HIGHLIGHTS: March 24, 2023
• Chinese dairy import update
• Maintaining the drumbeat on dairy trade priorities with Congress
• USDEC meets with Egyptian food safety chief about halal
• Feeding the Economy report outlines ag impact
• Harden talks Green Deal with EU environment head
• New USDEC research reports now available
• SIAL Canada coming May 9-11
• SEA webinar outlines market conditions, new products
• Last chance to register for Spring Membership Meeting
• Market Summary: cheese plunges on GDT
• ALIC sets butter, butteroil and whey tenders for next week
• USDEC urges Thailand to reduce MFN tariffs
• Southeast Asia office testifies at Philippine MFN hearing
• USDEC supports Torres Small for deputy ag secretary
• FrieslandCampina opens lactoferrin plant, gets new CEO
• Company news: Suntado, Tillamook, Good Memory Dairy
Featured
Chinese dairy imports pick up in February
Year-over-year Chinese dairy imports (major products, not including fluid) grew 5% in February after a steep 48% plunge in January. Strong gains in whey (+47%, +16,829 MT), SMP (+43%, +12,143 MT), infant formula (+37%, +6,625 MT) and lactose (+42%, 2,564 MT) drove the February increase.
Year-over-year Chinese cheese purchases held steady in February after rising 9% (+1,032 MT) in January.
WMP remained the biggest drag on overall volume. That’s partly due to soft demand, partly to domestic Chinese production and stocks, and partly due to the lack of a zero-tariff sales window this year. China essentially borrowed the 2023 zero-tariff volume outlined in the China-New Zealand Free Trade Agreement in 2022, leaving nothing for this year. Over the previous five years, China purchased anywhere from 28%-43% of its annual WMP volume in January and February. This year, year-over-year Chinese WMP imports fell 80% (-182,826 MT) in January and 31% (-22,133 MT) in February.
China’s WMP import volume for the first two months—95,557 MT—hasn’t been this low since 2012 when the country bought only 83,149 MT in January-February. And with New Zealand WMP exports to China down 39% in February (a general forerunner to next-month Chinese WMP imports), the situation does not seem like it will turn around anytime soon.
Despite WMP’s troubles and weak butterfat demand (-22%, -6,074 MT through February), whey, lactose and infant formula are off to strong starts and SMP and cheese are offering reasons for cautious optimism. The country’s economy looks to be rebounding, spurred by consumption. Retail sales grew 3.5% in January and February compared to the same period the previous year—a big reversal from a nearly 2% year-over-year decline in December.
(Note: China did not report January data in February, but instead released both January and February numbers at the same time this month.)
USDEC maintains steady drumbeat on dairy trade priorities in congressional meetings
USDEC Senior Vice President, Trade Policy Shawna Morris had two separate meetings this week to talk dairy trade with members of the House Ways and Means Committee. Morris (and representatives from other ag trade groups) met with Rep. Adrian Smith (R-NE), head of the House Ways and Means Trade Subcommittee, in a virtual update session on Wednesday, then joined an in-person ag trade policy roundtable with Ways and Means members Rep. Jodey Arrington (R-TX) and Rep. Dan Kildee (D-MI) yesterday.
Morris reiterated some of the key priorities outlined in a January letter to the House Ways and Means chairman and ranking member. Among those priorities, she emphasized:
- The need for the United States to resume negotiations on comprehensive free trade agreements with high-potential dairy export markets.
- The importance of addressing non-tariff barriers (NTBs) to trade.
- The need to maximize trade tools like the Indo-Pacific Economic Framework to address issues like NTBs.
The meetings were the latest in an ongoing series of USDEC engagements this year with Congress and the Biden Administration to highlight U.S. dairy trade priorities. They include letters and meetings with Doug McKalip, Chief Agriculture Negotiator at the USTR, and Alexis Taylor, the Under Secretary for Trade and Foreign Agricultural Affairs at USDA.
USDEC discusses halal mandate with Egypt’s National Food Safety Authority
USDEC continues to work with Egyptian authorities to find a mutually satisfactory solution to Egypt’s impending halal certification mandate. Last week, USDEC Senior Vice President, Market Access and Regulatory Affairs (MARA) Jonathan Gardner and the director of USDEC’s Middle East/North Africa office Nina Bakht Halal met with Dr. Tareq El Houby, chairman National Food Safety Authority Arab Republic of Egypt, to discuss the U.S. dairy industry’s concerns with the mandate and urge the agency to push for the exemption of U.S. dairy imports.
Gardner and Halal emphasized USDEC’s and the U.S. dairy industry’s strong relationship with Egypt and their mutual interest in food security. Discussions centered on the economic impact of the mandate on Egyptian consumers and the fast-growing Egyptian food and beverage sector.
Enforcement of the requirements that dairy imports be certified halal by a single halal body threatens serious disruptions to the dairy supply chain, Gardner said. In addition, because dairy is considered halal by nature and most U.S. dairy manufacturers already are halal certified (meeting rigorous halal certification standards), it is unnecessary to include dairy in the country’s single-certifier mandate.
Gardner and Halal also raised points about the lack of transparency regarding the requirements, the certificate cost and conflicting recommendations for the halal mark on packaging.
Egypt’s halal single-certifier requirements are set to go into effect in one week, on March 31, 2023. This effective date is the date of arrival into Egyptian ports. See Volume 2 of the USDEC Export Guide for more information or contact Bryan Jacoby at bjacoby@usdec.org.
Report highlights agriculture’s sizable impact on the U.S. economy
The seventh annual “Feeding the Economy” report found that the U.S. food and agriculture industries and their suppliers contribute over $8.6 trillion to the U.S. economy or nearly one-fifth of the national total. Released on National Ag Day, March 21, the report reinforces to policymakers and consumers the major role agriculture plays in U.S. economic prosperity.
The report, commissioned by 25 food and agriculture groups, including USDEC and NMPF, measures the influence of the U.S. food and agriculture sectors on local and national economic activity. Exports, jobs and wages rose from last year’s report and exceed pre-pandemic levels, underscoring the sectors’ resilience and reliability amid unprecedented crises.
“Despite the many challenges of the last few years—from COVID to supply chain disruptions to inflation—U.S. dairy exports continued to grow, to well over $9 billion in value in 2022,” said USDEC President and CEO Krysta Harden. “More than just a record number, this report highlights how these exports and the agricultural industry at large support thousands of American dairy farmers and workers and supplies the world with nutritious and sustainable products when it’s needed the most.”
The U.S. food and agriculture sectors directly support nearly 23 million U.S. jobs, providing $927 billion in wages, and are particularly vital to rural communities across the country, according to the findings.
The analysis breaks down the impact by state and congressional district. To look up your location or findings from other states or congressional districts, go to the Feeding the Economy home page and scroll down to the interactive U.S. map.
Harden talks U.S. dairy and the EU Green Deal with European Commission DG for environment
This week, USDEC President and CEO Krysta Harden sat down with about a dozen leaders from the manufacturing, energy, transportation and other business sectors to discuss the regulatory implications of the European Green Deal with Dr. Florika Fink-Hooijer, director-general of the Environment Department of the European Commission. Harden was invited by the Meridian International Center, which hosted the meeting.
Such meetings with high-ranking global officials help to build relationships, plant seeds for future discussions and keep the U.S. dairy story front and center with leaders around the world.
USDEC President and CEO Krysta Harden discussed how the EU Green Deal might impact European milk production and dairy competitiveness with Dr. Florika Fink-Hooijer, director-general of the Environment Department of the European Commission, at a meeting organized by nonprofit, nonpartisan public diplomacy group Meridian International Center.
New custom research on cheese, non-U.S. dairy exporters
USDEC’s Strategic Insights department has released two new custom research reports free to members. Click on the report name below to access a download link.
This research identifies strengths and weaknesses of U.S. dairy competitors at a corporate level to identify opportunities for U.S. exporters and to provide deeper insights into the evolving global dairy landscape.
Taste is the top purchase driver of cheese for consumers across the globe. This research explores specific sensory attributes associated with good tasting cheese in two key U.S. cheese export markets: Saudi Arabia and South Korea.
Events
SIAL Canada, May 9-11, has space for U.S. dairy suppliers in USA Pavilion and Cheese Business sector
More than 20,000 food and beverage industry professionals from Canada, the United States and 60 other countries are expected to attend this year’s SIAL Canada in Toronto. The annual food retail and foodservice trade show runs from May 9-11 and still has booth space available in the USA Pavilion and the Cheese Business sector.
The show also features four competitions, including the International Cheese Competition, which presents medals in 28 cheese categories, and SIAL Innovation, which recognizes the best innovations in food and non-food products, such as packaging and containers.
If you are interested in exhibiting in the Cheese Business section, please contact Claire Gros at ClaireG@imexmanagement.com and copy Maria Arbulu and Tyler Babcock at maria.arbulu@usda.gov and BabcockT@state.gov.
Webinar to update Southeast Asian customers on market conditions, new product trends
USDEC’s latest webinar, “Global Dairy Market Outlook Webinar—Signposts for 2023,” aims to provide insights into U.S. dairy ingredient capacity and U.S. dairy advantages to Southeast Asian food and beverage manufacturers. The virtual get-together takes place Tuesday, April 18, 2022, at 11 a.m. Singapore time.
USDEC Vice President, Global Economic Affairs William Loux and Director, Economic Research and Analysis Stephen Cain will headline the event. Loux and Cain will review 2022 U.S. and global supply/demand outcomes, U.S. dairy ingredient production and export expectations for 2023—and what it all means for opportunities for U.S. dairy customers in Southeast Asia. Scott Lantz, USDEC consumer insights analyst, will follow with a review of trends in new products made with U.S. dairy ingredients.
The webinar will conclude with a live panel discussion session moderated by Marcus Ng, trade insights analyst, USDEC Southeast Asia, and featuring several locally based USDEC members. For more information, please contact Kristi Saitama at ksaitama@usdec.org.
Last chance to register for next week’s USDEC spring meeting
You can still register for USDEC’s Spring Membership Meeting that takes place March 27-29 at the Willard Intercontinental Hotel in Washington, D.C. You can download the agenda for the meeting here. If you have any questions about the schedule, registration or anything else, please contact Weston Abels at wabels@usdec.org. We hope to see you in D.C.!
Market Summary
Huge drop in cheddar prices leads GDT down again
The Global Dairy Trade (GDT) Price Index fell 2.6% at the March 21 auction. It was the third decline in a row (the largest of the three) and answered any remaining questions about market direction. Prices dropped for all major products across almost all contract periods.
Cheddar prices were especially hard hit. The average winning price declined 10.2% to US$4,092/MT. In just the past two auctions, New Zealand cheddar has fallen by $1,034/MT. This week’s plunge dropped it price below the U.S. cheddar price for the first time since November 2020. The absence of Middle Eastern buyers hurt cheddar prices for the second straight week.
WMP fell 1.5% to US$3,228/MT, holding up fairly well considering Fonterra Co-operative Group raised offer volumes prior to the event by 10,000 MT over the next 12 months. (The company cited product mix optimization and recent supply chain interruptions as the reason for the additional product.) WMP has been range-bound around US$3,250/MT since December 2022.
SMP lost 3.5% to US$2,648/MT, continuing what is soon to be a slow, year-long decline.
North Asia (China) led all buyers in all product categories, increasing purchase volumes across the board versus the previous auction and the same auction last year. But it was a passive leadership, due more to low participation from other regions, particularly Southeast Asia, rather than aggressive bidding.
With NZ milk production starting to grow again, joining EU and U.S. producers, concerns over supply shortfalls have dissipated. The auction came even prior to the release of February New Zealand milk production, which recorded its biggest growth percentage (+2.3%) since July 2021.
There are no indications that prices have found a floor, much less were positioned for a rebound.
ALIC sets butter, butteroil and whey tenders next week
Japan’s Agriculture and Livestock Industries Corp. (ALIC) announced plans for three tenders for next week. New SBS tenders for butteroil (184.7 MT) and whey (406.4 MT) are set for March 29. A new SBS tender for 325.8 MT of butter will take place on March 30. These are the last tenders for fiscal 2022. Fiscal 2023 begins on April 1, 2023. For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410.
Trade Policy
USDEC calls on Thailand to reduce MFN tariffs
In collaboration with business groups, food companies and other dairy organizations, USDEC consulted on a report submitted to the Royal Thai Government urging selective and appropriate reductions on most favored nation (MFN) tariff rates for key dairy ingredients. The report makes the argument that tariff imbalances among suppliers are undermining Thailand’s ambitions to become a food manufacturing hub and, if left unaddressed, will generate significant negative political and economic consequences.
A lopsided tariff playing field is at the root of the problem. Trade agreements with New Zealand and Australia have created a de facto duopoly, limiting supply diversity and competition. Thailand’s existing MFN tariffs and tariff rate quotas are the least competitive in the region. The situation is having a direct negative impact on food and beverage manufacturers, causing international producers to close or reduce operations and is expected to significantly reduce investment in the nation’s food sector.
The report asks the Thai government to reduce MFN tariffs to create a more competitive supply landscape and better position its domestic food industry for growth. It specifies a range of dairy ingredients, including SMP, WMP, whey, AMF, buttermilk powder, cream and plain UHT and pasteurized milk, suggesting reductions of between 2 and 10 percentage points, depending on the product.
Southeast Asia office testifies on MFN tariff reductions in the Philippines
Representatives from USDEC’s Southeast Asia office testified at a hearing in the Philippines this week, making the case for the government to reduce MFN tariff rates for a range of dairy imports. The Philippine Tariff Commission announced a comprehensive review of its MFN tariffs in February. The testimony follows comments that USDEC and NMPF submitted last week urging the same (see Global Dairy eBrief, 3/17/23).
USDEC supports Torres Small for Deputy Secretary of Agriculture
A coalition of nearly 60 agriculture associations and companies, including USDEC and NMPF, co-signed a letter to the leaders of the Senate Committee on Agriculture voicing support for the nomination of Xochitl Torres Small as USDA Deputy Secretary of Agriculture. Torres Small currently serves as USDA Under Secretary of Rural Development, where she “has demonstrated a deep commitment to addressing challenges in the agricultural supply chain, fostering economic opportunities and security through rural infrastructure investments, and fighting for the needs of rural Americans,” the letter states. The ag coalition urges the committee to quickly advance the nomination so Torres Small “can continue her work in this expanded capacity, particularly as the farm bill reauthorization process is underway.”
Company News
FrieslandCampina opens lactoferrin plant, gets new CEO
FrieslandCampina’s ingredients arm opened a new lactoferrin manufacturing facility in Veghel, Netherlands. The plant quadruples the company’s total lactoferrin capacity to 80 MT annually. FrieslandCampina said it built the facility to meet rising global demand in early life and adult nutrition markets due to lactoferrin’s reported immunity-enhancement properties.
Separately, FrieslandCampina appointed Jan Derek van Karnebeek as the company’s new CEO. Van Karnebeek is currently CEO of GreenV, an international group of operating companies active in the horticultural sector, but spent most of his career at Heineken in commercial, marketing and management positions. He will begin on June 1, replacing Hein Schumacher, who is leaving the company on May 1 to become the new CEO of Unilever. (Company reports)
Suntado breaks ground on Idaho manufacturing plant
Suntado LLC, a partnership between Idaho dairymen Jesus Hurtado and Dick Reitsma, began construction on a $150-million, 190,000-square-foot dairy processing facility in Burley, Idaho. Dairy West is partnering with Suntado to help the company get to market with products that meet shifting consumer demands.
When completed in the spring of 2024, the facility will be able to process up to 450 MT of milk per day. The plant will open with six production lines making ESL and UHT conventional and organic dairy beverages and related products. Future plans call for up to 18 production lines. Former Glanbia USA CEO Jeff Williams is heading the company. (Ag Proud Idaho, 3/20/23; Capital Press, 3/18/23; KLIX, 3/16/23)
Mergers, acquisitions and joint ventures
Oregon-based Tillamook County Creamery Association purchased the former Prairie Farms ice cream plant in Decatur, Ill. Tillamook reportedly plans to spend $50 million to retrofit the facility and acquire adjacent property for future expansion. (Company reports; Herald & Review, 3/16/23)
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