HIGHLIGHTS: October 21, 2022
• Cheese diplomacy and policy engagement in the EU
• USDEC at UN food security committee meeting
• Reaffirming links to FEPALE; challenging trade barriers in Ecuador
• Dairy protein education in South Korea
• Board meeting presentations now online
• Market Summary: GDT plunges
• EU milk production update
• USDEC's August International Demand Analysis
• New Zealand emissions proposal would have farmers pay
• USDEC meets with FMC chair
• Comments on ocean carriers’ refusal to negotiate
• Danone to transfer Russian business
• Company news: Bega, Meiji, Norco
Featured
Europe trip seeks more favorable trade and dairy policy landscape; highlights quality of U.S. cheese
A cross-departmental delegation from USDEC visited Europe this week to begin deepening engagement with the EU in pursuit of more predictable trading conditions and to foster continued growth in dairy consumption, sustainability and food security. To proactively rebut European misperceptions regarding U.S. dairy products, USDEC showcased the depth, breadth and high quality of U.S. cheesemaking while conveying U.S. dairy’s sustainability leadership.
The USDEC delegation consisted of USDEC President and CEO Krysta Harden; Senior Vice Presidents of Trade Policy, Sustainability and Multilateral Affairs (SAMA), Global Cheese Marketing, and Global Retail Programs, respectively, Shawna Morris, Nick Gardner, Angélique Hollister and Merle McNeil. They were joined by two staff members based in the USDEC Middle East/North Africa (MENA) office: Firas Zahreddine, key account manager, and Antonio El Khoury, director of culinary programs.
Full slate of events
Harden, Morris and Gardner held a series of meetings in Brussels and Paris (organized around the sprawling SIAL Paris food exhibition) with European farm and food groups, European Commission leaders, Organization for Economic Cooperation officials and U.S. government staff. The goal was to open a deeper dialogue on trade, including contentious issues like geographical indications, export certifications and emerging EU sustainability-related policy-making, while also highlighting U.S. dairy quality and sustainability.
Left to right: USDEC’s Shawna Morris, senior vice president, trade policy, Krysta Harden, president and CEO, and Nick Gardner senior vice president, SAMA, outside EU headquarters in Brussels following their meeting with leaders of the European Commission Directorate-General for Agriculture.
It culminated in a USDEC-hosted dialogue and reception featuring 50 U.S. cheeses from a dozen companies across eight states. Reception attendees traveled from table to table in multiple reception rooms at the historic Hôtel de Talleyrand, sampling some of the finest cheeses the U.S. has to offer to drive home the idea of U.S. cheese expertise, variety and quality in a “taste the message” approach to diplomacy.
Left to right: Chef John Esser, USDEC consultant; Angelique Hollister, USDEC senior vice president, Global Cheese Marketing; and Chef Antonio El Khoury, USDEC MENA’s director of culinary programs, showcase one of many tables of U.S. cheeses at a reception following the “Hôtel de Talleyrand Agricultural Trade Policy Dialogue.”
This inaugural “Hôtel de Talleyrand Agricultural Trade Policy Dialogue” was the first in a series of U.S.-French agricultural trade policy talks that the U.S. embassy plans to convene to foster greater understanding as the EU develops its Farm to Fork policies on food production, consumption and trade. It took place in the embassy-owned Talleyrand building, which served as the headquarters of the post-WWII Marshall Plan, making it a fitting site for fostering greater collaboration on shared challenges between two of the world’s leading dairy suppliers.
During the policy dialogue portion of the event, U.S. Ambassador to France Denise Campbell Bauer kicked off the discussion between Harden and Laurent Damiens, COO of the French dairy industry association Centre National Interprofessionnel de l’Economie Laitière (CNIEL), with a focus on “Overcoming Challenges and Finding Common Cause on Dairy.”
“A strong Transatlantic relationship is more important than ever, which is exactly why policymakers should focus on how to further streamline dairy trade between our two markets and ensure that new regulations under consideration respect how vital yet diverse global dairy production is,” Harden said in a USDEC press release on the dialogue. “Trade needs to be a two-way street and right now, U.S.-EU dairy flows are already largely a one-way direction.”
Left to right: USDEC President and CEO Krysta Harden speaks with Farm Foundation’s Martha King, who served as moderator of the event’s Q&A segment, and CNIEL Chief Operating Office Laurent Damiens about common sustainability goals and Transatlantic trade between the U.S. and EU.
A new start
This week’s Paris and Brussels meetings were the first bilateral sessions USDEC held in Europe with EU dairy, food and government officials since the COVID pandemic, and they come against a backdrop of pending EU food policy and trade measures that are poised to drive an even bigger wedge between Europe and U.S. agricultural suppliers, like the emerging Farm to Fork initiative.
“We sought to engage a wider range of EU dairy stakeholders on these bilateral policy issues since policies that negatively impact dairy consumption in the EU and third markets will ultimately further a false narrative that a sustainable future should mean less dairy production and consumption,” said Gardner.
Meetings with food and farm groups sought to identify information on the EU food policy landscape and if there are areas where the EU and U.S. could better cooperate to achieve shared goals.
“To best foster global sustainability and food security needs, and promote more predictable trading conditions, we need to ensure that evolving regulations and policies in the EU do not introduce barriers to trade in safe, high-quality products,” said Morris.
Correcting an unfair imbalance
The EU already enjoys a massive dairy trade surplus with the United States, shipping nearly $2 billion a year in dairy here while tariffs and technical barriers to trade limit U.S. dairy exports to the EU to about $100 million. The EU’s monopolistic approach to geographical indications (GIs) is a big part of that but is far from the only challenge.
One of the reasons for exhibiting at SIAL Paris was to demonstrate that the United States has a portfolio of cheeses that can go toe to toe with the best of Europe in terms of quality and taste. (See this Food Ingredients First article quoting Hollister.)
USDEC President and CEO Krysta Harden (second from left) is flanked by USDEC members on the SIAL show floor at the USA Cheese Pavilion.
Three U.S. cheesemakers participated at USDEC’s booth, the USA Cheese Pavilion: Sartori, Belgioioso and Jasper Hill. The companies—each with multiple international cheese awards to their names—highlighted examples of the high-quality, sustainably produced U.S. cheese portfolio. Members reported strong interest from dairy buyers from multiple markets in Europe.
U.S. cheeses were also the star of the Oct. 16 U.S. embassy reception that Ambassador Bauer hosted at her official residence for U.S. agricultural participants at SIAL. The cheese table in the center of the main room had a near-constant line of 15+ attendees, including French and international visitors, waiting to sample the selections.
USDEC advocates for critical role of international trade and U.S. dairy at UN Committee on World Food Security
Last week, the 50th session of the Committee on World Food Security (CFS) convened in Rome at the Food and Agriculture Organization. USDEC’s VP of Sustainable Nutrition, Janice Giddens, was on the ground as a member of the Private Sector Mechanism (PSM) delegation, to advocate for the vital roles of U.S. dairy foods and international trade in providing a sustainable source of nutrition for a growing global population.
The CFS is an important UN-affiliated forum addressing nutrition, food security and sustainable food systems where the private sector has an official seat at the table. As a member of the PSM, USDEC participates in CFS to shape global policy guidance that can impact regulations at the national level, proactively working to prevent potential market access barriers for U.S. dairy exports. Governments often use policy guidance that comes out of these meetings in national legislation.
Packed agenda
Throughout the week, CFS debated and deliberated topics related to:
- Responsible investment strategies.
- The state of food and nutrition security in the world.
- Strengthening data collection.
- Addressing privacy and gender equality issues.
- Increasing youth participation in food systems and agriculture.
USDEC’s negotiating efforts focused on pushing back against language that seeks to undercut the critical role of international trade in delivering sustainable food systems, minimizes the benefits of animal-sourced foods and creates regulatory environments that could restrict U.S. dairy exports.
During a plenary session, Giddens took the floor to deliver a speech that reaffirmed the private sector’s commitment to improving gender equality, highlighting the role that women play in nourishing a growing global population and emphasizing the importance of agriculture and access to markets for improving women’s livelihoods.
Speaking up for equality
In past negotiations on gender equality, Giddens strongly pushed back against language that sought to malign the role of international trade and restrict women’s access to markets. In her comments during the negotiations, which included member states, civil society and UN staff, Giddens stated: “Market access is critical for food and nutrition security. We should address the issues that prevent women from accessing markets instead of putting more obstacles in their way.”
Following these comments, pro-trade language was introduced and supported by member states.
USDEC will continue to engage within these global fora by contributing subject matter expertise and building its network of policymaker and thought leader allies to promote the role of trade in sustainable food systems and maintain and expand market access for healthy, sustainably produced U.S. dairy products.
USDEC reaffirms relationship with FEPALE; challenges milk powder regulations with Ecuador
This week, USDEC reaffirmed and strengthened its relationship with the Pan-American Dairy Federation (FEPALE) at the organization’s 16th Congress in Quito, Ecuador. USDEC Executive Vice President, Policy Development and Strategy Jaime Castaneda; USDEC Senior Vice President, SAMA Nick Gardner, and Dairy Management Inc. Vice President, Nutrition Research Moises Torres spoke to FEPALE members, which include representatives from dairy trade associations, dairy companies and government officials from the region.
Among the topics addressed, Castaneda spoke in support of the USDEC-FEPALE partnership and the joint work in international forums that has effectively defended dairy and facilitated trade. Castaneda was also re-elected as vice president of FEPALE for a two-year term.
USDEC Executive Vice President, Policy Development and Strategy Jaime Castaneda, addresses FEPALE’s 16th Congress in Quito, Ecuador.
In a series of meetings on the margins of the conference, USDEC connected with:
- Alejandro Acosta, economist and livestock policy officer with the UN Food and Agricultural Organization, to discuss work between USDEC and FEPALE on sustainability issues.
- The Ecuadorian Codex Alimentarius office to discuss upcoming challenges and discussions in international policy at Codex.
- The Ecuadorian dairy farmer association to discuss partnership opportunities to increase dairy consumption and facilitate trade between the United States and Ecuador.
USDEC’s Castaneda (third from left), met with representatives from the Ecuadorian dairy farmer association to discuss partnership opportunities.
Milk powder threat
In addition to the FEPALE meetings, USDEC’s main objective in visiting Ecuador was to raise concerns regarding legislation that bans the importation of milk powder. Castaneda met with industry representatives and the Ministries of Commerce and Agriculture responsible for implementing the legislation to highlight the inconsistencies of the law with Ecuador’s WTO commitments and its harm to Ecuadorian consumers. Furthermore, Castaneda cautioned the Ecuadorian government that the law would diminish chances of an FTA between Ecuador and the United States.
The vice ministers with the Ministries of Commerce and Agriculture acknowledged the concerns and offered to work with the U.S. dairy sector to resolve the issue.
In addition, Castaneda highlighted concerns related to Ecuador’s agreement with the EU and its imposition of restrictions on common food names. The trade deal includes several restrictions that not only limit the ability of Ecuador’s consumers and producers to use recognizable, generic terms, it may also limit the use of terms for American-made cheeses should Ecuador and the U.S. pursue a trade agreement.
USDEC, along with our local counsel, will continue to work with the U.S. government and local industry to seek solutions to the potential trade barriers.
Events
USDEC bolsters dairy protein support among key opinion leaders in South Korea
One aspect of USDEC’s multi-faceted ingredient marketing plan is education. Last week in South Korea was a perfect example.
USDEC sponsored a 50-minute session at the Korean Nutrition Society (KNS) conference in Seoul. The session, titled, “Customized Nutrition, Whey Protein for Healthy Aging,” featured speakers Dr. Matt Pikosky, vice president, nutrition research, National Dairy Council, and Dr. Jun-Hyuk Lee, processor at the Eulji University School of Medicine.
More than 400 professors and economic scholars in nutrition, medicine, pharmacology and other fields influential in providing nutritional guidance in Korea attended the conference in person, with another 100 tuning in online.
An aging society
With 17.5% of Koreans currently aged 65 and older, the country is fast headed toward becoming a super-aged society. The presenters addressed how dairy protein is particularly suited to the nutritional needs of this growing demographic segment.
Pikosky, a frequent USDEC collaborator, focused on the risk of sarcopenia as a public health concern in a presentation titled, “Understanding protein quality and dairy protein’s role in healthy aging.” He shared the latest science on how dairy proteins could support healthy aging, zeroing in on protein quality and amino acid composition differences between dairy and plant proteins.
Lee, a lead author of a 2022 paper on dairy protein benefits in the Clinical Nutrition Journal, shared the findings from that study, as well as the broader body of research on dairy proteins and body composition in a healthy-aging context. The study focused on the relationship between dairy proteins and body composition in middle-aged and older women. Its findings indicated high dairy protein intake could be effective in preventing the incidence of low muscle mass with abdominal obesity in Korean women.
Word of mouth
By speaking to these key opinion leaders, USDEC hopes to get U.S. dairy protein messages out to a broader audience, ultimately expanding demand for U.S. dairy proteins while also improving health outcomes for the Korean population.
Board meeting presentations now available online
If you missed a session at the Oct. 10-11 USDEC Fall Membership Meeting—or want to rewatch a particularly interesting presentation—USDEC has it covered. USDEC members can download PowerPoint slides of many presenters and access video-archived versions of most of the sessions in the Meetings & Webinars section of usdec.org under the Fall 2022 meeting link.
Market Summary
GDT prices plunge
The Global Dairy Trade (GDT) Price Index took a firm step toward bear territory at the Oct. 18 auction. Weak demand caused price declines for all major products across nearly every contract for the second auction in a row.
The average winning SMP price took the biggest hit, dropping 6.9% to US$3,250/MT, the lowest since August 2021 and far worse than expected by futures markets heading into the event (NZX-SGX saw a slight gain for SMP). WMP fell 4.4% to US$3,421/MT; cheddar declined 3.9% to US$4,769/MT; butter fell 2.6% to US$4,851/MT; and AMF dipped 2.7% to US$5,661/MT.
China’s COVID issues continue to weigh on dairy demand. Authorities quarantined another 1 million people in the city of Zhengzhou on Monday, after a surge in new lockdowns the previous week, and President Xi Jinping signaled no changes to the country’s “zero-COVID” approach during a speech opening the Party Congress on Sunday.
Inflation and ongoing economic uncertainty are creating demand questions around the world. Despite the GDT declines for the past two auctions, dairy commodity prices are still exceeding historical pre-pandemic ranges and those elevated price levels have been making their way to consumers.
Take Japan, for instance, where a slew of fast-food operators raised prices in September. McDonald’s Japan lifted prices across the board by 15%. A survey of major Japanese domestic food and beverage manufacturers found that the companies raised prices on 6,700 items in October by an average of 14%. Japan’s top dairy processors—Meiji, Morinaga Milk Industry, Snow Brand Megmilk—announced price hikes ranging from 2.0%-12.5% on more than 275 dairy products starting in November.
It's looking more likely that consumers may be starting to push back on rising prices, or at least some dairy buyers might be expecting an imminent pushback and are being cautious on stocking levels.
August International Demand Analysis ready for download
Year-over-year global dairy trade grew 6% in August on a milk solids basis, marking the first increase in 2022. Improved demand from China (+5%), the Middle East/North Africa (+11%) and Latin America (+34%) helped pull the world out of the seven-month slump.
For more details on August performance, download USDEC’s latest International Demand Analysis. The 70-page document is packed with charts, graphs and commentary, providing a forward-looking glimpse at global markets from a U.S. exporter’s point of view. It analyzes demand in key markets for cheese, NFDM/SMP, whey (HS Code 0404.10) and WPC80+, and also includes shorter summaries for lactose, butterfat and WMP. For questions, please contact William Loux at wloux@usdec.org or Stephen Cain at scain@nmpf.org.
EU27+UK milk falls 0.8% in August
The rebound in EU27+UK’s milk production lasted exactly one month. After gaining 0.1% in July (only the second increase this year), year-over-year deliveries dropped 0.8% in August, weighed down by a 6.3% shortfall in Italy, a 2.5% drop in France and a 1.2% decrease in the UK. But those weren’t the only three finishing in the red—declines were commonplace in August, with 17 of the 28 nations posting lower volume this year than last.
While the decline is not shocking, its magnitude is a bit of a surprise given the improving year-over-year performance in June and July, better weather conditions and forecasts that EU output would increase in the back half of the year.
Early reports from key countries like Germany, France, Poland and the UK show some year-over-year milk production growth in the first couple weeks of September. But it remains unclear whether production can overcome the fallout from the scorching summer weather, persistently high farm input costs, growing uncertainty about domestic EU demand, and questions about energy costs and availability.
Indeed, the European Commission’s latest Agricultural Markets Short-Term Outlook report predicts that full-year 2022 EU milk production (without the UK) will decline 0.5%. For that to happen, the decline in EU milk deliveries would need to deepen in the second half, given that output for the EU27 fell only 0.4% in the first half.
The EC expects EU milk production to further decline 0.2% in 2023.
NZ emissions plan could undercut milk production growth
New Zealand dairy farmers could end up paying a levy on agricultural emissions starting in 2025 if the government approves a proposal submitted earlier this month by the He Waka Eke Noa primary sector climate action partnership. The proposal calls for regulated prices for methane, carbon dioxide and nitrous oxide emissions. But many details, including how those prices would be set, remain outstanding.
“The proposal would see New Zealand farmers lead the world in reducing emissions, delivering a competitive advantage and enhancing our export brand,” said Prime Minister Jacinda Ardern.
The proposal would also reduce annual milk solids production by up to 10%, according to government modelling.
New Zealand is accepting public comments through Nov. 18; the administration could sign it in early 2033. Farm groups have already criticized the proposal, noting that its authors disregarded many of the industry’s suggestions during the writing phase.
Supply Chain
USDEC meets with FMC chair to outline shipping challenges
Last week, USDEC and NMPF met with Federal Maritime Commission (FMC) Chair Daniel Maffei to discuss the implementation of the Ocean Shipping Reform Act (OSRA) and ongoing shipping challenges. It was the latest in USDEC’s ongoing efforts to resolve the supply chain crisis that has cost the U.S. dairy export sector money and lost business.
USDEC shared results from a membership supply chain survey completed this past summer and input gathered through individual talks with U.S. dairy suppliers. The discussions with FMC also built on comments USDEC submitted to the agency in September related to supply chain congestion and adverse effects on U.S. dairy competitiveness (see Global Dairy eBrief, 9/16/22).
USDEC conveyed that, even after passage of the OSRA and incremental improvement in logistics, members are still encountering high costs, fees and unreliable scheduling.
To continue to find ways to resolve the crisis, USDEC and NMPF emphasized collaboration between the agricultural industry and federal agencies like FMC is crucial to building a supply chain that works for American suppliers and consumers around the world.
USDEC President and CEO Krysta Harden thanked Maffei for his leadership and for taking the time to discuss the ongoing challenges. “This is a tumultuous time in ocean shipping,” she said, “but we're confident that there’s more we can do together to ease the burden that the dairy sector is facing.”
USDEC files comments on “unreasonable refusal to deal or negotiate”
In line with easing that burden, this week, USDEC and NMPF sent joint comments to the Federal Maritime Commission (FMC) in response to the agency’s requests for input to define “unreasonable refusal to deal or negotiate” regarding ocean carriers.
The comments outline how the pandemic created an environment in which ocean carriers would commonly tell shippers they had no available space or completely ignored shippers’ outreach to book space.
“On some occasions, there appeared to be intentional disregard for shipper efforts to secure space, while on others the cause was unclear and may have been due to overwhelmed customer service staff rather than negligence or carelessness,” the comments state. In either case, it’s an issue that needs to be addressed.
The comments backed FMC efforts to require ocean carriers to develop documented export strategies that outline their business plans for facilitating U.S. shipments, and their general approaches to engaging with shippers to make those exports happen. USDEC and NMPF go on to offer suggestions to the FMC as it deliberates, including emphasizing consistency, ensuring that any rules cover the full scope of negotiations for vessel space, specifying evidence needed to challenge an “unreasonable refusal” to deal or negotiate for space, and establishing anti-robust backsliding rules, penalties and enforcement provisions.
“It is our hope that the FMC’s rules will further assure that ocean carriers offer timely and reasonable rates and accommodations for their published services, and to increase the efficiency with which shippers may secure services,” the comments conclude.
Company News
Danone looks to transfer Russian operations
Danone is seeking a company to take over its Essential Dairy and Plant-based (EDP) business in Russia. Danone entered Russia in the early 1990s and built its position over the years, acquiring dairy processor Unimilk in 2010 to become one of the country’s largest processors.
After Russia’s invasion of Ukraine, Danone halted all import, export and investment plans in Russia but maintained production of dairy and infant nutrition products to meet the essential needs of the population. This planned divestment is a more definitive step to cut ties with the country, although Danone will maintain control of its Russian specialized nutrition business, which includes infant formula.
The EDP business includes 12 manufacturing plants and Russia’s No. 1 dairy brand, Prostokvashino. The business accounts for about 5% of Danone's net sales. Danone reports that the transfer could result in a write-off of up to €1 billion (about US$978 million). Danone sells products in Russia under both Russian brands and international brands like Activia, and it is unknown how any divestiture of the EDP business would address Danone’s global names. (Company news; FoodBev.com, 10/17/22; DairyReporter.com, 10/17/22; Bloomberg, 10/14/22)
Mergers, acquisitions and joint ventures
Australia’s Bega Cheese is selling its 49% stake in the Vitasoy Australia plant-based-beverage joint venture to Vitasoy International, Hong Kong. Vitasoy is exercising its right to buy the Bega stake as part of a previous agreement. (just-food.com, 10/17/22)
Company news briefs
Japan’s Meiji plans to open all three of its new dairy manufacturing facilities and one chocolate and biscuit plant in China in 2023 (see Global Dairy eBrief, 5/27/22). The company is building milk and yogurt plants in Tianjin and Guangzhou, an ice cream facility in Shanghai and the chocolate/biscuit operation in Guangzhou. … New Zealand’s a2Milk Co. renewed a distribution agreement with China State Farm Agribusiness Holding that will take the partnership through September 2027. … After signaling it might shut down the plant for good, Australian dairy co-op Norco is now moving ahead with plans to rebuild its Lismore ice cream factory that was destroyed in a flood earlier this year. The A$105-million price tag (about US$66 million) includes A$45 million in government funding and A$60 million of internal funding. (USDEC China office; Food & Drink Business, 10/7/22; ABC North Coast, 10/5/22)
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