Mexican border to stay open but questions remain on truck crossings
President Trump said Thursday he would delay closing the border with Mexico for one year, deescalating a potential U.S. dairy export crisis. However, despite the president’s statement, the administration appears to already be slowing trade by shifting border staff from Customs to immigration responsibilities.

In response, USDEC is hearing reports that U.S. truck shipments to Mexico are also being slowed. (Please contact Eddy Fetzer at efetzer@usdec.org or Sandra Benson at sbenson@usdec.org with any information on delays you are experiencing shipping to Mexico.)

USDEC issued an update on the situation to members yesterday afternoon, and staff continues to call for an open trade border with Mexico.

USDEC President and CEO Tom Vilsack has emphasized the potential damage to U.S. dairy to policymakers in media interviews, while the trade policy team has conveyed the same message to numerous staff in the Administration. USDEC Senior Vice President Jaime Castaneda, who is in Mexico City this week, has been working with USDEC Mexico to gather information and communicate to leaders in the Mexican government about this issue, in addition to USDEC’s work to emphasize to U.S. policymakers the risks of closing the border.

“This would be incredibly disruptive to the dairy industry,” Secretary Vilsack told Mike Adams during the April 3 Adams on Agriculture podcast. “Mexico is our No. 1 market. Thirty percent of all our exports go across that border, so closing it would disrupt $3.8 million daily of dairy products crossing the border, impacting farm incomes and 16,500 jobs that are connected to dairy exports to Mexico. Bad idea.”

Listen to the April 3 podcast here. Secretary Vilsack’s portion runs from 12:23-22:04. For a clip of his RFD-TV Market Day interview, click here. In addition, the Secretary is scheduled to appear live on FOX Business News’ “Countdown to the Closing Bell” with Liz Claman between 3-4 p.m. Eastern time today.

USDEC members speak up
USDEC members also came out vocally to oppose the closure. For instance, Dairy Farmers of America President and CEO Rick Smith sent a letter to members of the House and Senate urging “immediate action to ensure the U.S. border remains open to U.S. dairy exports.”

United Dairymen of Arizona (UDA) also spoke out strongly, with UDA member Jim Boyle telling the local CBS affiliate that the co-op cannot afford to lose business in Mexico.

“We employ thousands of truck drivers. We have on-farm employees in the thousands. Every one of their jobs would be at risk,” Boyle said. “You’d struggle to survive.”

USDEC was one of the first agricultural sectors to outline the potential fallout from a full border closure in our April 1 press release, “Mexican Border Closing Would Wreak Further Havoc for U.S. Dairy,” and moved swiftly to arm USDEC Trade Policy Committee members with key points for them to use in their own public messaging on the issue. We will notify members directly of any major developments in the situation. In addition, we have set up a members-only update page on the USDEC website to provide members a consolidated source of news on the Mexico border issue as it evolves.

Castaneda in Mexico City
Castaneda traveled to Mexico this week to participate in the Mexican Milk Federation (FEMELECHE) national conference. The visit, which also includes meetings with government and industry officials, is part of USDEC’s long-term efforts to strengthen relationships between the U.S. and Mexican dairy sectors and seek common ground on major issues that could impact trade.

While talk of driving Mexican dairy self-sufficiency was plentiful at the conference, Castaneda’s message was one of collaboration, rather than fighting for “half a glass of milk.”

“There is a reason why Mexican dairy producers have been able to double production since NAFTA: It is because of our work in developing an orderly market integration with Mexico and increasing consumption,” Castaneda told attendees.

“You can spend a lot of time and capital fighting for the half glass and fighting imports of SMP, or we can work together like we have for the past 25 years to share a full glass of milk and improve the per capita consumption of dairy in Mexico, which remains relatively low,” he said. “Let’s choose to work together for a full glass of milk.”

While there, Castaneda met with the Under Secretary of Mexico’s Ministry of Economia to discuss the policy-related issues of highest importance to USDEC members including: the recent risk of border trade changes, Section 232 tariffs and Mexico’s retaliation including its treat to carousel the targets of those tariffs, USMCA, common food names and recent rhetoric by farmers in Mexico urging the government to restrict dairy imports.

Butterfat firming as demand improves
Oceania butter prices are up more than 40 percent since November, while EU values have improved over the last three weeks. The slowdown in milk production from top suppliers is a factor, of course, as well as resumption of better purchasing from the Middle East (notably Iran, UAE and Saudi Arabia), plus very good import demand from Russia, the United States and Southeast Asia.

The strong butterfat markets drove the overall Global Dairy Trade index higher this week, the ninth straight rise, despite a small drop in WMP. The overall index increased 0.8 percent, led by a 3.7-percent increase in AMF and a 5.8-percent gain in butter. SMP also moved higher, increasing 1.8 percent. WMP, on the other hand, slipped 1.3 percent, the first decline since November. Cheddar tacked on 3.2 percent, reaching the highest price since June 2017.

EU milk powder
Global milk powder prices are mostly steady. In the first quarter, trade volumes were very good, supported by robust purchases from China and Southeast Asia, and stimulated by lower prices, particularly from the EU as it sought to move intervention SMP out of storage. Mexico also has bought heavily.

After moving record volumes of SMP overseas since last autumn, European SMP stocks are at a four-year low, according to the European Dairy Association. Meanwhile, butter inventories are high compared with 2017 and 2018 and cheese holdings have shrunk significantly since last summer, EDA says.

The European Commission forecasts an aggressive rebound in EU milk collections in the second half of 2019: up 2 percent, year-over-year. The Commission expects deliveries to lag in the first half, leaving full-year collections up 0.7 percent this year, about the same as 2018 growth.

The euro weakened further this week, falling to its lowest level vs. the U.S. dollar since July 2017.

Australian milk output plummets
Australia milk production was down 12.6 percent in February, bringing season-to-date output down 6.4 percent. On a daily-average basis, February showed the smallest production volume for any month in nearly a decade. Likewise, Australia exports of milk powder and cheese were off 12.7 percent in February compared with a year ago.

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 input evident in National Trade Estimate Report
USDEC’s influence is prominent in the National Trade Estimate Report (NTE) released last week by USTR. USDEC and NMPF submitted comments to USTR in October 2018 for the annual report on barriers to trade, investment and services that American exporters face around the world.

Dairy and milk are cited dozens of times in the 540-page document. The NTE Report specifically describes Canada’s supply management system, special milk classes and cheese compositional standards as U.S. dairy trade barriers—all points raised in USDEC comments and areas which the U.S.-Mexico-Canada Agreement (USMCA) makes some progress in tackling.

In the EU section, an entire page is devoted to the bloc’s “overbroad protection of geographical indications,” which the NTE Report calls “extremely concerning.” USDEC also called out the EU’s escalating pursuit of Country of Origin Labeling and its excessive certification and additional access compliance requirements, which figure prominently in the USTR report as well.

Other sections deal with dairy issues in the Russia-Kazakhstan-Belarus Customs Union, China’s food safety law and its impact on dairy and infant formula exporters, dairy access to India, nontariff barriers to dairy trade in Indonesia and other points raised by USDEC and NMPF.

USDEC joins Pass USMCA Coalition
USDEC and NMPF joined the Pass USMCA Coalition, a diverse alliance of trade associations, businesses and advocacy groups focused on swiftly passing the USMCA. Former 10-term Republican Congressman Joe Crowley and former Ambassador to China, Secretary of Commerce and Governor of Washington Gary Locke serve as co-chairs of the bipartisan group.

USDEC’s participation in the group, as well as its membership in the USMCA Coalition and the USMCA Task Force of the Food and Agriculture Dialogue on Trade, are part of extensive outreach efforts to urge policymakers to promptly approve the deal. The groups’ collective aim is to secure passage of USMCA by highlighting its numerous benefits to America’s workers, consumers, businesses and economy.

New Zealand dairy affirms stand against GI abuse
The United States is not alone in fighting the EU’s geographical indication (GI) overreach. Dairy Companies Association of New Zealand (DCANZ) and the NZ Specialist Cheesemakers Association registered objections to the European Commission’s geographic indication request submitted during EU-New Zealand trade negotiations.

“We have grown increasingly concerned that GI frameworks are being extended and misused beyond their original intent to unfairly monopolize longstanding, commonly used product names in global production,” the groups said, echoing points that USDEC has made in its own previous filings to foreign governments.

DCANZ and the cheese association said they had no problem with legitimate use of GIs for compound names to protect products linked to specific places, but pointed to EU intent to monopolize generic names like feta and parmesan. Acceding to EU demands on GIs would undermine investments made by the New Zealand dairy industry over many years, the groups said. (Farmers Weekly, 4/3/19)

Use Export Guide, Testopedia to facilitate trade; member input encouraged
The USDEC Export Guide and Testopedia are what are called “living documents”—continually changing to keep up with the needs of membership and the constantly evolving nature of market access regulations, testing methods and trade agreements.

At last month’s USDEC Board of Directors and Membership Meeting, attendees who participated in the USDEC Export Guide and Testopedia training session:

• Learned how to use the online resources to facilitate trade,
• Heard how upcoming upgrades would increase their utility, and
• Were repeatedly encouraged to contact staff with questions and requests for making them even more useful.

“If you don’t see a particular need being addressed, please contact us and let us know,” Sandra Benson, vice president, market access and regulatory affairs, told the crowd. For example, the Export Guide covers 90 countries. “If you are shipping to a country that we don’t cover, ask us. Every year, we analyze trade data and member questions we receive and we will add or subtract countries as needed based on what our members are looking for,” Benson said.

The training session went into detail on the organization of the Export Guide, the various certificates required by importing nations, plant registration requirements, determining a country’s tariffs and quotas, and more. The USDEC market access team is currently working on an upgrade to Volume 1 that will merge the existing tariff classification guide, trade agreement and tariffs to improve efficiency, and that will add material, such as new rules of origin.

If you were not able to attend the board meeting session, USDEC will hold additional webinars to review the Export Guide and Testopedia resources and will invite members to join. If any company is interested in more focused training for your staff, contact Jessica Smith at jsmith@usdec.org to discuss the possibility of a company-specific USDEC Export Guide training webinar.

Beyond the guide itself, “if you have a question about how a product should be classified, if product registration is taking longer that it should, or even if shipments get stuck at Customs, let us know,” Benson said.

The growth of Testopedia
Testopedia—USDEC’s collection of country-specific dairy and food test methods used in target markets to test imports—expands every year. In the seven years since its debut, it has grown to include nearly 800 test methods.

“The reason we do this is because test methods matter,” said Annie Bienvenue, vice president, technical services. “Different test methods can give you slightly different results that might put you outside the scope of a product specification. It is a way to help USDEC members reduce the risk associated with trade by helping members not only meet customer specifications but also Customs needs.”

As with the Export Guide, the resource aims to keep current with all member necessities.

“If there is anything we can do to make Testopedia more accessible, more thorough or easier to use, we would be happy to hear from you. Don’t hesitate to contact us,” said Bienvenue.

If you have questions about Testopedia or import test methods, contact Annie Bienvenue at abienvenue@usdec.org.

Each individual accessing the Export Guide, Testopedia or any members-only portion of the USDEC website must have unique log-in credentials. Contact Luke Waring (lwaring@usdec.org) or Jessica Smith (jsmith@usdec.org) to obtain credentials if you do not already have them.

Mexico ingredient innovation seminar draws heavy interest
The response to next week’s U.S. Dairy Ingredients Innovation Seminar in Mexico City has been so overwhelmingly positive that USDEC’s Mexico team chose to reserve a larger conference room to accommodate the crowd. More than 250 representatives from the Mexican food processing sector (R&D and technical personnel, production, procurement, nutritionists and traders), academia and specialized media have registered to attend USDEC’s largest ingredient-focused program in Mexico in years. Representatives from USDA-FAS and the Mexico Department of Agriculture will also be in attendance.

The seminar goes from 9 a.m.-5 p.m. on April 9. USDEC has recruited four top-level speakers to explore topics such as new product development with dairy ingredients, applications, functionality and nutrition. The 10 USDEC members participating in the event will get 10 minutes each to present their companies to the audience, in addition to a mini trade show and networking reception (featuring a U.S. cheese display) to meet and greet attendees.

Jiangnan University U.S. dairy lecture series kicks off
Last month, as part of the student education component of USDEC’s partnership with Jiangnan University (JU), USDEC invited nutritionist Dr. Chang Cuiqing to help students better understand the nutritional benefits of dairy proteins. Representatives from two USDEC members also participated, outlining product trends and potential applications for dairy proteins in food and beverage products.

The information presented in the lecture helped the students to prepare for this year’s JU Student Product Development Competition, titled the “Tasty U.S. Dairy Cup.” More than 130 students submitted proposals for new product ideas utilizing U.S. dairy proteins in dishes suited to local cuisine. Initial judging takes place in April with the final round set for May; winners will be announced at JU’s 2nd International Symposium of Innovation on Dairy Ingredients and Products on May 23-24.

The JU program seeks to build a strong base of knowledge of U.S. dairy ingredients amongst JU students studying dairy and/or food science as the next generation of food and beverage industry leaders, ultimately driving demand for U.S. dairy.

 

DMI publishes Research Pipeline Quarterly
DMI released the latest Research Pipeline Quarterly, a report that highlights recent high-impact nutrition and product research studies that were recently accepted or published in scientific journals, as well as regulatory and scientific affairs papers. The current issue includes two nutrition research abstracts, one produce research abstract and a sustainability study on farmer decision-making related to manure-management strategies.

The abstracts found that:

• Following a diet that aligns with the Dietary Guidelines for Americans can save billions in healthcare costs.
• Improving dietary protein quality (i.e., consuming whey protein) reduces the negative effects of inactivity on body composition and muscle function.
• A new in-package treatment technology called high-voltage atmospheric cold plasma reduced listeria and may help extend cheese shelf-life.

Bubs continues drive into Chinese formula market
Australian goat’s milk infant formula marketer Bubs Organic paid A$25 million (plus A$10 million in Bubs stock) for Melbourne-based Deloraine Dairy. Deloraine owns one of 15 Australian infant formula canning facilities licensed by Chinese regulators to export to China. The plant’s capacity is 10 million tins per year, but Bubs said it could double output with incremental capital investment.

Bubs has been moving aggressively this year to secure Chinese expansion, signing a contract manufacturing deal for infant formula base with Bega Cheese in February and securing a joint-venture distribution deal with China’s Beingmate Baby & Child Food last month. In tandem with the Deloraine deal, Bubs also secured A$15 million in funding from China-focused private equity firm C2 Capital Partners. (Business News Australia, 4/1/19)

Sill building formula plant in France
Sill Group is spending €85 million (about US$95 million) for a new milk drying tower in Landivisiau, France, to produce infant formula. The investment is part of a five-year, €180-million company-wide investment plan. When completed, Sill expects to produce 18,000 tons of infant formula annually at Landivisiau exclusively for export to China, the Middle East and Africa. It expects to begin production at the beginning of 2021. (L’Usine Nouvelle, 3/26/19; web-agri, 3/25/19)

Mergers, acquisitions and joint ventures
Ireland’s Lakeland Dairies and Northern Ireland’s LacPatrick Dairies officially merged. Michael Hanley, current CEO of Lakeland Dairies, will remain as head of the combined organization Lakeland Dairies Co-operative Society . . . Switzerland’s Emmi acquired a two-thirds stake in Austrian goat and sheep’s milk processor Leeb Biomilch GmbH. Leeb Biomilch also began marketing a dairy alternative line in 2016 called MyLove-MyLife based on almonds, coconut and oats . . . Germany’s DMK Group acquired the baby food brands and sales and distribution channels of fellow German food processors Alete GmbH and German Babyfood GmbH. DMK expects the brands will complement its infant formula line. (Company reports; Agriland, 4/1/19)

Company news briefs
McDonald’s plans to open 400 new stores in mainland China this year . . . Milkom, a unit of Russia’s Komos Group, reportedly signed a contract with China’s Li Hua Economic and Co. to ship 40 tons of ice cream and 500 tons of “other” dairy products per month to China. The company did not specify what the other products were . . . Norwegian dairy TINE and food and personal care giant Orkla are reportedly collaborating to add cheddar manufacturing capacity to TINE’s Meieriet Verdal plant in central Norway. Output is earmarked for Orkla pizzas, although TINE says domestic demand for cheddar at retail and in processed foods is rising in Norway. (USDEC China office; Dairy Markets, 3/27/19; The Dairy News, 3/25/19)