More than a dozen dairy products hit in Chinese retaliation; U.S. starts process for more tariffs
China’s latest round of retaliatory tariffs (announced on May 13) will increase total duties on a number of U.S. dairy products, including lactose and powdered infant formula to 20% and 30%, respectively, as of June 1. (See USDEC’s May 13 Member Alert and Volume 1 of the Export Guide for full details.) China’s tariff hike on $60 billion in U.S. goods comes in response to the U.S. move to increase tariffs on $200 billion in Chinese goods (see Global Dairy eBrief, 5/10/19).

“China will never succumb to foreign pressure,” the nation’s Foreign Ministry said shortly after the announcement.

That sentiment did not stop the USTR’s Office from filing a Federal Register Notice this week requesting comments and slating a public hearing on a plan to implement new duties of up to 25 percent on about $300 billion in additional Chinese goods. Comments on that tariff hike proposal are due June 17, and economic advisor Larry Kudlow said the full process to advance the measure could take months.

Despite the escalation in tensions, both sides have expressed a desire to continue negotiations. China invited USTR Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing for more talks, and Mnuchin told a Senate Appropriations Committee the U.S. team would likely take China up on the offer “in the near future.” President Trump and Chinese President Xi Jinping are also expected to meet at the next G-20 meeting in Japan in late June.

Education efforts communicate trade impact
USDEC’s increased educational outreach efforts since the escalation have focused on communicating the harm that has accrued to dairy due to China’s retaliation and that will intensify moving forward, given this set-back that’s postponed resolution. That message is one we are delivering to our membership and the public via press engagements. In conjunction, our trade policy team is sharing the detrimental impact China’s retaliation is having on our industry with the Administration and with targeted congressional offices.

Separately, USDEC is examining the potential ability of a second tranche of Trade Aid to be used effectively to support dairy exports.

USDEC President and CEO Tom Vilsack and Senior Vice President Jaime Castaneda have conducted a number of interviews outlining the toll the U.S.-China trade war is taking on U.S. Dairy, the prospects for that potential aid package and the overall need to advance trade agreements that provide improved dairy market access. For an example of the latter, read the Dairy Reporter column, “Why the U.S. needs to sign a trade deal with Japan.”

Spring production peak reached in Europe
Oceania prices were slightly higher across the board this week. In the EU, SMP continued to rise on the strength of strong export demand, while other product prices were generally steady. Buying activity is starting to slow with Oceania in its off season and the northern hemisphere now past its peak.

EU exports were lighter in March, with only SMP showing gains on year-ago levels, according to preliminary numbers. SMP exports look to be a record high, topping 90,000 tons in March, up 31% from last year. Suppliers increased sales to China and Southeast Asia (mostly Indonesia, the Philippines and Malaysia). In contrast, EU cheese exports were down 6% in March and whey exports were down 13%.

EU milk production up 1.3%
EU milk production was up approximately 1.3% in March. We estimate April output up by a similar amount. The spring peak has been reached and output will now decline seasonally for the next six months.

Several milk processors in Ireland have cut payout prices for April, reflecting weaker European demand. Product in storage is said to be high across Europe, particularly for cheddar, which was warehoused ahead of the potential UK split from the EU.

A new Algerian tender could help clear some of this inventory. An estimated 50,000 tons of SMP and WMP was purchased for June-August delivery. The EU reportedly garnered most of the SMP volume, while the majority of the WMP will come from South America.

Whey permeate prices have plunged to multi-year lows in the last several months due to lack of buying from China following widespread hog culling.

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.

 

CCFN urges President Trump for action on EU cheese trade barriers
Consortium for Common Food Names (CCFN) Chairman Errico Auricchio (president of Belgioioso Cheese) sent a letter to President Trump urging action to correct the “deep inequity of opportunity” that exists in U.S. food trade with the EU. Auricchio specifically pointed to how the EU’s “excessively protectionist” policies on geographical indications (GIs) perpetuates the $1.6-billion U.S. dairy trade deficit with the EU.

It was a message echoed by Sen. Chuck Grassley in a Politico op-ed this week. Grassley called out EU efforts to monopolize common names as a prime example of the many nontariff barriers to trade the bloc has imposed over the past two decades.

U.S. cheesemakers selling asiago, parmesan, feta and other names are shut out of Europe while EU cheesemakers selling cheeses by those same names enjoy close to $1 billion in sales in the United States. The CCFN chairman noted that the U.S. is an extremely profitable market for the EU and suggested that the United States “leverage that power” using all available tools to remedy the situation. (CCFN was founded and is staffed by USDEC.)

Auricchio concludes: “Let us at least consider imposing the same restriction on them that they do on us: require that they not sell cheeses by these names into our market as long as we are locked out of theirs.”

USDEC defends science-based standard-setting at Codex Ottawa meeting
Nick Gardner, USDEC director of Codex and international regulatory affairs, was in the field again this week defending dairy and promoting dairy exports at a meeting of the Codex Committee on Food Labeling (CCFL), in Ottawa, Canada. The Committee was due to consider a number of topics with potential to negatively impact U.S. dairy exporters, including discriminatory labeling of certain formulas for young children, the ongoing development of guidelines on Front of Pack Labeling (FOPL), and a proposal for CCFL to develop criteria for labeling foods “high in” sugar, fat and salt.

USDEC’s pre-meeting coordination and efforts on the ground in Ottawa resulted in positive or neutral outcomes in the face of significant pressure for CCFL to advance standards harmful to dairy products. Some of the notable outcomes included:

• The Committee opted not to endorse a poorly understood and controversial World Health Organization (WHO) backed term that would have prohibited private companies manufacturing infant formula and follow-up formula from using registered trademarks, branded logos, colors and images across their product lines. Given CCFL opposition, the sentence including the harmful term will be referred back to Nutrition Committee for further consideration with direction from CCFL suggesting that the term may be problematic and unnecessary.
• Improvements were made to the text of the Codex FOPL guideline, including language stressing the need for these systems to account for national dietary guidelines that generally support dairy consumption and that any labeling be evidence-based. The lack of consensus at the meeting on warning labeling prevented the document for expressly endorsing a nutrient profiling style approach to FOPL that misrepresents dairy foods, but this will remain a topic of discussion. Importantly, the Committee opted not to advance this work to the next step in the Codex process leaving the entire document open for more revision over the next 18 months.
• The Committee did not endorse a problematic new work proposal on establishing criteria for “high in” labeling, which could have created a WTO-compliant framework for warning labels used to discourage consumption of foods high in sugar, fat and salt. While this will remain a potential future work item for the Committee, it is unlikely that it will be raised again until the FOPL work is completed.

USDEC’s close coordination with FEPALE (the Pan-American Dairy Federation) and the International Dairy Federation (IDF) helped to augment Gardner’s individual efforts to inform the U.S. delegation and resulted in other delegations raising key USDEC priorities on the floor during the meeting. As Codex decision-making is consensus based, this is the only way to successfully drive outcomes consistent with USDEC priorities.

While work will continue in CCFL and the Codex Nutrition Committee on all of these topics, USDEC’s leadership of these issues with the U.S. and within our regional and international dairy organizations provides us a strong position to defend the interests of U.S. dairy exporters now and in the future.

Sign up now for Monday’s Export Guide and Testopedia review webinar
Do you know how to fully take advantage of USDEC resources? The Market Access team maintains an up-to-date, comprehensive resource—the USDEC Export Guide—which provides information on import requirements, product composition, labeling, tariff rates and classification, and free trade agreements for 90 countries. Testopedia includes information on test methods used in foreign countries to determine product compliance.

USDEC will be holding a webinar to review the Export Guide and Testopedia on Monday, May 20, from 3:30-4:30 p.m. ET/12:30-1:30 p.m. PT. The webinar is open to the staff of processor and trader USDEC members. Please email Jessica Smith at jsmith@usdec.org to register.

USDEC’s IFT booth highlights U.S. dairy ingredient innovation potential
The annual Institute of Food Technologists (IFT) conference may take place in the United States, but one in three attendees is international, which is why USDEC makes sure the U.S. dairy presence at the show is strong. This year’s messaging and product prototypes available at the USDEC booth (#5613) focus on the advantages of our sustainably-produced milk supply, elevating dairy proteins from nondairy, and highlighting new opportunities for end-users using U.S. whey protein, milk protein and permeate.

The product prototypes—calamansi protein gel snack and protein-powered curry hummus—showcase the nutrition, functionality, sustainability and flavor advantages of U.S. dairy ingredients in products tailored to regional tastes.

Fourteen USDEC members are exhibiting at the show, which takes place June 3-5 in New Orleans. Download USDEC’s show handout, Discover U.S. Dairy at IFT 2019, which provides information on all 14 member attendees and their booth numbers, as well as dairy-focused symposia.

USDEC gets full-time cheese program manager in Chile
River Global, USDEC’s South America office, is relocating staffer Anna Pizarro to Santiago, Chile. The move will give us a dedicated resource to manage our Chile program locally, as opposed to River Global having to manage it from São Paulo.

Chile is one of the fastest growing cheese markets in the world in terms of import volume. U.S. shipments to Chile grew 19 percent in 2018 to 10,806 tons. However, U.S. share of Chile’s cheese import market has declined by nearly 6 percentage points over the last three years as the EU and New Zealand made inroads.

Rosewood/Renard’s applies to join USDEC
Algoma, Wis.-based cheesemaker Rosewood Dairy/Renard’s Cheese will join USDEC ranks on May 24, barring any negative concerns expressed by membership to Matt McKnight (mmcknight@usdec.org). Renard’s is a third-generation, family-owned and operated business manufacturing cheddar, colby, monterey jack and other varieties. Ann Renard, vice president, will serve as USDEC director.

Fate of Synlait nutritional plant up in the air
New Zealand’s Synlait Milk insists that it is “working through” an appeals court ruling that calls into question its rights to build a nutritional powder facility in the North Island town of Pokeno. The trouble is that the NZ$250-million facility is nearly complete. Synlait started constriction last May after the original court ruling removed covenants restricting the land to grazing, lifestyle farming and forestry. The new ruling says those covenants never should have been lifted.

The Pokeno plant was supposed to be ready for the start of the 2019/20 production season. It has a reported capacity of 45,000 tons per year. (Company reports; Newsroom, 5/13/19)

Mergers, acquisitions and joint ventures
New Zealand’s Fonterra sold its Tip Top ice cream brand and manufacturing facility in Auckland to Froneri, the UK-based ice cream joint venture between Nestlé and R&R Ice Cream. Froneri also acquired the license to manufacture Fonterra’s Kapiti ice cream brand . . . Australian dairy and poultry processor TasFoods paid US$8 million for fellow Tasmanian dairy Betta Milk. Betta recently upgraded its manufacturing plant in Burnie, Tasmania . . . Troubled Argentine food company Arcor increased its stake in struggling Argentine dairy processor Mastellone to 43%. (USDEC South America office; Company reports; AAP, 5/13/19)