Chinese dairy imports set first-quarter record
Chinese dairy imports grew by 13% (+106,950 tons) in the first quarter of 2019 (compared to January-March 2018), according to Chinese data reported in Global Trade Atlas. Aggregate dairy volume (all products) reached 877,655 tons—far and away a record.

It was a welcome sign for international dairy trade, particularly given concerns over how the trade war with the United States was impacting Chinese economic growth and might filter down into consumer purchasing. First quarter Chinese GDP growth (+6.4%) actually slightly exceeded expectations.

However, despite the positive start to Chinese dairy purchasing, most market watchers believe forward-buying accounts for a portion of the volume, and double-digit growth is unlikely to persist as we move deeper into the year.

WMP was the star of the quarter, up 29% compared to the same period the previous year. New Zealand, which accounts for more than 95% of China’s WMP imports, grew sales by 30% (an additional 61,453 tons) vs. January-March 2018.

But gains were widespread: SMP imports jumped 28%; fluid milk/cream rose 22%; infant formula increased 21%. Cheese volume rebounded from 2018’s disappointing performance, gaining 3% in the first quarter (helped by a 9% jump in March), but still lags 2017.

Whey problems
African Swine Fever prevented an even better overall performance. Official government numbers say more than 1 million pigs have been culled so far because of African Swine Fever, and analysts suggest the nation could lose as much as one third of its entire herd or around 130 million of its 400 million pigs.

Chinese whey imports dropped 14% in the first quarter, in part due to reduced feed demand because of the disease. U.S. suppliers were badly hit, although retaliatory tariffs played a significant role in the 51% decline in Chinese whey imports from the United States.

Overall Chinese whey imports declined by 20,565 tons in the first quarter, but Chinese imports from the United States fell 39,745 tons. In other words, other whey suppliers, led by Belarus whose Chinese whey shipments rose by nearly 13,000 tons over January-March 2018, made up for a portion of the U.S. decline.

Strong purchasing amidst contracting production
EU SMP prices continue to tick higher, up for the fourth straight week. Strong purchasing from China and Southeast Asia amidst contracting production worldwide has tightened the global market. Oceania cheese and butter prices are marching higher as well. Other prices are mostly steady.

New Zealand exports remained strong in March, particularly WMP (+41%) and cheese (+28%). WMP shipments to China more than doubled, and sales to Southeast and South Asia also were much higher. Cheese gains came primarily from Japan, China and the Philippines.

China’s milk powder and cheese imports posted healthy gains in March, but whey imports continue to lag. In the first quarter, milk powder imports were up 29%, while whey imports were down 14% (see lead story). Sri Lanka’s WMP imports hit a record high in March (12,263 tons) after very slow purchasing in the first two months of the year. In contrast, milk powder demand from the MENA region remains light.

New Zealand pasture conditions have improved heading into the off season. Meanwhile, weather is hot and dry in northern Europe. Production in Australia and South America continues to be significantly lower, limiting export supply. Argentina exports of milk powder, cheese, butterfat and whey were down 20% in March, and down 18% in Q1. First-quarter export volume was the lowest for Q1 in 16 years. Dry weather persists in Australia, jeopardizing the crop outlook for next season.

India SMP exports were just 135 tons in February, after moving nearly 37,000 tons in the previous five months.

If line is trending up, currency is strengthening vs. U.S. dollar (U.S. dollar is weakening). This is favorable for U.S. competitiveness. If line is trending down, currency is weakening vs. U.S. dollar (U.S. dollar is strengthening). This is unfavorable for U.S. competitiveness. Currency exchange rates are calculated for Wednesday of each week. Source: Oanda.com.

 

USDEC members testify before Congress
Representatives from two USDEC member companies testified on April 30 before a House Committee on Agriculture Subcommittee on Livestock and Foreign Agriculture.

The hearing’s purpose was to review the state of the U.S. dairy economy. California Dairies Inc. CEO Andrei Mikhalevsky called international trade a “critical component” of that economy.

Mikhalevsky stressed the vital need for the United States to expand exports and warned of the extreme damage caused by trade conflicts. He emphasized how the United States was falling behind major competitors in forging new trade deals, tilting the playing field in their favor.

Mikhalevsky called for passage of USMCA, resolution of the trade conflict with China, a new trade deal with Japan that matches or exceeds the dairy terms of Japanese deals with our competitors, and a “thorough and robust” trade agreement with the EU that addressed all existing tariff and nontariff barriers.

“Our industry needs increased access to markets, a greater number of trade agreements and a level playing field,” Mikhalevsky concluded.

For more on his testimony, read the U.S. Dairy Exporter Blog piece, “California Dairies CEO Tells Congress That U.S. Has ‘Fallen Behind’ on Trade Agreements.”

In addition to Mikhalevsky, Sadie Frericks, owner and operator of Minnesota-based Blue Diamond Dairy (supplier to USDEC member Land O’Lakes), also testified.

Vilsack visits the Hill to talk trade
USDEC President and CEO Tom Vilsack met with members of Congress this week to educate and inform them of the benefits of trade for the U.S. dairy industry and dairy farmers in particular. In meetings with Sens. Bob Casey from Pennsylvania, Maria Cantwell from Washington State and Tina Smith from Minnesota, and Reps. Conor Lamb and Chrissy Houlahan from Pennsylvania, Secretary Vilsack and USDEC Trade Policy staff focused on many trade issues impacting U.S. Dairy. Topics included USMCA approval, the removal of steel and aluminum tariffs on Mexico (and subsequent removal of Mexican retaliatory tariffs), U.S. trade talks with China and China’s retaliatory tariffs, and U.S. trade talks with Japan.

USTR fact sheets summarize dairy and other benefits from USMCA
USTR released a series of 10 fact sheets yesterday summarizing specific aspects of the U.S.-Mexico-Canada Agreement (USMCA). On the agriculture fact sheet, dairy commands a high profile, in large part because of the critical role USDEC played in the negotiations. Four of the six achievements listed on the ag sheet—improved market access to Canada, elimination of Canada’s Class 6 and 7 pricing schemes, creation of a generic cheese name list in Mexico, and modernized sanitary and phytosanitary measures—are directly about dairy or feature critical components related to dairy, each of which USDEC worked extensively on with the U.S. government during the course of USMCA and prior trade negotiations.

U.S. cheese impresses at Singapore’s World Gourmet Summit
U.S. cheese made its mark at this year’s World Gourmet Summit (WGS), the month-long annual celebration of food and drink in Singapore. As the official dairy partner for the event through our partnership with Peter Knipp Holdings (PKH), USDEC engineered a series of activities that elevated the visibility of U.S. cheese and educated chefs, food professional, media and consumers about U.S. cheese craftsmanship, variety, versatility and innovation potential.

Highlights included:

• Nine hundred culinary sector representatives sampled a U.S. cheese feast at the gala opening reception April 22. The reception served as the backdrop for unveiling the winner of the USDEC-hosted “U.S. Dairy Innovative Chef Challenge.”

The contest tasked five acclaimed chefs from the region with creating an innovative dish pairing U.S. monterey jack and chipotle cheddar with more traditional ingredients and elevating the cheese to be the star of the entree. Millar Mai, head chef of modern Southeast Asian restaurant Ding Dong, won for his Lobster Tail Roulade Stuffed with U.S. Chipotle Cheddar Seafood Mousseline and U.S. Monterey Jack Glaze.

• At the April 24 U.S. Cheese Masterclass, celebrity chef Shaun O’Neale showcased U.S. cheese in culinary demonstrations, a wine pairing and a chef luncheon. O’Neale demonstrated how U.S. cheese could be used to bring bold flavors to life in edgy culinary innovations. The growth of U.S. artisanal cheesemakers alongside major producers has ushered in a “cheese renaissance” in America and made the country a cheesemaking powerhouse, he told his fellow chefs.

• The activities culminated in a gourmet Sunday brunch with about 300 attendees, where WGS sponsors showcased products on tabletop displays. The USDEC table, with samples of 23 U.S. cheeses, was “swamped” with attendees eager to taste U.S. products.

Media coverage
USDEC staff in the region reached out to key media with a press release highlighting U.S. dairy growth in Southeast Asia and some of the activities built around WGS. The release, which generated online and print media coverage, conveyed the U.S. commitment to serving the market and capacity to deliver to consumer needs.

In addition, USDEC created an infographic for the activities, highlighting how “U.S. Dairy Delivers in Southeast Asia.” The infographic is a colorful, attention-grabbing outline of the breadth and depth of U.S. dairy business in Southeast Asia that members are welcome to use in dealings with customers.

Seeking to further highlight the versatility of U.S. cheese and spark and use, USDEC published a special section in the March/April issue of PKH’s Cuisine & Wine Asia magazine. The section focused on blending U.S. cheese with traditional Nanyang cuisine, and featured U.S. cheese-focused recipes from five leading chefs in Singapore.

Get your Readiness Roadmap to prepare for potential crises in Mexico
As the recent border closure threat shows, it’s not only food safety risks that can create a business crisis with our No. 1 dairy customer—it’s politics. In fact, since 2000, Edelman-Mexico has identified 58 dairy-related risks in Mexico; 41 qualified as political risks.

The evolving relationship between the United States and Mexico and political complications were key topics at USDEC’s Crisis Readiness Summit held at the spring Board of Directors and Membership Meeting. Edelman’s Hector Faya and Mariana Sanz spoke in-depth about that relationship as well as the role of social media in Mexico in the event of a crisis and Mexican consumer views on U.S. products and brands.

Links to audio of their presentations as well as a written transcript can be found in the Global Dairy eBrief Exclusives column, “USDEC Crisis Readiness Summit Outlines New Dynamics in Mexico.” In addition, click here for the 56-page, members-only “Crisis Readiness Roadmap for Mexico” that was unveiled at the summit.

New opportunity to make inroads in Vietnam
USDEC will be participating in the 2nd International Exhibition on Milk and Dairy Products in Vietnam May 30-June 2 in Ho Chi Minh City. The biennial expo kicked off in 2017 in Hanoi as part of an effort to boost sustainable development of the domestic Vietnamese dairy sector.

We encourage members to participate or send representatives to the show, which the U.S. Embassy’s Office of Agricultural Affairs calls “a new opportunity for a wide range of enterprises and organizations to promote their products, meet new partners and better understand Vietnam’s growing dairy market.”

Exhibitors span the dairy supply chain from the farm machinery to processing and packaging equipment to ingredients and finished products. For more information, contact Kristi Saitama at ksaitama@usdec.org.

 

Nestlé looks to tap Southeast Asian health trends
Judging by two recent new product rollouts, Nestlé has its eyes set on nutritional appeal when it comes to dairy R&D in Southeast Asia.

Nestlé Thailand unveiled Milo UHT No Sucrose, a product deliberately developed to reflect the government public health policy of encouraging Thai people to consume an appropriate amount of sugar in their diets. The product carries the Thai Healthier Choice logo, a state-backed labeling scheme started in 2016 that aims to improve national health.

Meanwhile, Nestlé Indonesia rolled out Nestlé Acticor, a milk-based drink containing beta glucan (a sugar with immune enhancing qualities) and inulin (sometimes used to lower cholesterol). Heart disease is the No. 1 cause of death in Indonesia, and the Acticor marketing campaign is built around heart health. The product also aligns with the Indonesian government initiative “Movement for Healthy Living Society,” which encourages healthier dietary patterns to improve quality of life. (USDEC Southeast Asia office; Company reports; Indopos, 4/29/19)

 

Coke opens Mexican milk, juice plant
Coca-Cola Mexico opened a new $105-million fluid milk and juice plant in Lagos de Moreno, Jalisco. The facility, part of Coca-Cola’s Jugos del Valle-Santa Clara non-carbonated beverage division, can produce 120 million liters per year. It is the company’s second milk facility in Mexico; the first is in Pachuca, Hidalgo. The Lagos de Moreno plant will initially produce milk under the Santa Clara label for the domestic market, but Coca-Cola is eyeing export opportunities in Latin America and the United States as well. (USDEC Mexico office; Company reports; Forbes, 4/29/19)

Saputo buys Australian cheese business
Canada’s Saputo entered into an agreement to purchase the specialty cheese business of Australia’s Lion-Dairy & Drinks for A$280 million (about US$208 million). The deal includes two manufacturing plants located in Burnie and King Island, Tasmania, two dairy farms and a number of brands, including Mersey Valley, South Cape and King Island Dairy. Saputo previously purchased Lion’s Coon, Cracker Barrel and Mil Lel cheese lines in 2015.

Saputo says the deal will further diversify its product offerings, expanding and complementing its current activities in Australia. Lion is still looking to divest its fluid and fresh dairy operations in Australia. (Company reports; North Queensland Register, 4/19/19)

Company news briefs
Australia’s Freedom Foods completed a key commissioning step for a new lactoferrin production line at its Shepparton, Victoria, manufacturing site. It expects to produce 16 tons of lactoferrin annually. The plant also began producing micellar casein in February and native whey protein isolate in March . . . Russia’s Galactika Group expanded its partnership with Finland’s Valio, opening a new production line for yogurt and dairy desserts at its facility in Gatchina, Leningrad Oblast . . . Domino’s Pizza expects to add nearly 10,000 additional locations in 85 markets worldwide by 2025 . . . Ornua’s Kerrygold brand is the first Irish food brand to top €1 billion in retail sales, according to Irish Ag Minister Michael Creed . . . Northern Ireland’s Dale Farm is not renewing the contract for the Fivemiletown Creamery cheese plant it was leasing from Fivemiletown & Brookeborough Co-operative. The company will transfer production to its facility near Culleybackey. (Newstalk, 4/30/19; Agriland, 4/25/19; The Dairy News, 4/25/19; Yahoo Finance, 4/24/19; Motley Fool, 4/3/19)