• USDEC Data Hub

• Ask Krysta Harden: Mexico and FTAs

• Positive step in port crisis
• IAG and MARA Advisory Group meeting dates

• Chapin touts trade at virtual town hall

• UK to start GCC trade talks

• Dairy proteins and Chinese beverage makers

• Last chance to register: USDEC fall board meeting

• Market Summary: EU milk deliveries show signs of life

• Japan’s ALIC slates butter tenders

• Sub-Saharan Africa dairy research

• Company news: Yili, Ornua, Arla

 

New USDEC Data Hub puts dairy trade numbers at your fingertips
How much NFDM/SMP did Mexico import in June? How does that compare to the previous June? How much whey did the U.S. ship to China every month this year? What were EU milk deliveries by month since the start of 2019?

If you need to find a U.S. dairy export or international dairy trade number, the information may be just a click of the mouse away in USDEC’s new Data Hub section at usdec.org. Under the Research & Data tab, the USDEC Data Hub replaces and expands upon previous trade data sections, offering a broader and deeper dive into current and historical trends—conveniently collected in one place.

The hub features four sections:

• Milk production. See milk production trends by month for the seven biggest global suppliers: Argentina, Australia, Belarus, the EU+UK, New Zealand, the United States and Uruguay.
  
  
• Dairy Prices: Compare EU, New Zealand and U.S. pricing trends for milk powder, cheese, butter and dry whey in dollars/lb. and dollars/MT.
  
  
• Key Importing Countries: Check on import volumes (all suppliers) of 13 select major U.S. target markets.
  
  
• U.S. Exports. Find year-to-date and current-month U.S. export data by product and country. Historical U.S. exports by market and month date back to 2010.

The USDEC Data Hub is an evolving tool for members. If you have any questions about the information listed or how to find specific data or suggestions for improvements, please contact William Loux at wloux@usdec.org.

Ask the CEO: Mexico and new free trade agreements
In this month’s “Ask the CEO” column, USDEC President and CEO Krysta Harden answers member questions about Mexico and the potential for new U.S. free trade agreements under the Biden administration.

If you have a question of your own, we invite you to submit it for next month’s column. We will treat the questions as completely anonymous—no company or individual names will appear. Please submit your questions to progers@usdec.org or click the big red button at the end of this column. Thank you.

Krysta Harden, USDEC President and CEO

1) When will Mexico fully recover economically and in terms of dairy demand? What obstacles are we facing to increased exports to Mexico?

Mexico entered a recession about six months before COVID-19 hit the country, so its economic issues run deeper than the pandemic. The economy retracted 8.5% last year, the worst annual performance in nearly 90 years. So the nation is climbing out of a sizable hole.

Between recession and pandemic (which shuttered foodservice and tourism and lowered food demand overall), U.S. dairy exports to Mexico fell across all major categories last year: NFDM/SMP -13%; cheese -3%; lactose -28%; and whey -34%.

Gradual recovery
The good news is that the situation is slowly improving. In the second quarter, Mexico posted its first year-over-year GDP increase since mid-2019, driven by the U.S. economic rebound as well as the reopening of restaurants and tourism. (Year-over-year arrivals at the Cancun airport—gateway to the country’s largest coastal resort—topped pre-pandemic levels for the first time in September with nearly 1.7 million people.) In addition, schools have been returning to in-person classes since July, which should boost dairy consumption and the economy. As a result, analysts forecast year-end GDP growth at around 5-6%.

U.S. dairy exports are rebounding as well: U.S. NFDM/SMP shipments were up 25% through the first eight months of 2021 vs. January-August 2020, while cheese exports grew 2%. Both numbers are well above 2019 totals. Whey and lactose were also running higher year-over-year through August, but lagged January-August 2019.

Things are moving in the right direction but the nation has yet to bounce back fully. Mexico’s economy was still about 4% smaller at mid-year than at its pre-pandemic peak in the third quarter of 2019. The country has yet to fully recover lost investment and jobs, and the pandemic has widened poverty, inequality and gender gaps. The government was slow to react with economic assistance programs last year, and overall domestic consumption remains around 6% below pre-pandemic levels.

A full recovery hinges on the progress of the country’s vaccine campaign (less than 40% of the country is fully vaccinated), and is closely tied to the ongoing U.S. economic recovery as well as the country’s ability to implement policies that address education, income and gender disparities.

An economically healthy Mexico is key to expanded U.S. dairy exports to the country.

Expanding sales
In the meantime, USDEC continues to lay the groundwork for increased sales through activities like dairy ingredient training workshop series aimed at educating food manufacturers—specifically small and mid-size domestic cheesemakers and bakers—on the advantages of using U.S. dairy ingredients in their products.

We also started a new cheese partnership with Mexico’s Colegio Superior de Gastronomía as part of our global effort to build a generation of U.S. cheese advocates through the USA Cheese Specialist Certification Program for culinary students and continue to conduct marketing activities in the retail sector to promote U.S. cheese.

Another key is ensuring Mexico maintains open access for U.S. dairy imports. USDEC’s Trade Policy and Market Access teams continue to collaborate with the USDEC Mexico office to address the rise in Mexican regulatory measures and protectionist actions aimed at discouraging dairy imports. We are working with Mexico’s National Chamber of the Dairy Industry (CANILEC), the Mexican processing industry, and importers on a common strategy to address the main issues in proposed cheese and milk powder regulations by participating in working groups and actively engaging with Mexican regulators and primary dairy organizations to address these and other U.S. export issues.

2) What new trade agreements are we pushing for and what are we hoping to get with the Biden administration?

One of the major dairy trade priorities we’ve communicated to the Biden administration is the need to open new markets through either new free trade agreements (FTAs) or bilateral arrangements that lower tariffs, resolve trade barriers and expand U.S. dairy export markets. Examples of countries where we see the greatest need are the UK, Japan, Vietnam and other key markets in Southeast Asia and Africa.

The Trump administration concluded unique agreements with Japan and China and started comprehensive trade talks with the UK and Kenya in 2020. USDEC supports comprehensive FTAs with all of the above and more.

Potential opportunities
A UK agreement would create an opportunity to build business in a significant dairy market that, prior to Brexit, was virtually closed to the United States. Importing the equivalent of more than 600,000 MT of dairy solids per year (mostly in the form of cheese, butter, liquid milk and whey), the UK represents a significant opportunity if an FTA removes the types of tariff and non-tariff barriers that have long hindered U.S. dairy exports to this dairy-hungry market.

A Kenya agreement may not hold the same volume potential as the UK, but if done right, it offers an opportunity to establish a strong precedent for opening market access and eliminating non-tariff barriers in Africa. When announced, the Kenya deal was envisioned as an opportunity to create a template for deals across the African continent.

We are consistently urging the administration to pursue those deals and the others across Asia by advocating for provisions in FTAs that eliminate tariffs on our exports, address non-tariff barriers like regulatory impediments, feature transparent and scientifically grounded sanitary and phytosanitary rules, contain safeguards for common names, and offer strong rules of origin.

In addition, we are encouraging the administration to use other methods beyond the FTA format to expand markets. For example, Trade and Investment Framework Agreements (TIFAs)—a tool U.S. Trade Representative, Ambassador Katherine Tai has referenced—along with other formal trade negotiating forums that offer potential opportunities to address problematic barriers to trade.

As we come to the end of the year, the Biden administration has yet to commit to any new FTAs or any new market access, a situation we are regularly pushing to change.

Seeking forward momentum
In the meantime, a very positive sign is that the administration has made enforcement of existing deals one of its major goals. While market access expansion is our North Star and top priority, enforcement of current deals is also critical to U.S. dairy export growth. And we are seeing the administration take action in these areas—on Canada’s U.S.-Mexico-Canada Agreement commitments, on Colombian milk powder safeguard discussions, and in Mexico with rules on labeling and on cheese and milk powder standards.

We also see opportunities to build beneficial provisions with existing FTA partners, such as securing common name protections, and have been urging the administration to make headway on this front.

We’re taking an “all avenues” approach to looking at ways to foster market access expansion for our exporters through policy tools while continuing to tout that new FTAs would deliver the biggest benefits and make the most significant difference in dairy’s ability to compete on a level playing field.

 

White House orchestrates plan to accelerate container movement
On Wednesday, following months of intensive advocacy by USDEC, working together with other organizations impacted by the shipping crisis, the White House Supply Chain Disruption Task Force, Port Envoy John Porcari and President Biden announced a series of public and private commitments from ports, dockworkers and large companies aimed at addressing port bottlenecks that have been snarling supply chains for nearly a year. USDEC met with Porcari and White House supply chain task force staff last month to help drive home the depth and complexity of the shipping-related challenges facing dairy exporters.

The administration convened a series of meetings with business leaders, port leaders and union leaders to discuss the challenges and actions each partner might take to address delays and congestion. The Executive Director of the Agricultural Transportation Coalition, in which USDEC is a member, participated in the small group meeting to represent the views of U.S. agricultural exporters. Those leaders announced a series of measures that each will execute to speed up shipments of goods throughout the country.

• The port of Los Angeles is expanding to 24/7 operations, nearly doubling the hours in which cargo will be able to move out of its docks and onto highways.
• The International Longshore and Warehouse Union announced that its members are willing to work those extra shifts.
• Six large companies—Walmart, UPS, FedEx, Samsung, Home Depot and Target—pledged to use the expanded hours to move more cargo off the docks so ships can come to shore faster.

“Collectively, this is a positive step because even though it is not targeted directly at dairy and agricultural exporters, we will benefit indirectly from the extra system capacity this creates. That’s a key reason why we’ve been calling for expanded port hours, coupled with greater labor and transportation resources to help get things moving more quickly,” said Jaime Castaneda, USDEC executive vice president for policy development and strategy.

“These changes bring the Port of L.A. up to the 24/7 operational level. Equally important, the pledges by the big shippers and labor to also engage in 24/7 operations will make this impactful. We believe the bigger buyers with integrated operations can push cargo through the ports during the expanded hours, which could alleviate some of the cargo backlogs and free up more containers and allow more trucking traffic during normal hours, making those operations more efficient,” Castaneda added.

More work ahead
USDEC, NMPF and a broad-based agricultural coalition continue to work along multiple tracks to resolve the port crisis. That work has included urging the Biden administration to further extend terminal gate hours and push for the integration of key technologies to optimize port efficiency.

Trade Policy staff also continues to build bipartisan support in Congress for the Ocean Shipping Reform Act (H.R. 4996), which now has 35 co-sponsors. A briefing paper on the legislation is here and a new “frequently-asked questions” document compiled by USDEC can be found here.

U.S. dairy farmer highlights importance of exports at virtual town hall
Doug Chapin, dairy producer and chairman of Michigan Milk Producers Association, highlighted the importance of exports for his family’s farm as well as the thousands of workers throughout the supply chain that the U.S. dairy industry supports at a virtual townhall organized by Farmers for Free Trade. Chapin called for more aggressive pursuit of trade policies that can expand market access for U.S. dairy exports by removing tariff and non-tariff barriers that make it harder to compete around the world.

“The U.S. Dairy Export Council supports Doug’s comments today on the need for the administration to pursue new trade agreements that benefit the dairy producers and processors in Michigan and elsewhere in America,” said USDEC president and CEO Krysta Harden in a joint USDEC/NMPF news release on the townhall. “U.S. dairy exporters are able to compete on quality and price anywhere in the world—so long as there is a level playing field. Unfortunately, that playing field continues to tilt in our competitors’ favor as the tariff gap between the United States and our trade competitors only widens.”

Chapin is part of USDEC’s Dairy Trade Envoy program that kicked off earlier this year. The envoys, a select group of U.S. dairy farmers and manufacturers, serve as knowledgeable, reliable spokespeople to help complement USDEC staff’s work to provide the dairy perspective on trade policy issues. USDEC created the program as part of ongoing efforts to better communicate the benefits and importance of U.S. dairy exports to policymakers and the media. For a video clip of Chapin's comments, click on this tweet.

UK to start trade talks with GCC
Britain said it expects to begin negotiations toward a free trade agreement with the Gulf Cooperation Council (GCC) in 2022, after completing a 14-week consultation with its public and business sectors. The nation, which is also negotiating deals with Australia, New Zealand and the members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), called a potential GCC pact “a huge opportunity to liberalize trade with a growing market for British business and deepen ties with a region that is vital to our strategic interests.” UK talks with the U.S. were put on hold by the Biden administration, which has provided no signals for when they might be restarted. (Bloomberg, 10/7/21)

IAG meeting approves 2022 plans, sets dates for next year’s meetings; MARA Advisory Group to meet March 1
The USDEC Ingredients Advisory Group (IAG) met virtually via Zoom across two days (two hours each day) on Oct. 5 and 6. The primary meeting objective was to gain member input and feedback on proposed 2022 USDEC ingredient marketing program tactics to optimize alignment with USDEC members’ commercial business interests and desires.

Active participation (at one point, 29 member participants representing 27 companies were online) concluded with the approval of the proposed 2022 ingredient marketing plans.

The meeting also established March 1-2 as the dates for the 2022 IAG meeting, which we expect to hold in-person at a yet-to-be-determined location in conjunction with the Market Access and Regulatory Affairs (MARA) Advisory Group meeting slated for March 1. A poll to determine the fall 2022 IAG meeting dates yielded Sept. 15-16, following the International Whey Conference in Chicago.

Please watch for a “save the date” announcement and further communications about these future meetings. Any USDEC members interesting in becoming involved in the IAG are encouraged to reach out to Allison Guzman at aguzman@usdec.org for more information. For more information about the MARA Advisory Group meeting, please contact Jessica Smith at jsmith@usdec.org.

USDEC highlights dairy proteins to Chinese beverage makers
Dr. Peng Zhou, food science professor at USDEC partner Jiangnan University, and Chang Su from USDEC’s China office highlighted U.S. dairy proteins’ nutrition, versatility and functionality in beverages applications to about 210 R&D professionals and other staff from Chinese beverage makers. The two presented at the China Beverage Industry Association (CBIA) Protein Beverage Development Seminar in Wuhan (Chang was live, Dr. Zhou was pre-recorded due to COVID-19 travel restrictions).

The nutrition messaging in particular found a receptive audience given how Chinese consumers have gravitated toward dairy as a healthy food option during the pandemic.

Beverage industry representatives use their phones to capture a protein-throughout-the-day slide during Chang Su’s CBIA presentation.

In addition to the presentations, Chang handed out more than 80 sets of printed materials from members and USDEC at a display table during the webinar, established new contacts with major Chinese dairy and beverage companies (including Yili Industrial Group, Mengniu Dairy and Feihe Dairy), fielded more than a dozen requests for more information on U.S. whey and milk ingredient advantages and opportunities, and received five inquiries for samples.

Professor Zhou’s presentation is posted here. The presentation and the slides are in Chinese. We encourage you to direct your customers to the link to learn more about using dairy proteins in beverage applications—in case they were not able to attend the protein CBIA event or want to listen again to what Dr. Zhou had to say.

More to come
USDEC’s participation at the Sept. 29 Protein Beverage Development Seminar builds on continued engagement with CBIA, reinforcing the U.S. commitment to and support for Chinese end-user innovation success with U.S. dairy ingredients.

USDEC will engage again with CBIA on Nov. 18 at its “2021 China Functional Beverage Development Seminar” in Shanghai. We plan to use the opportunity to highlight the use of permeate in beverages and present applications developed at Jiangnan University.

Last chance to register for next week’s USDEC membership meeting
USDEC’s Fall Annual Membership Meeting begins Monday, but you can still register and attend in-person or virtually. The meeting takes place Oct. 18-19 at Chicago’s Swissôtel.

Don’t miss:

• The panel discussion, “USDEC in the Middle East: An Overview of Programs and Priorities,” featuring USDEC Middle East/North Africa office chief Nina Halal.
• A panel on port and shipping issues featuring Mario Cordero, chair, American Association of Port Authorities and former Federal Maritime Commissioner, and Patti Smith, president and CEO, DairyAmerica.
  
  
• Anup Singh, principal at Solera Advisors, and Steve Spencer director at Freshagenda, examine the export investment landscape, including strategies of major U.S. export competitors.
• Rubisel Velázquez, director of normatives for Mexico’s Secretariat of Economy, and Dr. Julie Callahan, assistant USTR for Agricultural Policy and Commodity Affairs, discuss recent Mexican regulatory moves, USMCA implementation and the U.S. trade policy agenda.

In addition, USDEC staff from across the organization will outline USDEC program highlights, activities and issues facing U.S. exporters, as well as provide the market outlook for the coming year.

To download the full preliminary agenda for the meeting, click here. To register, click here. In addition, you can invite a colleague to attend as well by clicking here. (Please note: Colleagues will need a USDEC log-in to register—to request a log-in, please contact Luke Waring at lwaring@usdec.org or Weston Abels at wabels@usdec.org.)

EU+UK milk deliveries show signs of improvement
With Germany, Spain and a handful of smaller producers yet to report, EU+UK August milk production was up 1.5% compared to the previous year. German results could temper that number, but after lackluster output in May and a year-over-year decline in July, it is a surprisingly strong outcome.

Italy led the bloc with an 8.7% gain compared to the previous August, and was backed by Ireland (+5.4%), France (+1.1%), Denmark (+1.6%) and Poland (+0.9%).

That being said, milk still seems to be very tight within Europe of late, according to the latest weekly figures. And EU dairy commodity prices continue to climb.

Look ahead
The European Commission’s latest short-term outlook expects August-December milk deliveries to improve. The bloc (not including the UK) posted a 0.1% decline over the first seven months, but the Commission projects calendar year output will finish the year 0.3% ahead of 2020.

Expect more of that second-half production to be channeled to SMP and butter, the Commission said, but more to cover domestic demand than exports.

The short-term outlook goes on to forecast a 0.6% increase in EU milk deliveries in 2022.

The Commission further projects EU SMP exports (not including the UK) will rise 5% in 2022 or about an additional 40,000 MT. It expects EU-only cheese exports will gain 3% in 2022 or about an additional 30,000 MT.

Download USDEC pricing app
Price trends are always at your fingertips. All you need to do is download the USDEC Commodity Prices Finder app, a mobile resource for tracking a variety of USDA dairy commodity prices. It is available at the Apple Store for iOS devices and Google Play for Android.

ALIC announces new slate of butter tenders
Japan’s Agriculture and Livestock Industries Corp. (ALIC) announced butter tender plans for October 2021 through January 2022. Dates are as follows:

• Oct. 21: 700 MT
• Nov. 18: 700 MT
• Dec. 9: 700 MT
• Jan. 13, 2022: 700 MT

ALIC said it will make separate announcements for butteroil and whey and modified whey. Japan’s Ministry of Agriculture, Forestry and Fisheries will announce tender plans for 750 MT of SMP for fiscal 2021.

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

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.

 

USDEC research outlines challenges, opportunities in Sub-Saharan Africa
Recognizing USDEC member interest in the long-term potential for U.S. dairy exports to Sub-Saharan Africa and the potential for future U.S. trade agreements to develop in the region, USDEC’s Trade Policy and Strategic Research and Insights teams undertook a major research project to explore the opportunities and potential barriers to U.S. dairy exports in that region. A new report outlining that research is now available to members.

The report highlights the most promising market opportunities in South Africa, Nigeria, Angola, Senegal and Ethiopia, assessing market potential for milk powder, whey, cheese, lactose, infant formula and condensed/evaporated milk.

A key challenge is overcoming protectionism from domestic African dairy industries. But when given a level playing field, the research concludes that the U.S. generally can compete with other suppliers, such as the EU.

The United States does not have any free trade agreements (FTA) with Sub-Saharan African countries, and the Biden administration has not decisively said whether or when it will continue FTA negotiations with Kenya that were started in 2020. USDEC continues to urge the administration to initiate new trade negotiations with dairy markets in order to expand market opportunities for our exporters.

Read this USDEC Trade Talk for more on the Sub-Saharan Africa report.

Yili invests millions in cheese
Chinese dairy giant Yili Industrial Group is investing US$93 million in the wholly-owned subsidiary Yijiahao Cheese Co. to accelerate the development of its domestic cheese business. China’s retail cheese market remains small compared to the U.S., but cheese consumption is on the rise, with analysts estimating retail sales up 21-35% per year since 2015.

Yili hopes to seize the growth opportunity. At present, the cheese division is a relatively small part of Yili’s overall business, but it has launched some significant successes, including a lollipop-shaped cheese for children. Natural cheese content of the lollipop is over 51% (compared to similar products on the market with natural cheese content of about 16%), and nutritional value exceeds that of similar products.

Separately, Yili is reportedly exploring a potential takeover of Hong Kong-listed infant formula maker Ausnutria Dairy Corp. (USDEC China office)

Ornua buys Wisconsin cheese/analog supplier
Ireland’s Ornua purchased Wisconsin-based Whitehall Specialties Inc., a supplier of cheese, plant-based cheese alternatives and analog products to the foodservice, manufacturing and retail sectors. Ornua said the purchase is central to its long-term strategy: “unlocking significant advanced capacity and flexibility to support existing and new customers’ ambitious growth plans.” (Company reports)

Arla opens new ingredients innovation center
Arla Foods Ingredients (AFI) opened a new 100,000-sq.-ft. innovation center in Nr Vium, Denmark. The building, adjacent to AFI’s Danmark Protein plant, includes labs for clinical trials, a pilot plant and office space for 100 scientists and technicians. AFI says it will use the facility for “all aspects of research and development within whey and milk—from advanced separation technology to improved functionality and shelf-life.” AFI expects to partner with leading researchers from academic institutions in Denmark (including Copenhagen and Aarhus Universities) and overseas (including the University of California-Davis).

“Working with our scientific and industry partners, we’ll be able to undertake more research, embark on ambitious new projects and innovate to tackle some of the world’s most urgent food and nutrition challenges,” AFI said.

Separately, AFI launched a new protein product: Lactoprodan BLG-100, made using a “patented new separation technology.” The products target people experiencing loss of muscle mass, including seniors and patients experiencing loss of mobility. (Company reports)

Mergers, acquisition and joint ventures
Savencia Fromage & Dairy acquired Hope, a Colorado-based maker of hummus and plant-based dips. . . . German dairy processor DMK Group sold its majority stake in German dairy production and trading company Fude + Serrahn Milchprodukte as part of a broader plan to focus on its core businesses. Fude+ Serrahn Asset Management now owns 90% of the business with DMK maintaining a 10% stake. (Company reports; Bloomberg, 9/30/20)

Company news briefs
Ireland’s Dairygold Co-operative Society appointed Conor Galvin as CEO-designate. Galvin will take over on Jan. 1 when current CEO Jim Woulfe steps down. . . . Cell-based milk start-up TurtleTree Labs, headquartered in Singapore, opened a new R&D facility in West Sacramento, Calif. . . . Looking to reset its operations in the Middle East and accelerate expansion, Subway signed a new master franchise agreement with Saudi Arabia’s Kamal Osman Jamjoom Group (KOJ). The deal covers the UAE, which was previously handled by multiple franchisees. This is KOJ’s first foray into the food and beverage sector, but the company franchises several retail brands, including The Body Shop and Lego. (USDEC Middle East/North Africa office; Agriland, 10/8/21; FoodBev.com, 10/5/21; Gulf News, 9/24/21)

• On National Farmers Day, USDEC thanks farmers for the support they provide
• A National Farmers Day reminder of the progress being made on sustainability
• Farmers to discuss ag trade in Oct. 14 virtual roundtable
• Opportunities to create new products with U.S. dairy proteins (retweet)