Fonterra has criticised the US decision to extend its support for dairy exporters for another year, claiming that the move is "protectionist".

Earlier this week, the US Department of Agriculture announced that it would extend the Dairy Export Incentive Program (DEIP) into 2010.

DEIP provides financial aide to dairy exporters. The program is designed to help US dairy exporters "meet prevailing world prices" and "encourage the development of international export markets", the USDA said.

Announcing the move, Agriculture Secretary Tom Vilsack said: "Our international markets continue to erode and the European Union has shown no indication that it will refrain from providing dairy export subsidies. We will continue to use this program in a responsible manner in support of US dairy farmers."

However, a spokesperson for Fonterra, the world's largest dairy exporter, told just-food that the move would be detrimental to the global market for dairy products.

"The move by the US is short sighted and sends a very negative signal to the market. Prices have been bouncing along the bottom in recent months and news of US export subsidies will only create more uncertainty," the spokesperson warned.

Fonterra dismissed Vilsack's contention that the DEIP was "fully consistent with our WTO commitments"

"People are trying to justify the US subsidies, but anyway you cut it, this is clearly a move to increased protectionism. And this is bad news for the market and bad news for our farmers who compete internationally with no support or subsidies of any type," the spokesperson said.

"The facts are irrefutable: this will have minimal benefit to the US milk price or US farmers. It's likely to have a negative impact on international dairy prices - especially at a time when the market is delicately balanced."