Dairy Industry

Potential for and Barriers to Market Development Gao ID: RCED-94-19 December 21, 1993

Since 1981, Congress has sought to reduce the U.S. dairy industry's dependence on federal financial support. As a result, the government's costs under the U.S. dairy program have shrunk from $2.7 billion in fiscal year 1983 to $395 million in fiscal year 1992. In addition, recent international trade agreements may promote freer trade, causing the U.S. dairy industry to be more responsive to market forces. This report (1) compares and contrasts the U.S. dairy industry's export activities with those of other major milk-producing nations, (2) examines ways to develop and expand markets, and (3) identifies potential obstacles that the industry faces in expanding markets.

GAO found that: (1) the United States is the third largest milk producer in the world; (2) the U.S. dairy industry is not taking full advantage of the expanding international dairy market, since it exports less than 2 percent of its dairy products; (3) the United States has a relatively small share in most international dairy markets; (4) Mexico and Pacific Rim countries have the greatest potential for increasing U.S. dairy exports because of their increasing per capita incomes, low milk consumption, and preference for Western-style diets; (5) the U.S. domestic dairy market has some potential for expansion in lowfat and specialty cheeses and processed foods; (6) federal dairy policies that encourage the production of dairy products do not always meet consumer demand, increase U.S. dairy prices above world market prices, and impede expansion and competitiveness in global markets; (7) U.S. dairy prices remain above world market prices despite reductions in dairy price supports; and (8) the U.S. dairy industry needs to change to a more global marketing strategy that focuses on consumers' needs.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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