Japan’s lower house approves U.S. trade deal, January implementation on track
The lower house of the Japanese Diet approved the Phase 1 trade agreement struck with the United States in September (see Global Dairy eBrief, 10/11/19). The deal now heads to the Diet’s upper house, which is reportedly aiming to ratify it before the end of its current session on Dec. 9.

Both countries have said they would like to see the agreement enter into force on Jan. 1, 2020. (Members can download a summary of the key dairy elements of the deal prepared by USDEC’s trade policy team here or get into the details of the pact in the Trade Agreements section of the USDEC Export Guide.)

USDEC and 33 other agricultural organizations sent a joint letter this week to the House Ways and Means Committee expressing strong support for the Phase 1 agreement, noting the importance of January 2020 implementation, while also emphasizing the importance of continued progress on tariffs and non-tariff issues in Phase 2 of the negotiations. Ways and Means held a hearing on Tuesday on the Phase 1 deal and planned future talks for a comprehensive agreement.

Phase 2 prospects
USDEC continues to call for a comprehensive agreement that delivers the full range of access to the Japanese dairy market. As noted above, the joint letter to Ways and Means reinforced the message, noting that the signatories were “eager for the commencement of second-phase negotiations to build on the market access gains achieved in the Phase 1 deal.”

U.S. Trade Representative Robert Lighthizer said the U.S. and Japan would begin negotiating a Phase 2 deal four months after the interim agreement had been implemented. Uncertainty on the timing of progress on that portion of the negotiations remains, given the 2020 U.S. presidential election and the challenge of securing a fully comprehensive agreement with Japan. (USDEC staff; Reuters, 11/18/19; Inside U.S. Trade, 11/18/19)

Editor’s Note: No issue next week
There will be no Global Dairy eBrief next week due to the Thanksgiving holiday. The next issue will appear December 6. Happy Thanksgiving!

Membership renewal invoices sent out
Membership renewal invoices for 2020 were sent to all members on Nov. 20. If you did not receive your invoice, please reach out to Weston Abels at wabels@usdec.org. Please note that in order to guarantee uninterrupted service, payment of 2020 dues is due by Feb. 17, 2020.

GDT auction posts fifth straight increase
Market conditions and sentiment remain unchanged from prior weeks. Current supplies of SMP are tight relative to persistently strong demand, and buyers continue to bid prices higher to secure coverage. Lagging milk production in New Zealand (see below) is supporting the WMP market. Cheese markets are steady, butterfat markets are steady/softer. Whey markets have firmed on improved interest from China.

The overall index at this week’s Global Dairy Trade auction increased for the fifth straight event, settling at its highest level since early May. The average winning price of US$3,481/ton is up 28% from a year ago.

Milk powder leads gains
Once again gains were led by milk powder. WMP was up 2.1% to US$3,321/ton, the highest in nearly three years. SMP increased 3.3% to US$3,017/ton, the highest in more than five years. Milk powder interest on the auction was broad-based across China, Southeast Asia and Africa, plus an unexpected surge of bidding from European buyers to supplement a shortage of domestic production.

Other products were mixed. Cheddar cheese was higher (+2.5%) while butterfat was lower (-1.5% for AMF, -1.3% for butter).

The GDT gains prompted ASB to raise its 2019/20 payout forecast 50 cents to NZ$7.50/kg MS, which is well above break-even and would be the highest since 2013/14. ASB set its initial 2020/21 forecast at the same NZ$7.50/kg MS. BNZ lifted its current-year forecast 30 cents to NZ$7.40/kg MS.

Just hours before the auction, DCANZ published October milk production data, showing New Zealand output down 2.6% during the peak month of the year. In the first five months of the season, production was down 0.7%.

EU exports remain heavy
EU exporters were very active in September, with shipments of milk powder, cheese, butterfat and whey up 10% vs. prior year. Cheese exports were a record-high 76,450 tons, up 12%, led by increased sales to the United States, South Korea, Southeast Asia and the MENA region. With intervention stocks mostly cleared, SMP exports were the smallest figure of the year, though still 11% more than last September. Sales to Southeast Asia (-20%) and Algeria (-28%) were significantly lower, but EU suppliers offset this with increased volume to the MENA region outside of Algeria, plus Mexico, Nigeria and Pakistan.

Global dairy demand rebounded sharply in September, as exports of the major commodities (milk powder, cheese, butterfat and whey) from the five major suppliers (EU, U.S., New Zealand, Australia and Argentina) were up 10% vs. a year ago. This growth followed five months of lighter trade volume.

Japanese butter tender results
New Zealand (457.5 tons) and France (306 tons) led all others in the 1,000-ton Agriculture and Livestock Industries Corp. (ALIC) SBS butter tender on Nov. 21. Four European nations—Belgium, Ireland, Netherlands and Switzerland split the remainder. Japanese butter demand remains strong, with tenders consistently oversold in recent months. The average selling price rose 7% since the Oct. 29 auction to ¥808,092/ton (about US$7,446/ton) for bulk, and increased 10% to ¥870,169/ton (about US$8,018/ton) for smaller sizes.

Two more 1,000-ton SBS butter tenders are slated for Dec. 12, 2019, and Jan. 16, 2020. An SBS tender for 1,500 tons of SMP will take place Dec. 19. For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410. (USDEC Japan office)

If line is trending up, currency is strengthening vs. U.S. dollar (U.S. dollar is weakening). This is favorable for exports, because it increases import purchasing power. If line is trending down, currency is weakening vs. U.S. dollar (U.S. dollar is strengthening).  This is unfavorable for exports, because it decreases import purchasing power. Currency exchange rates are calculated for Wednesday of each week. Source: Oanda.com.

 

Mexico launches test laboratory registration portal
The Mexican government has launched the online portal for laboratory registration for all labs performing the required tests to show compliance with the new milk powder standard, which enters into force Jan. 31, 2020. See Volume 2 of the USDEC Export Guide, Laboratory Registration section, for more information. Contact Sandra Benson at sbenson@usdec.org with questions.

 

INTA GI resolution supports role of generic names
The International Trademark Association (INTA) approved a new resolution on geographic indications (GIs) this week at its Leadership Meeting that reflects the important role generic terms play in business and marketing. USDEC Senior Vice President Jaime Castaneda attended the conference in Austin, Texas, as part of USDEC’s and the Consortium for Common Food Names’ (CCFN’s) ongoing work with INTA.

USDEC and CCFN have representation on the group’s trademark and GI committees and have been very active in expressing U.S. Dairy’s views on GIs and common names, presenting at the INTA Annual Meeting in Boston in May and an INTA-sponsored World Intellectual Property Organization (WIPO) event in Geneva, Switzerland, earlier this month. Active involvement in INTA has provided the opportunity to help shape the viewpoints of the world’s most influential trademark organization and defend the use of common names in the face of the EU’s efforts to monopolize such names.

Oscar Ferrara joins MARA department
Oscar Ferrara joined USDEC’s Market Access and Regulatory Affairs (MARA) team this week as director, market access and regulatory affairs. Ferrara will work out of the Arlington, Va., office and handle matters related to Mexico, Central America, the WTO and Codex.

He brings with him extensive experience representing U.S. agricultural industries in overseas markets, having previously worked at the U.S. Meat Export Federation as regional director for Mexico, Central America and the Dominican Republic and at USDA as an international trade specialist. Responsibilities included enforcing U.S. and international food safety regulations in support of U.S. ag trade and collaborating with USDA, FDA, USTR and the State Department.

Ferrara has a PhD in Food and Resource Economics from the University of Florida and holds Bachelor of Science degrees in Applied Economics from the University of Minnesota and Agricultural Engineering from Universidad Nacional de Asunción in Paraguay. Please join us in welcoming Oscar Ferrara to the USDEC team.

Guadalajara hosts second USDEC Mexican feed seminar of 2019
On Nov. 21, about 35 key members of the Mexican pig feed industry—including the Pig Producers Association of Jalisco State, the largest pig-producing state in Mexico—attended USDEC’s feed seminar in Guadalajara. This was the second in a series of events in Mexico targeting this sector. Co-sponsored by Asociaciόn Mexicana de Productores de Alimentos (AMEPA), the attentive audience learned from well-recognized speakers about how U.S. dairy ingredients contribute economical nutrition to pig feed formulations. In addition, participating USDEC members explained how their product portfolios can add value to pig’s diets.

Vilsack and other dairy execs weigh in on U.S. dairy concerns, prospects
Dairy Foods magazine asked the top executives from some of the leading U.S. dairy associations about the state of the U.S. dairy industry and the biggest concerns of the day. USDEC President and CEO Tom Vilsack took part in the project, commenting on market access challenges, USDEC programs and why he is optimistic for the future. To read the whole Q&A, go to the November 2019 Dairy Foods digital edition (registration may be required).

NAFB follow-up
A number of media organizations covered Secretary Vilsack’s National Association of Farm Broadcasters (NAFB) speech and subsequently interviewed him about the presentation. For the full 58-minute speech and following Q&A, go to the AgWired story, “Prospects for a Prosperous Dairy Economy;” for a 17-minute post-presentation interview for the DairyVoice Podcast, go to, “Former USDA Secretary of Agriculture and head of the U.S. Dairy Export Council Tom Vilsack speaks about the state of U.S. exports;” or for a shorter post-event interview with FarmWeekNow, go to, “6 minutes with Tom Vilsack.”

Strong outreach to farm broadcasters is an important slice of USDEC communications efforts given their position as a conduit to generating state and regional grassroots support for U.S. dairy trade priorities.

 

One more chance to nominate for sustainability awards
The Innovation Center for U.S. Dairy extended the nomination deadline for the 2020 U.S. Dairy Sustainability Awards to 11:59 p.m. CT, Monday, Nov. 25. There is no fee to enter and companies can nominate themselves or others.

If you know of any original, cutting-edge, successful examples of dairy farm, dairy manufacturer or community efforts that demonstrate U.S. Dairy’s sustainable practices or sustainability leadership, submit a nomination now.

There are four nomination categories: Outstanding Dairy Farm Sustainability; Outstanding Supply Chain Collaboration; Outstanding Dairy Processing & Manufacturing Sustainability; and Outstanding Community Impact. Winners will be announced during a special ceremony on April 22, 2020, during the annual Dairy Sustainability Forum.

 

CME to launch block cheese futures, options
CME Group plans to launch block cheese futures and options contracts in January 2020. The new contracts will be cash-settled to the monthly average price for 40-lb. block cheddar cheese as reported by USDA's National Dairy Products Sales Report (NDPSR) with each contract representing the equivalent of 20,000 pounds of block cheddar cheese and the tick size of $0.001 per pound. For more information, go to www.cmegroup.com/dairy. (CME Group)

Argentina looking to ship more dairy to Malaysia
Representatives from Malaysia’s Veterinary Services Department recently visited Argentina to audit the nation’s dairy and beef inspection systems. The auditors met with Argentina’s National Food Safety and Quality Service Agency and individual dairy processors and will prepare a final report before adding plants to the list of facilities authorized to export to Malaysia. (USDEC South America office)

 

Australia okays Mengniu’s acquisition of Bellamy’s—with conditions
Australia’s Foreign Investment Review Board (FIRB) unanimously approved Mengniu Dairy’s takeover of infant formula maker Bellamy’s Organic as long as Mengniu meets three FIRB requirements. Those requirements are: Bellamy's must keep its headquarters in Australia for at least 10 years; the majority of its board must be Australian resident citizens; and the new owners must invest a minimum of A$12 million (about US$8 million) on improving infant milk formula processing facilitates in the Australian state of Victoria.

The takeover proposal and FIRB’s green light are generating political controversy in Australia, with some legislators expressing concerns about putting too many Australian assets in foreign hands. The buyout still requires court approval before being finalized. Australia has blocked a number of Chinese investments in recent years, citing national interests. (Sydney Morning Herald, 11/15/19; Reuters, 11/14/19)

Newbaze opens Irish nutritional powder plant
Shanghai-based Newbaze Industrial Group officially opened a new €20-million (about US$22-million) dry blending and packaging plant for nutritional dairy powders in Carrickmacross, Ireland. The plant, a 93,000-sq.-ft. converted electronics facility, is Newbaze’s first venture outside China. Newbaze is targeting international markets with the powders from the plant, including China, Africa, Southeast Asia and the Middle East. (The Anglo Celt, 11/18/19; Agriland, 11/18/19)

Agropur reviewing organization
Agropur is undertaking an organizational review in an effort to increase the profitability of its Canadian operations. The first fallout from that review came last week when the company released 125 employees. According to a story in La Presse, the co-op is also exploring the possibility of spinning off its U.S. division or selling its fine cheese division, although Agropur did not confirm the press reports. (Company reports; La Presse, 11/14/19)

Mergers, acquisitions and joint ventures
FrieslandCampina sold its 82% stake in CSK Food Enrichment to DSM. All three companies are based in the Netherlands. CSK produces dairy cultures, rennet and cheese coatings . . . Ireland’s Kerry Co-op Society raised around €90 million (US$100 million) by selling 800,000 shares in Kerry Group. Kerry Group is said to be the lead bidder to acquire DuPont’s nutrition and biosciences division. (Company reports; Irish Times, 11/20/19, 11/8/19)

Company news briefs
California-based frozen-yogurt chain Yogurtland opened the first two locations in Indonesia through a development deal with local business partners. The agreement calls for more than 15 Indonesian Yogurtland locations over the next three years. Indonesia is the eighth country outside the U.S. where Yogurtland operates. (USDEC Southeast Asia office; Company reports)