices through a combination of import restrictions, price supports, government purchasing and subsidised disposal of surpluses.

As a result, dairy production in these countries is largely insulated from international price trends. However, these dairy assistance policies can have a significant impact on international trade flows and pricing.

Factors Influencing International Prices
Domestic prices for milk and dairy products vary markedly between countries in line with differences in production costs and domestic price support arrangements. As a result, returns from export sales can also vary considerably between markets.

Quota vs Non-Quota Markets
For markets where imports are restricted on a volume and/or country of origin basis (ie quota markets), returns from sales are generally influenced by the domestic price structure in the importing country. This can mean a sales price well above the prevailing international price.

For non-quota import markets, international prices are more uniform, and are largely determined by the policy settings of major exporting nations, such as the EU and USA through their use of export subsidies.

Other Factors
Other important factors which can influence international price movements include:

  • exchange rate movements;
  • the level of government stocks of product in the EU and USA;
  • changes in regulations covering subsidised sales within these countries;
  • the seasonality of product supply from Australia, New Zealand, and South
    American producers;
  • the level of food aid shipments; and
  • the timing of major import tenders.


World Trade Organisation (WTO): Commitments on Export Subsidies & Market Access
The World Trade Organisation (WTO) was created in April 1994. In forming the WTO, the world’s major traders agreed to replace the General Agreement on Tariffs and Trade (GATT), and implement a set of reforms based on seven years of multilateral negotiations known as the Uruguay Round.

The Uruguay Round marked the first attempt to establish comprehensive rules governing international trade in agricultural products. The key impact of the Uruguay Round agreement on international dairy trade was to put limits on the use of export subsidies and increase access to previously highly regulated or restricted product markets.

Both the export subsidy commitments and the market access commitments were phased in over six years to 2000. For developing countries, a ten year period of implementation was allowed.