By Marjorie Stair, Staff Reporter 
ONE YEAR after the introduction of a new duty regime for milk products, the Government suffered a decline in duty revenue of J$12.8million.
This despite a marginal increase of 84 tons in the importation of skimmed milk and whole milk powder. The Permanent Secretary in the Ministry of Agriculture says the government is now taking steps to plug the existing loophole, thereby ensuring that the correct duties are paid.
The new duty regime introduced in 1997 made provision for no payment of duty on imported skim milk powder and Nestle's imports for nutritional drinks viz. Milo and Suppligen; the imposition of five per cent duty on Nestle's imports for condensed milk and imports for the manufacture of confectionery, ice cream, baked goods and yoghurt; and 50 per cent duty on all other milk imports.
Raw material imports of skim milk powder jumped from 678 tons for the period June 1996 to May 1997 to 1226 tons for the period June 1997 to May 1998. Raw material imports of whole milk powder jumped from 4,861 tons to 5,934 tons over the same period, a total increase of 1,641 tons.
Imports of milk powder under the consumer category declined as significantly as raw material imports increased. Skim milk imports under this category moved from 231 tons down to 114 tons; whereas whole milk powder imports under the consumer goods category moved from 1,721 tons to 301 tons, a total decline of 1,437 tons.
Jamaican consumers are faced with three milk purchasing options. Purchasing fresh milk from farmers, an option that is being exercised less frequently as the years go by to the extent that many young people have no knowledge of the taste of fresh cows milk, or even how to prepare it for human consumption. The other options are the reconstituted milk or 'box milk', made primarily from milk powder, and powdered milk, sold in sachets.
The dilemma facing the policymaker is the age-old conflict between food and agricultural policy. What should take priority? The development of a local dairy industry or the provision of the cheapest form of milk protein to the consumer?
This, because when the costs are calculated, the milk sachet can be supplied to consumers at less than half the price of domestically produced farmers milk. Consumer preference for the powdered milk, or even the reconstituted, boxed milk, is strengthened by the fact that these milk options have a longer self-life and are easier to handle than the farmers fresh milk. Many Jamaican farmers no longer sell directly to consumers; however, most of the milk produced locally is sold to milk processors.
The Government must take a very long-term approach in the development of a sustainable policy for the dairy industry. The suspension of the debate on the Jamaica Dairy Development Board Act, will, hopefully, not only provide the dairy industry with some more time to study the Act but will also allow a review of some of the issues that might not be apparent to all interested parties. The first issue is that of the International Agricultural Agreement. January 1 2005 is the new deadline for reaching a final agreement on agriculture.
The three "pillars" of the agriculture agreement are export subsidies/competition; market access and domestic support. Milk products, benefiting from generous production and export subsidies are being dumped into the Jamaican domestic market and policy changes, over the past decade, which have placed emphasis on cheap food at the expense of agricultural development, have resulted in local milk production moving from 38.8 million litres in 1992 to 25.5 million litres in the Year 2000.
Final agreement on WTO trading of agricultural products will likely result in a sharp increase in the price of milk products as the current high level of subsidies on milk products, especially in the USA and Europe are scheduled to be removed.
The question then is whether the dairy industry will be able to survive until 2005 when it should be hopefully be operating on a more level playing field and will be more competitive. Or will it be too late. In recent months Nestle has not only reduced its buying price for Grade 'A' milk, but it has also reduced the quantities purchased pushing the dairy industry into further crisis. This, plus competition from cheap milk imports, made even cheaper by the loophole in the new duty regime, will push more dairy farmers out of production.
Nestle - Jamaica Milk Products benefits from a number of concessions which include zero duty on imported milk powder for use in the production of infant foods and nutritional supplements viz: Nutrament and Milo; 5 per cent duty on milk powder imported for the manufacture of all other products including condensed milk; and 75 per cent protective tariff on imported condensed milk. These concessions were predicated on their support for the growth and development of the local dairy industry and the acceptance of all fresh milk produced in the island. As with all else in our increasingly materialistic world there has been a shift from development to bottom line and, in essence, all the indications are that the Jamaica Dairy Development Board will now assume the developmental role, formerly undertaken by Nestle-Jamaica Milk Products.
It will be interesting to see who will still get what and when, given that the Government has committed US$10 million from the PL480 programme to the Milk Marketing project and a companion Milk Enhancement Programme which is still being developed. Dairy farmers are expected to inject US$1 million in the milk marketing project. The Milk marketing project will provide funds for the acquisition of the old Century Dairy Processing plant, Old Harbour; its refurbishing and operation as a milk processing plant by dairy farmers.
