U.S. cheese makes a splash at debut of Costco in China
Crowds at the grand opening of Costco’s first Chinese outlet in Shanghai were so large that the store had to close early due to safety concerns. On day 2, the company implemented a new traffic flow system to limit the number of customers in at one time to 2,000, a ceiling they had no trouble hitting.

It was a perfect event to help raise the profile of U.S. cheese, and U.S. cheese options were there in force. Cheese from the USA—including products from Belgioioso, Sartori, Tillamook, Pacific Cheese, Schuman Inc. and Lactalis—covered the refrigerated section and a dedicated U.S. cheese end-cap (in place until mid-September). The end-cap is part of USDEC’s retail support for the launch, provided as an extension of our Costco North Asia partnership. Additional USDEC-supported promotions accompanied the grand opening, including a large digital “Cheeses from the USA” lightbox sign at the store’s entrance that will remain in place for 12 months. U.S. cheese demos are set to begin Sept. 2.

Opening reception
A pre-opening VIP party attracted a crowd and offered an opportunity for U.S. suppliers and USDEC staff to build relationships and reinforce the fact that the United States is committed to the Chinese market despite ongoing trade tensions at the highest levels of both governments. USDEC’s Ross Christieson, USDEC China office reps Daniel Chan and Missha Hu, representatives from Pacific Cheese, Schuman Cheese, Sartori Cheese and the California Milk Advisory Board and Ryan Scott from USDA’s Shanghai Agricultural Trade Office took part in the reception.

For photos from the event, click here and here.

Costco is targeting China’s affluent, growing middle class, who know the retailer and the products it carries from travelling abroad. The company is planning a second store in China in 2020.

 

New Zealand exports lower in July
World dairy markets are steady this week. The highlight is an uptick in EU butter prices, the first improvement since mid-April. European traders report continued good export interest for SMP, but heavy supplies remain after EU SMP production rose 5.1% in the second quarter. As the month comes to a close, EEX whey futures for August expired at €612/ton (about US$678/ton).

New Zealand exports in July were markedly below year-ago levels for the first time in nine months, reflecting a slowdown in global trade after robust movement in the first five months of the year. Shipments of milk powder, cheese, butterfat and whey to China were off 22% last month, while sales to Southeast Asia were down 12%. Among major products, exports of WMP (-21%), butterfat (-34%) and cheese (-14%) were all lower. SMP was the primary exception, with exports up 34% vs. last July on increased sales to China, Southeast Asia and Saudi Arabia.

New Zealand milk production in June-July was up 8.7% from last year’s strong start, but this volume accounts for less than 2% of annual output. The gains also reflect on-going processor incentives to boost winter milk; production in the first two months of the season has increased by at least 7% year-over-year in five of the last six years.

Australia milk production was down 9.3% in the first six months of 2019, and down 5.7% for the full 2018/19 season. In publishing year-end numbers, Dairy Australia revised 2018/19 figures higher.

China buying pulls back
After strong buying earlier this year, China’s overall imports were lower for the third straight month in July, dragged by a 21% decline in combined volume of whey products, lactose, butterfat and cheese. On the positive side, imports of milk powder were up 17% and imports of fluid milk/cream were a record high, up 39%.

And in Argentina . . .
Argentina exports of major dairy products were down 26% in July, continuing a 7-month trend. Volume is down 28% year-to-date. Argentina milk production is increasing seasonally, but the recent sharp devaluation of the peso and stock market crash is eroding farmer confidence.

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.

 

U.S., Japan reach trade deal “in principle”
Last weekend, during the G7 summit in France, President Trump and Japanese Prime Minister Shinzo Abe announced that they had agreed “in principle” to the core elements of a trade agreement. Neither side released details, but the deal reportedly covers agricultural (including dairy) and industrial trade.

U.S. and Japanese negotiators have been tasked with resolving working-level details over the coming weeks and preparing a final agreement in time for the president and prime minister to sign during the UN General Assembly meeting in New York in late September.

What we know
Our Trade Policy team was fully engaged with USTR during negotiations for past several months and in the last few days of the negotiations. Although dairy provisions have not yet been publicly announced, we are certain that dairy has been included.

USDEC, NMPF and its members seek a Japan trade agreement that builds upon the best components of the EU-Japan Economic Partnership Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and puts U.S. Dairy on a level playing field with competitors in the EU, New Zealand and Australia. USDEC will continue to work with the administration to get the best possible deal with Japan and to open new markets.

USDEC President and CEO Tom Vilsack continues to make that case in talks with the media. Hear his interview with Brownfield Ag News here.

Potential implementation advantage
The deal is intended to be limited in scope rather than a “comprehensive” trade agreement, as it only covers agriculture, industrial tariffs and digital trade. This type of “early harvest” agreement, if properly constructed, would not need congressional approval. (USDEC staff; Bloomberg, 8/26/19; Politico, 8/25/19; Wall Street Journal, 8/25/19)

USDEC forms new partnership to promote science-based food regs
USDEC and the Inter-American Institute for Cooperation on Agriculture (IICA) formed a new partnership aimed at strengthening collaboration to promote science-based regulations and policies affecting food and ag trade. Thirty-four Western Hemisphere nations belong to Costa Rica-based IICA, whose mission is to promote and support its members to achieve agricultural development and rural well-being through international technical cooperation.

The Memorandum of Understanding (MOU) between IICA and USDEC will deepen coordination between the organizations to advance development and adoption of science-based international standards. It will also promote outcomes and practices that enhance food safety, improve animal welfare and facilitate fair trade practices throughout Latin America.

USDEC Senior Vice President Jaime Castaneda and Director Nick Gardner were in Costa Rica this week to sign the MOU along with IICA Director General Manuel Otero. (Castaneda and Otero can be seen signing the MOU in the image below.)

“USDEC continues to build partnerships around the world to ensure that science-based regulations prevail over unjustified barriers intended to impede international trade,” said USDEC President and CEO Tom Vilsack. The new partnership will not only facilitate IICA’s communication among its members, it will “allow the Americas to fight to preserve the scientific basis of international food standards with one voice.”

The MOU with IICA complements the agreement USDEC previously signed with the Pan American Dairy Federation (FEPALE) and provides USDEC with an additional channel to engage with stakeholders in Latin America. To read the USDEC press release on the partnership, click here.

USDEC holds meetings with Costa Rican leaders to collaborate on international standards
In addition to signing the agreement with IICA, Castaneda and Gardner connected with FEPALE’s Secretary General, Ariel Londinsky, for a series of meetings with Costa Rican officials and industry leaders. The trio organized a very productive dialogue with the Costa Rican Codex office that stressed the mutual goals of enhancing participation of Central American countries in key Codex meetings and advancing science and evidence-based international trade standards for dairy products.

As the Costa Rican Codex office has been a strong voice for science-based regulations in the region for many years, the IICA MOU and productive meeting promise a strong platform from which to continue collaboration with FEPALE and USDEC on Codex and other international priorities. Meetings were also held with leadership from the Milk Producers Association, the largest dairy co-op Dos Pinos and the U.S. Embassy in San Jose to explore opportunities for collaboration.

Vilsack, Grassley call for USMCA passage
USDEC President and CEO Tom Vilsack also continues to spread messaging on the need for Congress to pass the U.S. Mexico Canada Agreement (USMCA). In a widely reported press conference held this week with Senate Finance Committee Chair Chuck Grassley (R-Iowa) at Anderson Erickson Dairy, the Secretary reviewed the specific dairy benefits of USMCA as well as the benefits of trade to American farmers, jobs and the economy.

“Exports matter and trade agreements are incredibly important in allowing us to have a level playing field with the rest of the world,” he summarized.

For more, read the USDEC press release, “Grassley, Vilsack say USMCA trade pact critical to further growth of Iowa ag,” listen to clips from the press conference at the Iowa Agribusiness Radio Network or read the Cedar Rapids Gazette article, “Grassley, Vilsack push for trade deal approval with Mexico, Canada, Japan.”

Vilsack heads to China, Japan, to reinforce relationships
USDEC President and CEO Tom Vilsack is on the first leg of a two-nation trip to China and Japan to reaffirm U.S. Dairy’s commitment to serving both markets. In China, Secretary Vilsack is meeting with a number of industry and government officials with the aim of maintaining and building relationships and demonstrating that despite what is going on at the political level in Washington, D.C., and Beijing, U.S. Dairy is in the market for the long haul.

In Japan, he will be meeting with USDEC partners and the dairy trade, including representatives from Hattori Nutrition College, Curves fitness chain and at least one major U.S. cheese importer. On the docket are topics such as how U.S. Dairy can work with such groups to build win-win relationships that deliver mutual growth.

The trip goes through Sept. 3. Watch next week’s Global Dairy eBrief for more details.

Seminar explains why dairy protein is right for Southeast Asia
A lineup of dairy and nutrition experts helped defend and reinforce the nutritional benefits, sustainability and innovation potential of U.S. dairy ingredients to an audience of 94 Southeast Asian food and beverage R&D and management staff at USDEC’s Health & Fitness Innovation Seminar this week in Singapore.

The seminar approached U.S. dairy ingredients from all angles:

• Dali Ghazalay, head of USDEC’s Southeast Asia office, relayed how dairy positively stands out from plant protein and how U.S. dairy is fully committed to sustainability.
• Martin Teo, USDEC’s technical director, food applications, Southeast Asia office, outlined Southeast Asia-friendly applications for U.S. dairy proteins, including ongoing prototype work underway at Singapore Polytechnic’s Food Innovation & Resource Centre (FIRC).
• Donna Berry, food scientist, editor and consultant with Dairy and Foods Communications, excited attendees with examples of the innovation potential of U.S. dairy protein to meet the demands of today’s protein-hungry consumers.
• Leslie Bonci, nutritionist and owner of nutrition consultancy Active Eating Advice, reinforced the role of dairy protein in health, fitness and well-being.
• And Eric Bastian, vice president, innovation partnerships, Dairy West, took the crowd on a deeper dive into dairy protein functionality and dairy use in protein bars.

Click here for images from the seminar. In addition, Bonci and Berry gave interviews to five regional media publications, echoing many of the messages expressed during the presentations. Articles based on those interviews, spreading key messages to an even broader regional audience, should be appearing in the coming weeks.

Southeast Asian snack makers get hands-on lesson in dairy protein
Twenty R&D and technical staff from Southeast Asian snack manufacturers attended USDEC’s Aug. 28 U.S. Dairy Protein Workshop on healthy protein snack innovation at Singapore Polytechnic’s Food Innovation & Resource Centre (FIRC). The hands-on learning session focused on innovation in protein bars, balls and bites, specifically addressing manufacturer concerns on bar hardening.

Martin Teo, USDEC’s technical director, food applications, Southeast Asia office, and Eric Bastian, vice president, innovation partnerships, Dairy West, walked attendees through options for overcoming bar hardening to create products that not only satisfy the region’s taste preferences but maintain that taste over the life of the bar without hardening.

Four USDEC members participated in the workshop, presenting their portfolios to the attendees and meeting one on one to answer questions and develop a rapport.

Board meeting: McGrath advises businesses on how to “see around corners”
Strategic inflection points are those forces that change the assumptions we make about how to run our businesses, how to live our lives and how we perceive reality generally, says Rita McGrath, renowned business innovation and growth expert, best-selling author and long-time professor at Columbia Business School. And these inflection points, she contends, do not spring up out of nothing.

Armed with the right strategies and tools, smart businesses can see these inflection points coming and use them to gain a competitive advantage, McGrath says in her new book, Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen.

McGrath will pass along her tips on anticipating, understanding and capitalizing on those inflection points as keynote speaker at this year’s USDEC Board of Directors and Annual Membership Meeting, Oct. 14-15 at Chicago’s Swissôtel.

For more information on the board meeting, go to the board meeting landing page. There you can download the preliminary agenda and register for the meeting.

Discuss USDEC’s 2020 business plan at Sept. 12 webinar
USDEC will hold a webinar to review the 2020 draft business plan and 2020-22 strategic plan on Sept. 12 from 11 a.m.-12:15 p.m. Eastern time. Please download and read the plans, jot down any questions you might have—particularly in light of the rapidly evolving global trade environment—and join us for the discussion. For more information or to register, click here.

In addition to the business plan review led by Tom Vilsack and Matt McKnight, USDEC’s Marc Beck will present the market outlook, Shawna Morris will provide an update of the latest trade policy activity and Jonathan Gardner will summarize recent market access developments. We look forward to your participation!

Join USDEC at U.S. Ingredient Innovation Seminar in Central America
Sign up now for USDEC’s Nov. 5 U.S. Ingredient Innovation Seminar in Guatemala City. The seminar targets food and beverage processors in the six largest countries in Central America: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. The aim is to increase U.S. dairy ingredient use—dairy proteins, permeate and milk powder in particular—via a two-fold approach:

• Educating potential U.S. dairy ingredient end-users (R&D, procurement, marketing) on the functionality and nutrition of U.S. dairy proteins, permeate and milk powder for a broad range of food and beverage applications.
• Connecting USDEC members with potential buyers in the region via member presentations, one-to-one meetings and a networking reception in a mini-trade show environment.

For more information, please contact Keith Meyer at kmeyer@usdec.org. In addition, for a full list of upcoming marketing events, visit USDEC’s online Marketing Calendar.

German cheesemaker builds new plant, relocates production
German dairy Bayernland is spending €55-million (about US$61-million) to expand its cheese operations in Bayreuth, Bavaria. The Bayreuth site currently makes around 23,000 tons of cheese per year, mostly mozzarella.

The project, due for completion in mid-2021, will add 40,000 tons of semi-hard cheese production per year to the site, as well as transfer all production from Bayernland’s Kemnath plant. The Kemnath facility will close in 2021. (Onetz.de, 8/22/19)

Baltic dairies merge, plan new facility
Latvian dairy co-op Piena Cels and Estonian co-op E-Piim plan to merge their operations under a new name: E-Piim Societas Cooperativa Europaea. The partners plan to build a new €100-million (about US$111-million) milk processing facility in Paide, Estonia, with a projected opening date of 2021. Dutch dairy trader Interfood BV is reportedly one of the investors in the project. Combined, Piena Cels and E-Piim handle about one-quarter of Latvia and Estonia’s aggregate milk output. (eLiesma, 8/27/19)

Company news briefs
Nestlé is closing its Tongala, Victoria, Australia, tinned milk plant due to reduced demand and aging equipment. The facility will shutter between late 2020 and mid 2021. (FoodBev.com, 8/28/19)