U.S. increases tariffs on Chinese goods; China pledges countermeasures
Trade talks between China and the United States continued into the night on Thursday, despite a U.S. move to increase tariffs from 10% to 25% on $200 billion in Chinese goods. The tariff increase, which went into effect today at 12:01 a.m., was previously slated for Jan. 1, 2019, but postponed after President Trump and Chinese President Xi Jinping agreed to trade talks in December.

In addition, President Trump plans to levy a 25% tariff on $325 billion in Chinese products not yet subject to additional U.S. duties. No timetable was given for the latter threat, but the president said Thursday that the administration was “starting the paperwork.”

China backtracking on commitments
The Trump administration made the move due to what USTR Robert Lighthizer characterized as China “retreating from commitments that have already been made.” China reportedly stripped binding legal language from the seven chapters of the draft negotiating document.

China warned that it would resort to “countermeasures” in response to the tariffs but has not yet specified what those measures would be. As of early this morning, the Chinese government had not announced any additional tariffs. China’s Commerce Ministry had urged the United States to avoid unilateral action but the government had also stated that it is better prepared for an escalation in trade tensions than the United States.

USDEC will continue to closely monitor the situation and provide updates as warranted. In addition, watch the USDEC Hot Topics page for additional material related to evolving U.S.-China trade talks. (USDEC staff; USTR’s Office; Reuters, 5/9/19; Washington Post, 5/8/19; Wall Street Journal, 5/9/19, 5/7/19, 5/6/18; Nikkei Asian Review, 5/7/18)

U.S. cheese exports set single-month record
U.S. cheese suppliers exported 37,190 tons of cheese in March, 10% greater than March 2018. It was a single-month record, topping the previous high set in March 2014 by 1,000 tons.

At the same time, retaliatory tariffs continue to weigh on overall U.S. performance. Aggregate volume of milk powders, cheese, butterfat, whey products, and lactose reached 186,185 tons in March, the most in seven months, but down 12% from the strong results posted in March 2018.

Sales to China plummeted, with overall March volume just half of what it was a year ago, before retaliatory tariffs hurt U.S. competitiveness.

In cheese, U.S. suppliers found success across a broad geography, with high double-digit gains to Japan (+28%), South Korea (+39%), the Middle East (+39%), Southeast Asia (+33%) and Central America (+35%). The growth was enough to offset declines to Mexico (-17%) and China (-37%).

Total U.S. export value rose 4% to $538.3 million, compared to March 2018.

For a more in-depth look at the numbers, visit the U.S. Export Data page on the USDEC website.

 

GDT index inches closer to 5-year high
The absence of intervention stocks has taken the lid off the SMP market, with EU prices up for the fifth straight week. They now sit at their highest since June 2017. EU whey, on the other hand, slipped again, falling to a six-month low on lighter demand from China. EU butter has failed to gain any traction over the last three weeks. Cheese and WMP are steady.

In Oceania, SMP is likewise firmer. Cheese is slightly weaker, while butter and WMP are steady.

In March, Australia milk powder exports were down 25% and cheese exports were down 18%, reflecting the sharp reduction in milk production this season across the country. Production in Q1 was off 11% vs. a year ago, the worst quarter in at least a decade.

Buyers are looking to ensure second-half coverage in the face of global supply lagging in all regions of the world.

With the New Zealand season coming to a close, GDT prices were mixed. WMP declined fractionally for the third straight event. AMF increased to its highest level since June. SMP tacked on 2.8% to cross US$2,500 for the first time since February. Cheddar dropped 2.4%, the first decline of the year.

In all, the average winning price moved up 0.4% to US$3,490, the 11th straight increase. Since July 2014, the index has rallied to this level twice, and both times the price petered out in the mid-US$3,600s.

The U.S. dollar continues to strengthen against competitor currencies, hitting a 23-month high against the Euro this week. This puts downward pressure on global prices.

S&P Dow Jones plans new dairy index
S&P Dow Jones Indices plans to launch an index for the global dairy industry by the end of this year. The index will take into account markets in Europe, New Zealand and the United States, with an initial focus on SMP.

S&P Dow Jones is creating the index “at the request of the industry,” which felt “left out of financialization of commodity markets,” according to Fiona Boal, head of Commodities and Real Assets at S&P Dow Jones Indices. Boal said there were a number of challenges to creating the index to make it useful to farmers and investors. She indicated it would likely be trade-weighted rather than production-weighted. (Reuters, 5/7/19)

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.

 

Ag letter to congressional leaders calls for USMCA approval
USDEC, more than 10 USDEC members, NMPF and IDFA were among 67 agricultural associations and companies that signed a joint letter to Senate and House leaders calling for Congress to pass the U.S.-Mexico-Canada Agreement (USMCA). The letter, dated May 6, emphasizes the benefits of USMCA for the U.S. agricultural sector, including improved market access, science-based sanitary and phytosanitary standards, and protections for common food names. USDEC’s comprehensive efforts to advance USMCA continue on multiple fronts.

USDEC supports Codex contaminants guidelines that facilitate trade
Nick Gardner, USDEC’s director of Codex and international regulatory affairs, was in Yogyakarta, Indonesia, last week for a meeting of the Codex Committee on Contaminants in Food (CCCF). On the docket was a new contaminant guideline that, if adopted, will help facilitate dairy trade.

Specifically, the guideline will ensure quick evaluation and resolution of disputes at ports when shipments of foods, including dairy products, are found to contain very low levels of unexpected substances. Gardner was part of the U.S. delegation working closely with the International Dairy Federation (IDF) and USDEC members on the ground, actively engaging on IDF position development to support the guideline’s advancement.

New Zealand developed the guideline, in part as a response to detections of traces of dicyandiamide (DCD) in milk powders in 2013. It provides a science-based process for regulators to evaluate low levels of chemicals detected through import screening or other surveillance that is rapid enough to avoid trade disruptions when the substance detected is determined not to be a public health concern.

The guideline also establishes a “cut-off” value of 1 part per billion (ppb) under which detection of most substances are deemed not to require risk management measures. Today, 1 ppb is a low value. But because dairy products and ingredients are subjected to increasingly sensitive test methods and tested for an increasingly large number of compounds, this guideline provides U.S. dairy exporters a powerful future-proofing tool to resolve disputes and a science-based threshold of toxicological significance.

Radioactivity working group formed
CCCF also agreed to form an electronic working group (eWG) to develop a paper on radioactivity in feed and food of both human-made and natural origin. The paper (to be presented at the next CCCF meeting) will look at baseline radioactivity found in low levels in all foods/feed, not radioactivity associated with an emergency event. It may also identify potential risk-management activities the Committee could undertake if data indicates a potential public health risk from baseline contamination.

Given the potential implications for dairy, USDEC will monitor development of the paper closely and work with the U.S. delegation to CCCF, IDF and other stakeholders to ensure that any future work undertaken by the committee is scientifically sound and includes rigorous risk communication strategies.

If you are interested in learning more about this paper or the new Codex guideline on low-level detections, please contact Nick Gardner (ngardner@usdec.org).

Mexican technical regs, Korean test methods headline April Export Guide and Testopedia updates
USDEC updated 24 sections of the USDEC Export Guide in April and posted seven new test methods for South Korea in Testopedia, including methods for salmonella, Staph aureus, and yeast and mold counts. Major changes include:

• USDEC incorporated the new technical regulations issued in January 2019 for milk powder as a raw material, cheese and yogurt. Volume 3 of the Export Guide contains the new requirements that will apply when the regulations enter into force in July 2019 (for yogurt) and January 2020 (for cheese and milk powder as a raw material). Volume 2 of the Export Guide includes a new section, “Test Report for Milk Powder as a Raw Material,” outlining the product testing and documentation requirements that will be mandated to comply with conformity assessment provisions of the new technical regulation.
• Volume 2 of the Export Guide includes information on the AMS Sanitary Certificate required for all shipments of Chapter 4 dairy products entering Taiwan on or after June 1. AMS posted an application for the Taiwan certificate on the AMS website on May 3.
• USDEC updated the Indonesia Volume 2 (Product Registration) and Volume 3 (General Labeling) documents to include a new requirement for bar codes on labels, which ties in to product registration for the goods. Bulk foods for further processing are exempt.

Every month USDEC’s Market Access team emails a list of guide updates to interested members. If there is anyone at your company who should be included on the distribution list for that email in the future, please contact Jessica Smith at jsmith@usdec.org. (USDEC staff)

Sign up now for Export Guide review webinar
USDEC will be holding a webinar to review the Export Guide on 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.

U.S. cheese takes the stage in Hong Kong
Nine U.S. companies highlighted U.S. cheese expertise and the diverse U.S. cheese portfolio at the USDEC pavilion at this week’s HOFEX show in Hong Kong. HOFEX targets the Asian food and hospitality sectors, attracting more than 42,000 visitors this year.

Schreiber Foods and Schuman Cheese each had a spot in the USDEC pavilion, while the Oregon Dairy and Nutrition Council (ODNC) had two spots shared by six cheesemakers from Oregon, Utah and Washington: Beehive Cheese, Face Rock Creamery, Ferndale Farmstead, Oregon State University Creamery, Rogue Creamery and Tillamook Creamery.

In addition to the show floor, USDEC, in collaboration with ODNC and the California Milk Advisory Board (CMAB), showcased U.S. cheese May 8 at the Hong Kong Agricultural Trade Office’s “U.S. Food Day.” During a one-hour timeslot, suppliers introduced themselves to potential buyers and frequent USDEC collaborator Chef John Esser and Mark Todd narrated a wine and cheese pairing for the guests. A wine and cheese reception, also co-sponsored by USDEC, ODNC and CMAB, gave attendees further chances to taste U.S. cheese and meet face-to-face with U.S. suppliers.

Like USDEC’s participation in the World Gourmet Summit in Singapore (see Global Dairy eBrief, 5/3/19), HOFEX activities aim to build demand for high-value U.S. cheese by enhancing awareness of U.S. cheese heritage, tastes and applications among buyers, distributors, chefs and other end users in the foodservice sector.

Mexico feed seminar set for May 24
USDEC is hosting a Pig Feed Seminar in Queretaro, Mexico, in conjunction with the May 24 annual meeting of AMEPA, the Mexican feed manufacturers association. Speakers include Dr. Tercia Reis de Souza, technical specialist in piglet digestion and broader health and nutrition, and consultant Juan Carlos Anaya. Presentations will cover a range of topics related to pig nutrition, including an overview of the Mexican pig feed sector.

USDEC members that are actively promoting dairy ingredients (primarily permeate and lactose) to the pig feed sector have confirmed their attendance and will speak on their market strategies and product portfolios. As of May 7, 70 attendees from 38 companies—including key members from the Mexican Association for Animal Nutrition—had confirmed their attendance. For more information, please contact Rodrigo Fernandez as rafernandez@usdecmexico.com.

Foremost earns sustainability award
USDEC member Foremost Farms earned a U.S. Dairy Sustainability Award for Outstanding Supply Chain Collaboration with General Mills. The annual awards, presented by the Innovation Center for U.S. Dairy, recognize dairy farms, businesses and partnerships whose practices improve the well-being of people, animals and the planet. The awards are part of the Innovation Center’s broader sustainability commitment, which includes the U.S. Dairy Stewardship Commitment, the Dairy Sustainability Alliance, on-farm and supply chain resources, and environmental research.

Foremost and General Mills won for their collaborative effort to reduce greenhouse gas emissions and capture additional environmental benefits. The two companies convened a network of 16 dairy farmers and other experts to assess and implement operational improvements using science-based, on-farm assessment tools that provided a comprehensive estimate of a farm’s GHG emissions and energy use. Participating farmers saw a combined 11% reduction in GHGs over a three-year period, outperforming national and regional averages.

In addition to Foremost and General Mills, three dairy farms were recognized for Outstanding Dairy Farm Sustainability: Cinnamon Ridge Farm, Donahue, Iowa; Majestic Crossing Dairy, Sheboygan, Wis.; and Philip Verwey Farms, Hanford, Calif. The Innovation center also recognized Gleaners Community Food Bank in Detroit for Outstanding Community Impact for its work with the dairy industry to get milk to families in need.

 

Bubs-Fonterra deal latest in infant formula developments
Infant formula marketer Bubs Australia signed a deal with Fonterra Australia whereby Fonterra will supply Bubs with organic milk powder for a new line of infant formula under the Bubs Organic label. Bubs will distribute the formula in Australia starting June 1, with distribution in China to follow via its joint venture with Beingmate Baby & Child Food and through Chinese ecommerce giant Tmall. Bubs is aggressively pursuing the Chinese infant formula market, cutting a series of deals over the past three months to bolster manufacturing and distribution (see Global Dairy eBrief, 4/5/19).

Fonterra will reportedly source the milk from its New Zealand organic milk pool and manufacture the powder at its Darnum, Victoria, Australia plant. Fonterra recently regained full ownership of the Darnum plant after exiting its Australian joint venture with Beingmate. (New Zealand Herald, 5/7/19; Small Caps, 5/6/19)

FrieslandCampina reorganizes ingredient business
Dutch dairy giant FrieslandCampina reorganized its ingredients business, folding its four individual operating companies—DOMO, Kievit, DMZV and Nutrifeed—into a new product-oriented structure to better tap into the growing global nutrition market. The former operating companies are now four strategic segments: Early Life Nutrition; Adult Nutrition (performance, active and medical nutrition); Food & Beverages; and Animal Nutrition. FrieslandCampina Ingredients runs five regional sales offices located in Brazil, China, the Netherlands, Singapore and the United States. (Company news)

Company news briefs
Canada’s Saputo announced plans to close its Dresser, Wis., cheese facility at the end of the month. It acquired the plant late last year with its purchase of F&A Dairy Products . . . The government of Canada is investing C$1.5 million (about US$1.1 million) to modernize equipment at the St-Albert Cheese Co-operative facility in Ontario. The money is part of the government’s Dairy Processing Investment Fund, which was established to help the nation’s dairy sector cope with increased competition due to the EU-Canada Comprehensive Economic and Trade Agreement. (Company reports; The Sun, 5/3/19)