The US Department of Agriculture has increased dairy export subsidies to increase competitiveness and halt the corrosion of the US dairy industry's international market share.

Announcing the extension of the Dairy Export Incentive Program on Friday (22 May), Agriculture Secretary Tom Vilsack said that the US subsidies were prompted by the EU's reintroduction of dairy subsidies earlier this year.

Nevertheless, Vilsack added: "The Obama Administration remains strongly committed to the pledge by the Leaders of the Group of Twenty to refrain from protectionist measures. Our measured response [to EU subsidies] is fully consistent with our WTO commitments and we will make every attempt to minimise the impact on non-subsidising foreign suppliers."

Under the Dairy Export Incentive Program, allocations of 68,201 metric tons of non-fat dry milk; 21,097 metric tons of butterfat; 3,030 metric tons of various cheeses and 34 metric tons of other dairy products, as well as individual product and country allocations, will be made available through Invitations for Offers.

The move has prompted criticism from the world's largest dairy exporter, New Zealand-based Fonterra.

"This is bad news for the market and bad news for our farmers in New Zealand who compete internationally with no support or subsidies of any type," said Fonterra's managing director of global trade, Kelvin Wickham.

According to Wickham, world dairy prices - which have been depressed by the global economic downturn - are currently "bouncing along the bottom" as the market goes through a "rebalancing phase" following 2007's record high prices and excess supply. The US subsidies will create "more uncertainty", he said.

"Farmers all around the world are hurting with returns at current levels. But it's vital that we don't have subsidies and support programmes which distort the market and send the wrong price signals to farmers.

"Restarting of export refunds by the US sends a very negative signal to the market and the global community. DEIP will only have a relatively small effect on US milk prices and US farmer incomes, but it's extremely disappointing and potentially damaging to the world dairy market," he warned.