US Dairy Industry

702 Words 3 Pages
Introduction
The U.S. dairy industry is the world’s 6th largest, representing one-tenth of global milk production. Milk consumption in particular, has been heavily promoted by the government and milk cooperatives, and thus become a staple of American culture . The Dairy Farmers of America (DFA) is America’s largest co-operative, owned by and serving more than 9,000 dairy farms in 48 states. The DFA owns several consumer brands including Dairy Maid and Borden Cheese, and generates shareholders value through consumer retail, investments, and national supplier agreements. With over $12.8 billion in 2013 net sales, the DFA represents approximately 30% of milk production in the U.S. and is the world’s 5th largest dairy company.
The Vietnamese dairy
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dairy industry is strictly regulated and subsidized by the federal government. Support for dairy is provided through the U.S. federal dairy policy, which has five main components: the Dairy Product Price Support Program (DDPS), Federal Milk Marketing Orders, Milk Income Loss Contract (MILC) Program, Dairy Export Incentive Program, and tariff‐rate quotas on dairy imports. The DDPS ensures that the government is ready to purchase dairy products to prevent market prices from dropping below support levels, the Dairy Incentive Program pays cash to exporters as bonuses, allowing them to sell certain U.S. dairy products at prices lower than the exporter 's costs of acquiring them, and import barriers keep domestic milk products competitive. Despite an open dairy market, regulations make it extremely difficult for foreign entrants to compete in the U.S. milk market while ensuring that domestic farmers are encouraged to export internationally without fear of failing against large competitors like Nestle and Fonterra (who are ranked 1st and 4th internationally, respectively). Furthermore, with the U.S. ranked #16 on Transparency International’s Corruption Perceptions Index , clean government operations help ensure that the dairy industry runs smoothly and …show more content…
However, if Vinamilk expanded into the U.S., it would be at a disadvantage no matter if it sold regular or specialty dairy products. Even with government funding, Vinamilk’s foreign brand presence would be challenged by the U.S. government’s strict tariff regulations and strong subsidization for U.S. milk producers. Furthermore, Vinamilk would experience difficulty competing with already established specialty brands such as Danone and Yoplait (27.8% and 25.8% of U.S. yogurt sales, respectively) . If the DFA were to compete in Vietnam, the increasingly liberated FDI laws would be advantageous. However, the DFA needs to keep in mind that although the Vietnamese government does not regulate its dairy industry heavily, Vinamilk does receive the government support that provides a competitive advantage over foreign

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