• Latest supply chain developments

• Canada’s TRQ proposal falls short

• Take a survey: USDEC business plan webinar

• Gulfood insights
• Harden, Loux talk dairy at Ag Outlook Forum

• Market Summary: more GDT price records

• Japan fiscal 2022 tender announcement

• USDEC Data Hub: cheese prices

• USDEC calls for comprehensive FTAs

• UK, NZ sign trade deal

• Action required: Verify China plant registration details

• USDEC Export Guide February updates

• Membership renewal reminder

• Ukraine invasion affects Fonterra, Lactalis businesses

• Company news briefs: Farm Fresh, Mazoon

 

Dept. of Justice, FMC expand supply chain partnership; letter supports Senate version of OSRA
Last week’s streak of supply chain actions aimed at easing the port crisis for the short term and laying the groundwork for long-term solutions continued this week.

On Monday, the White House announced that the U.S. Department of Justice (DOJ) and the Federal Maritime Commission (FMC) were strengthening a Memorandum of Understanding signed last July to work together to “investigate and punish anti-competitive conduct” related to ocean carriers. Under the expanded cooperation agreement, Justice will provide the FMC with attorneys and economists from the Antitrust Division to better enforce violations of the Shipping Act and related laws. The FMC will provide the Antitrust Division with support and maritime industry expertise for Sherman Act and Clayton Act enforcement actions.

President Biden cited the “crackdown” on ocean carriers in his State of the Union address Tuesday night, and USDEC strongly endorsed the move in a joint press release with NMPF.

“Laws that protect shippers are only as good as their enforcement. We urge the DOJ and the FMC to move swiftly in pursuit of steps that will help deter unreasonable ocean shipping practices that harm U.S. dairy exporters,” USDEC President and CEO Krysta Harden said in the release.

The White House also called on Congress to address the present antitrust immunity for the predominantly foreign-owned ocean shipping alliances. On Monday, in a move supported by USDEC, the House of Representatives advanced reforms in this area by introducing the bipartisan Ocean Shipping Antitrust Enforcement Act (H.R. 6864), which would repeal certain antitrust exemptions for ocean common carriers.

More support for OSRA
USDEC and NMPF cosigned a letter with 87 other business groups expressing “strong support” for the bipartisan Senate version of the Ocean Shipping Reform Act (OSRA). The letter also encourages senators to sign on as co-sponsors and support the legislation when it comes to the floor.

The letter, sent to the bill’s sponsors Sens. Amy Klobuchar (D-MN) and John Thune (R-SD), commends the legislation for the how it “addresses longstanding, systemic supply chain and port disruption issues, which have been further exacerbated by the COVID-19 pandemic.”

The letter cites some of the key supply chain problems affecting U.S. dairy exporters, including unprecedented detention and demurrage charges, and calls for changes to provisions of the Shipping Act that haven’t been updated in more than 20 years. “We need to ensure the regulations remain applicable to today’s market reality,” the letter states.

The letter came shortly before this week’s hearing by the Senate Commerce Committee on OSRA, at which FMC’s Chairman Daniel Maffei and Commissioner Rebecca Dye testified. USDEC and its members conducted outreach to Committee members ahead of the hearing to urge supportive questioning and voice support for the legislation.

Canadian proposal fails to address faulty TRQ system
USDEC and NMPF condemned Canada’s proposal to modify its tariff rate quota (TRQ) system to align with its U.S.-Mexico-Canada Agreement (USMCA) trade obligations. Canada rolled out the proposal in response to an historic dispute settlement panel decision ruling in January (see Global Dairy eBrief, 1/7/22) that the nation is improperly restricting access to its markets for U.S. dairy products in violation of its USMCA commitments.

The challenge, brought by the U.S. and strongly supported by USDEC, centered on Canada’s TRQ allocation system. USMCA requires Canada to open its TRQ-application process to anyone in the Canadian food and agriculture sector. Canada instead designates the bulk of its TRQs to domestic dairy processors who have less incentive to import.

The new proposal fails to resolve the issue.

“U.S. dairy farmers and manufacturers have only limited access to the Canadian market under USMCA. That makes it essential that Canada abide by its original commitments under that agreement,” said USDEC President and CEO Krysta Harden in a joint USDEC/NMPF press release. “Canada’s recent dairy TRQ proposal will not lead to that result. While it’s not surprising that Canada is trying to see just how little will be demanded of them after losing the dispute resolution panel, it’s essential that the U.S. government insist on real reforms.”

As the first case brought and decided under USMCA, the U.S.-Canada dairy TRQ panel is a test case for whether or not the USMCA dispute settlement process can provide effective enforcement and deliver genuine compliance with the agreement. USDEC will continue to work with the Biden Administration and Congress to ensure that the process provides the type of strong precedent needed for future USMCA disputes and delivers on upholding USMCA’s dairy market access opportunities.

We want to hear from you: business plan webinar survey
USDEC is continuously striving to provide members with avenues to provide input into the organization’s strategic plans. We invite you now to provide your thoughts on the annual USDEC Business Plan Webinar with a quick six-question survey. Your response to this survey will guide the specific communication mode and platform that members can use to participate in the development of the 2023 operational plan. For questions, please contact Luke Waring at lwaring@usdec.org.

Insights on export opportunities from Gulfood 2022
Nearly 100,000 representatives from food and beverage manufacturers, importers/distributors, trading companies, foodservice operators and certification bodies attended this year’s Gulfood exposition Feb. 13-17 in Dubai. USDEC Middle East/North Africa (MENA) Director Nina Halal described the event as having “a bustling, positive atmosphere” with innovation at the heart of it.

Twelve USDEC members exhibited at the USDEC booth, reconnecting with customers, initiating new relationships and strengthening existing ones. In addition to facilitating contact between U.S. dairy suppliers and potential customers, USDEC’s aim for the show—which is billed as the largest annual food and beverage exhibition in the world—is to enhance awareness of the U.S. as a high-quality, reliable, preferred supplier of cheese and dairy ingredients.

Dairy in demand
The show generated significant sales leads from priority markets of Egypt, Saudi Arabia and the UAE, as well as inquiries from other countries in the region. Halal outlined a number of dairy demand insights gleaned from talks with booth visitors and customers, including strong interest in specific dairy ingredients and cheeses as follows:

• SMP and WPC80+ for applications in yogurt, labneh and feta for the Qatari market
  
  
• SMP for food processing operations in Saudi Arabia, the UAE and Egypt
  
  
• Cheese sauces for the retail and foodservice sectors in Jordan and Saudi Arabia
  
  
• Mozzarella for pizza and butter for processing applications in Jordan
  
  
• Block cheddar (retail and bulk) for the Saudi Arabian retail and foodservice sectors
  
  
• Cheddar, Monterey jack and colby cheeses for the UAE foodservice sector, and artisanal cheeses for the UAE high-end restaurant and hotel channels
  
  
• Cheddar, mozzarella and butter for cut-and-wrap operations in Egypt
  
  
• Dairy products for private label enterprises throughout the region but especially the Saudi market

Show activities
In addition to serving as a venue for U.S. dairy suppliers to connect with new and existing customers, the USDEC booth featured a demo kitchen where Chef Antonio El Khoury, USDEC’s director of culinary programs-MENA, showed visitors how to incorporate U.S. cheese in MENA-friendly dishes. Four student chefs that completed the USA Cheese Specialist™ Certification Program at the International Centre for Culinary Arts (the USA Cheese Guild partner in the region) assisted El Khoury, showcasing U.S. cheeses and raising awareness of U.S. quality, the broad U.S. cheese portfolio and U.S. cheese versatility.

The USDEC MENA office also hosted a retail visit to a LuLu Hypermarket for seven executives representing five member companies. The trip showcased how USDEC designs and implements in-store promotions as well as USA Cheese Guild point-of-purchase materials that help drive shoppers to U.S.-origin cheeses.

Harden and Loux talk dairy exports, supply chain, sustainability at USDA Ag Outlook Forum
USDEC President and CEO Krysta Harden and Senior Director, Global Trade Analysis, William Loux highlighted the importance of export markets to the U.S. dairy sector, why they expect continued growth and one of the key challenges threatening that growth path at last week’s 98th Annual USDA Agricultural Outlook Forum.

Harden spoke on a CEO panel moderated by USDA Acting Deputy Under Secretary, Trade and Agricultural Affairs, Jason Hafemeister. She emphasized ongoing U.S. export potential, the need for further steps by the administration to help expand market access opportunities for U.S. dairy exports and the importance of continued USDA-USDEC collaboration to address trade barriers. She also touched on U.S. dairy’s sustainability record and why those sustainability efforts position the U.S. dairy sector well for growth in the years ahead.

Supply chain
Loux provided an outline of supply chain challenges, with a focus on West Coast port slowdowns and the shipment of empties over full containers. U.S. dairy exporters lost $1.5 billion in 2021 due to shipping issues, he estimated. And that number does NOT include damage to the U.S. reputation as a reliable supply source. Doubts about U.S. reliability will, over time, provide our major competitors in Europe and Oceania an opportunity to “take market share that we have worked so hard to establish,” he said.

At the same time, U.S. dairy exports reached record levels in 2021, with volume rising 10% and value jumping 18%.

“I am asked all the time by our dairy producers, what would have been the percentage increase if we had not had these supply chain headwinds,” Harden told the audience. “I know it would have been greater, because we could not fulfill all of our orders, and nothing is more frustrating.”

Watch here
You can watch the archived versions of the forum’s presentations by clicking here, signing in (if you previously registered for the meeting) and going to the “auditorium.” If you did not register for the event, you will have to register now to gain access. Harden spoke at a session titled “U.S. Ag Trade Agenda & Outlook” on Feb. 24. Loux spoke at the “Dairy Outlook” session on Fed. 25.

GDT prices blaze forward
The ongoing contraction in milk production from the world’s leading dairy suppliers, a reduction in milk powder volumes on offer, steady demand and the added uncertainties brought on by Russia’s invasion of Ukraine drove the Global Dairy Trade (GDT) Price Index to a record high at the March 1 auction.

The index rose 5.1%—an impressive increase made even more remarkable because it follows three straight auction gains of more than 4%.

The average winning WMP price jumped 5.7% to US$4,757/MT while SMP rose 4.7% to US$4,481/MT, coming very close to pre-auction SGX-NZX futures market predictions. Before the event, citing reduced Kiwi milk production, Fonterra Co-operative Group removed 10,000 MT of WMP and 5,000 MT of SMP from its 12-month forecast volumes. While that recalibration supported the milk powder gains, bullish pricing factors go much deeper.

Robust dairy appetites
Demand remains strong in the face of elevated price levels. North Asia (China) continued to be the No. 1 buyer across most product categories, but for WMP Southeast Asia remained very active and South and Central America exceeded previous auction and previous year purchases.

Middle Eastern buyers led the charge in cheddar, securing the largest volume at the auction. Southeast Asian purchases topped the previous year. The GDT cheese price—already at a record level—soared 10.9% to US$6,394/MT.

North Asian and Middle Eastern demand sent butter prices up 5.9% to a record US$7,086/MT, and AMF gained 2.1% to US$7,048/MT.

With GDT cheese and butter prices at record highs and SMP and WMP at their highest levels since 2013/14 (and possibly heading for records), this is uncharted territory—particularly given the backdrop of the ongoing pandemic and a major military conflict in Europe.

ALIC announces tender plans for fiscal 2022
Japan’s Agriculture and Livestock Industries Corp. (ALIC) announced its first series of tenders for butter, butteroil and whey for the fiscal 2022 year (April 1, 2022-March 31, 2023). Products and dates are as follows (all tenders are SBS):

• March 17: 900 MT of butter, 150 MT of butteroil and 1,500 MT of whey and modified whey
• April 14: 900 MT of butter
• May 17: 150 MT of butteroil
• May 19: 900 MT of butter

For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410.

USDEC Data Hub: cheese prices
The USDEC Data Hub collects dairy production, pricing, export and import numbers and organizes them into a series of meaningful, interactive tables and graphs for members to investigate trends, plan export strategy, and seize global opportunities.

Each week, Global Dairy eBrief will feature a Data Hub chart. This week’s issue highlights cheese prices. You can find the graph at the Data Hub under the Milk Production tab.

We encourage you to visit the Data Hub and experiment with an interactive version of this and other charts, graphs and tables. If you have any questions regarding the information, please contact William Loux at wloux@usdec.org.

Dairy commodity prices rose across the board at this week’s Global Dairy Trade auction, but none more so than New Zealand cheddar (+11%).

 

USDEC calls for comprehensive trade deals as USTR releases 2022 trade policy agenda
On March 1, the U.S. Trade Representative’s Office released President Biden’s 2022 Trade Policy Agenda and 2021 Annual Report to Congress. To read the full report, click here. For USTR’s three-page fact sheet on the report, click here.

While thanking the administration for its efforts to support U.S. agricultural trade, USDEC emphasized the need for comprehensive free trade agreements to be part of the agenda this year.

“To remain competitive as other countries pull ahead with trade agreements, we cannot forget the pursuit of them ourselves,” USDEC President and CEO Krysta Harden said in a statement on the 2022 Trade Policy Agenda. “Comprehensive free trade agreements are a cornerstone of trade policy for U.S. exporters and must not be left on the cutting room floor in 2022.”

New Zealand, UK sign trade deal
UK Trade Secretary Anne-Marie Trevelyan and New Zealand Minister for Trade and Export Growth Damien O’Connor signed the UK-NZ Free Trade Agreement at a meeting in London this week. The two sides agreed in principle last October (see Global Dairy Trade, 10/22/21).

The deal establishes transitional duty-free quotas on New Zealand cheese and butter exports starting at 24,000 MT and 7,000 MT, respectively, in Year 1. Those quotas will rise to 48,000 MT for cheese and 15,000 MT for butter before being eliminated five years after entry into force of the agreement. All tariffs on other dairy products will either be eliminated on entry into force of the agreement or over three years.

NZX Dairy Analyst Alexandria Winning-Browne called the agreement “a game-changer for New Zealand’s primary sector,” with dairy being one of the major beneficiaries.

For more on the deal, see this New Zealand Foreign Affairs and Trade web page.

The UK and New Zealand said they were working to have the deal enter into force by the end of 2022. The next steps toward that goal are votes by each country’s parliament.

 

Members shipping to China: Check your GACC facility listing for accuracy
Late last week, China’s General Administration of Customs (GACC) sent an email to all U.S. dairy facilities containing the registration number, username and password for each registered plant under the China Import Food Enterprise Registration (CIFER) system. USDEC advises all members to log-in to the CIFER system, verify that all information is accurate and add products to the plant registration.

Note: When adding lactose, click the "Application for Registration" tab; when adding other dairy products, click the "Application for Modification" tab. In either case, you only need to populate the mandatory (*) sections in the registration.

If you do not have the email from hanyi@customs.gov.cn with the login credentials, it may be that GACC’s email is in the spam folder or the email address on record with GACC is out of date. The email address on record for a particular plant should be the same one found in the FDA’s ELM.

These requirements stem from GACC’s new facility registration rules implemented Jan. 1, 2022, which mandate that all food facilities must be registered in the CIFER system (also known as the GACC Single Window System). If you have any questions, please contact Eddy Fetzer at efetzer@usdec.org.

February updates for USDEC Export Guide
The Market Access and Regulatory Affairs team updated 16 documents in the USDEC Export Guide in February. Some of the changes include:

Volume 2: Import requirements

• Electronic Export Information (EEI) filing for all applicable countries: Noted Automated Commercial Environment (ACE) portal upgrade and new portal login required as of Feb. 20, 2022.

• China: Updated guidance on how to register U.S dairy facilities under the Chinese CIFER system.
  
  
• Indonesia: Added new certificate of origin guidance and an updated link to a copy of the new plant questionnaire with recommended responses.

Volume 3: Compositional Standards and Labeling

• Central America: Updated Additives, Ripened Cheese and Milk Powder documents.
  
  
• GCC: Updated to reflect a new food additives standard that applies to all GCC countries. Updated contaminants in product standard documents. Incorporated the revised standard on “General requirements for prepackaged foods for special dietary use” into the infant formula document.
  
  
• Singapore: Noted new front-of-pack nutrition labels for Nutri-Grade beverages will be required as of Dec. 30, 2022. Updated microbial criteria and contaminants sections of all documents.

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.

Contact us with any questions about membership renewal
All USDEC members should have received membership renewal notices by now. If you have not received the invoice or if you have any questions, please contact Weston Abels at wabels@usdec.org. Membership renewal fees are due by March 15. Thank you, and we appreciate your support!

 

Fonterra halts exports to Russia; Lactalis halts production at Ukraine plant
Citing the “rapidly changing situation and sanctions being taken against the country,” New Zealand’s Fonterra suspended dairy exports to Russia. New Zealand’s main dairy export to Russia is butterfat. In 2019-2020, Russia accounted for 5-6% of Kiwi butterfat shipments or about 25,500 MT per year. In 2021, volume fell by almost half to 13,420 MT.

The company has seven people based in Moscow at its Fonterra Russia business and 35 in St. Petersburg at its Unifood joint venture. Both companies were reportedly still operating at press time.

Conditions are changing rapidly in the region. But at press time, French dairy giant Lactalis had halted operations at one of its three Ukraine factories and slowed production at the other two plants. The Ukraine plant in Nikolaev was shut down due to its proximity to combat zones. Plants in Shostka and Pavlograd had to reduce output due to significant cutbacks in milk deliveries.

The company’s Ukraine plants serve domestic markets but also export to other countries in the region like Georgia and Moldova. Lactalis said it was closely monitoring its sites and employees based in Russia. (Stuff.co.nz, 2/28/22; just-food.com, 2/28/22)

Company news briefs
Vertically integrated Malaysian dairy producer/processor Farm Fresh plans to go public with a listing on the Bursa Malaysia stock exchange. It is looking to raise RM1 billion (about US$238 million) to expand export operations first to Hong Kong, then to the broader region, including Indonesia and the Philippines. … Oman’s Mazoon Dairy signed a distribution deal with Dubai-based Ghassan Aboud Group. Ghassan Aboud will begin distributing Mazoon’s entire product line—including milk, cheese, ice cream and other items—in the UAE. (USDEC Southeast Asia office; USDEC Middle East/North Africa office; Company reports)

• INFOGRAPHIC: What USDEC did to help lift 2021 exports to new highs
• “The future is bright for U.S. dairy,” Harden tells Ag Outlook Forum
• Harden reflects on a year of record-setting U.S. dairy exports