By W.B. Dobson

Possibilities for substantial additional opening of world dairy markets appear limited in the near term. U.S. policymakers have few incentives to push for more open U.S. markets. EU policymakers must decide what to do about domestic dairy policies–especially how to include Eastern European countries under the CAP–before they will be positioned to consider substantial further liberalization of Union dairy trade policies.

Australia’s dairy industry experienced unique circumstances that created strong pressures for deregulation and a push for dairy export expansion. The U.S., EU, and Canada face no similar pressures for deregulation.

The WTO panels’ decisions regarding Canada’s Class 5 pricing system have had chilling effects on proposals such as the U.S.’s Class IV dairy export program and two-tier export programs advocated by the Danes.

The New Zealand Dairy Board’s decision to adopt strategies that will increase the Board’s direct investments in foreign dairy companies and use milk produced in other countries to expand the firm’s sales reflects in part a lack of optimism on the part of New Zealanders about further opening of world dairy markets.
Management Lessons

Officers of many dairy-food companies point to Nestle as a model to be emulated in the sale of highly differentiated dairy-food products. In particular, Nestle’s practices show how a firm can capitalize on size advantages and operate successfully in both developed and developing economies.

The New Zealand Dairy Board (NZDB) and Kerry Group/PLC provide examples of what can be accomplished mainly by superior management.

The NZDB has been able to cling to monopoly exporting and long- established exporting practices in part because it has had superior management.

Cooperatives in many countries point to Irish cooperative/public limited companies – especially the Kerry Group/PLC – as examples of what can be accomplished by converting to a cooperative/public limited company. An important lesson from Kerry Group’s experience is to not attribute too much of the firm’s success to Kerry’s decision to convert to a cooperative/public limited company. Kerry’s success is mostly a tribute to good management.

Food Master’s experience in Kazakhstan, the Ukraine, and Moldova underscores the difficulties of operating dairy-food businesses (and probably many other businesses) in the Former Soviet Union. The company’s businesses appear to be operating in what Michael Porter and Warren Buffett describe as unattractive industries.

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By Thomas Reardon, Peter Timmer, and Julio Berdegue

In the past decade, there has been a spectacular rise of supermarkets in the two developing regions that are growing the most rapidly. These regions are Latin America and Asia. The areas are home to four billion consumers, roughly one billion in middle class, and the fast growing food markets on the planet. The paper begins by detailing the patterns and reasons for this dramatic rise of supermarkets in these two regions. The authors draw comparisons and point out differences between the two regions concerning the developments leading to and the later impacts of supermarket growth. The paper expands by analyzing the evolution of supermarket procurement systems, in terms of their organization and institutions including standards. The driving force of this analysis focuses on the emerging effects of these changes on the fruit and vegetable markets and trade. The authors hypothesize the ways in which converging patterns in organization and institutions in food industry over the regions studied and developed regions may affect trade patterns in the future. A careful discussion is brought forth concerning the implications of these developments and the effects they may have on emerging public policy issues and questions concerning food safety standards. The most worrying implication of all is the huge challenge this transition poses for small farms and firms trying to survive in this unknown and overwhelming world of large supermarkets.

It should be noted that the data and trends discussed in this paper are based on preliminary evidence and emerging examples drawn from an amalgam of industry surveys, some government statistics, and many direct interviews by the author and collaborators. There is a general dearth of “official statistics” on these new phenomena, both for how they affect domestic markets in those regions and international trade.

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By Prabhu Pingali and Randy Stringer

The post Uruguay Round food security picture is rather bleak for a large number of developing countries. Between 1997/99 and 1998/2000, the number of undernourished people increased by 15 million, a disturbing development given the global community’s commitment to food security concerns, its capacity to produce more than enough food for every human being, and its power to use modern information systems to pinpoint exactly where food is needed and to mobilize rapid transport systems to move food quickly around the globe. The food security problem remains as formidable and deadly as ever.

From a longer term perspective, food security progress has been nothing short of remarkable. The proportion of people in developing countries living with average daily food intakes of less than 2200 kcal fell from 57 percent in the early 1960’s to just 10 percent by the end of the century. During this period, per capita food supplies increased by more than 70 percent in China and Indonesia; by more than 50 percent in Pakistan and the Republic of Korea; and by more than 30 percent in Brazil, Burkina Fasso, the Dominican Republic, Ecuador, El Salvador, Jamaica, Mauritania and the Philippines.

This paper reviews agricultural and food security performances of developing countries after the Uruguay Round. In particular, issues and trends relevant to the interests of the low income food deficit and the net food importing countries are examined as the world prepares for further trade negotiations. The paper attempts to answer several questions, including: How has food security in the low income countries been effected over the past ten years? Are agricultural policies evolving in ways that take advantage of emerging trade opportunities? What are the emerging policy issues facing the net food importing countries? What is the role of food imports, domestic production, export earnings and food aid? In concluding the article the author presents a review of the most common arguments against further trade reform.

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