• GDP projections

• U.S. dairy exports surge in February

• REGISTER: South America session at membership meeting

• SIGN UP: USDEC Export Guide Volume 1 training

• Get manual on FTA compliance

• More dates for Mexican, Central American ingredient workshops

• Market Summary: Good signs for demand

• NZX, SGX ink partnership

• Trade policy research reports

• Letter calls for China trade progress

• March updates to USDEC Export Guide

• Glanbia revises peak milk scheme

Global growth projections strong, but recovery uneven
The International Monetary Fund (IMF) significantly upgraded its global economic growth forecast on the strength of developing vaccination programs and the U.S. stimulus package. The organization expects world output to rise 6% in 2021 led by the United States and China. That’s half a point higher than the organization estimated in January and the biggest increase in four decades (although it follows a 3.3% decline in 2020).

Advanced economies, those with strong vaccination programs and export oriented nations will lead. Besides the U.S. and China, the IMF points to 6%-plus growth for Vietnam, the Philippines, Malaysia, Chile, Peru and India. Advanced economies will emerge with far less damage than was caused by the Global Financial Crisis.

Uneven recovery
While such economic gains are generally positive for global dairy demand, the uneven nature of the recovery points to slower growth for key dairy consumers like the EU (where growth is estimated at +4.5%) and some major export markets like Japan, South Korea, the Caribbean and the UAE (with growth expected in the 3-4% range). Countries with little access to vaccines, with weak public finances or heavily dependent on tourism are most at risk for a slow rebound.

Why it matters
Global dairy consumption growth and export demand has coincided with the growth of the world’s middle class. In 2020, the global middle class contracted for the first time in more than 20 years, according to an analysis in Bloomberg. About 150 million people fell out of the middle and upper-middle classes in 2020—about 134 million of them in the developing world.

The outlook has improved overall, but “prospects are diverging dangerously,” said IMF Managing Director Kristalina Georgieva.

It could take years before much of the world catches up to the U.S. and China in fully recovering from the pandemic. (International Monetary Fund; Bloomberg, 4/6/21, 4/5/21, 4/3/21; Wall Street Journal, 4/2/21)

U.S. dairy exports rebound in February
NFDM/SMP shipments to Southeast Asia and whey exports to China led a rebound in U.S. dairy exports in February. After three months of year-over-year declines (November 2020-January 2021), U.S. exports (milk solids equivalent) jumped 15% over the previous February, while value grew 11% to $566 million (both percentage gains adjusted for Leap Day).

The increases came despite ongoing issues with U.S. products finding space on ships and getting to buyers.

Product by product
On a product basis (subsequent numbers NOT adjusted for Leap Day), total NFDM/SMP exports grew 31% over February 2020, with volumes rising to both Southeast Asia (+38%) and Mexico (+30%, off a low 2020 comparable). At 71,584 MT, it was a February volume record for NFDM/SMP.

U.S. whey exports (+29%) posted their seventh straight month of year-over-year gains, with China continuing to drive growth. U.S. whey shipments to China more than doubled (+159%), as the nation’s pig farmers continued to buy to rebuild their herds.

U.S. cheese exports topped 30,000 MT for the first time in seven months. While volume was down 2.4% compared to February 2020, that number changes to +1.1% after adjusting for Leap Day. Solid gains to a broad geographic spread of markets—the UAE, Saudi Arabia, Japan, South Korea, China, Central America and Oceania—helped mitigate an 11% decline to our No. 1 market, Mexico.

U.S. suppliers shipped more butter in February (nearly 3,500 MT) than in any month since 2014. Total U.S. butterfat shipments through the first two months of 2021 were up 115%.

Demand signs are strong (see Market Summary below), U.S. supply available and U.S. prices are competitive, but whether this is a single-month rebound or the start of another growth streak will depend in large part on uncertainties related to shipping and COVID-19.

For more information
For a more detailed analysis of January export data, download the Latest Month Trade Data Summary or read the U.S. Dairy Exporter Blog piece, “U.S. dairy exports surge despite shipping woes.” In addition, check out the interactive charts at the U.S. Export Data link at usdec.org.

 

Spring membership meeting to explore South American export opportunities
Join Jose Madeira and Carolina Nascimento from USDEC’s South America office on Day 3 of the USDEC Spring Membership Meeting to learn about untapped U.S. dairy export opportunities in Brazil, Chile, Colombia and Peru and other South American markets. Gail Legaspi-Gaull, USDEC senior vice president, Strategic Insights, will moderate the panel discussion, which takes place on Wednesday, April 21, from 2:00-3:30 p.m. ET, and also features representatives from USDEC’s marketing, trade policy and market access teams.

This first-of-its-kind, cross-organization session aims to provide a holistic, USDEC-wide overview of South America: the opportunities, successes, challenges and, most importantly, why we think this is a promising region for future growth. Members will have a chance to ask questions during the Q&A portion of the presentation.

USDEC invites you not only to register now for the Spring Membership Meeting but also invite a colleague. The meeting is taking place virtually over the course of four days from April 19-22. Download the preliminary agenda to see the complete list of sessions and speakers so far. For questions, please contact Luke Waring at lwaring@usdec.org or Weston Abels at wabels@usdec.org.

Bylaws vote slated for Spring Membership Meeting
On April 21 at the Spring Membership Meeting, USDEC will ask members to vote on proposed revisions to the organization’s bylaws. USDEC President and CEO Krysta Harden sent an email to all members this week providing background on the proposal.

The most recent revision to the bylaws came in 2002 and the organization has evolved significantly since then. In reviewing the bylaws recently, we realized they needed modernizing to reflect the reality of the way USDEC operates—and has been operating for years.

With the assistance and oversight of the USDEC Operating Committee, and the law firm of Watkinson Miller PLLC, we are proposing a number of modifications to the bylaws. Click on these links to read a copy of a memo from Watkinson Miller summarizing the changes as well as the revised bylaws themselves. The Operating Committee has read and approved the revised bylaws.

Please attend the meeting and be ready to vote on April 21.

Sign up now for training for Volume 1 of the USDEC Export Guide – Tariffs and Classification
USDEC’s Market Access and Regulatory Affairs (MARA) Team invites you to join a brief refresher training session for Volume 1 of the USDEC Export Guide on April 27 from 2:00-2:30 PM ET. The training will cover the informational resources available in Volume 1, classification guidance, and how to access and view tariff and trade agreement information. To register for the Volume 1 training, please email Bryan Jacoby at bjacoby@usdec.org.

Resources available from MARA FTA compliance training webinar
USDEC’s MARA Team partnered with Sidley Austin LLP on April 7 to offer training to processor and trader members on free trade agreement (FTA) compliance. The training covered preferential treatment criteria, accumulation, transshipment requirements, FTA certificates of origin, recordkeeping requirements and origin verification. The Sidley team also prepared a manual on FTA compliance for USDEC members. To access the manual, the presentation and a recording of the training, please visit the Market Access Resources section under the Market Access tab on the USDEC website. For further questions, please contact Sandra Benson at sbenson@usdec.org.

More dates set for U.S. dairy ingredient workshops for Mexican, Central American cheesemakers
USDEC set dates for additional U.S. dairy ingredient workshops targeting Mexico and Central America (see Global Dairy eBrief, 3/26/21). Most of the workshops will be live streamed and members are welcome to view, but please be aware that events are in Spanish.

Exact dates for July-August workshops are yet to be determined. Dates are subject to change in the event of COVID-19 developments. For more information, please contact Keith Meyer at kmeyer@usdec.org.

The workshops are as follows:

Indigenous Mexican cheeses

• Workshops that were slated this month for the Monterrey and Queretaro campuses of Tec de Monterrey are being rescheduled due to COVID-19 limitations.
• May 11-14, Ciatej Center, Guadalajara
• May 19-20, Rancho El Castillo, Celaya

Indigenous Dominican cheeses

• Week of May 3, Fábrica de Quesos Rottis cheese plant, Puerto Plata, Dominican Republic
• Week of May 3, Universidad Autonoma Santo Domingo, Higuey, Dominican Republic

Mexican bakery sector

• July, Canainpa, Mexico City

Indigenous Guatemalan cheeses

• Early August, Gremial de Lácteos, Guatemala City

Positive sign for global demand
For an auction with minimal price movements, the April 6 Global Dairy Trade (GDT) event offered a weighty testament to global dairy demand strength. Heading into the event, futures markets were pointing to 4% and 2% declines, respectively, for WMP and SMP, given that prices are well above historical price ranges. Price levels, driven by aggressive Chinese purchasing, had pushed other buyers out of the market in recent auctions.

But when the dust settled, WMP was unchanged (US$4,085/MT), SMP rose nearly 0.6% (to US$3,367/MT), and all other products except lactose followed suit, with AMF up 0.8% (to US$6,209/MT), butter up 2.0% (to US$5,776/MT) and cheddar up 2.2% (to US$4,393/MT). Moreover, while China played a role, buyers in other regions stepped back in and purchased at the elevated prices: Africa, the Middle East, South and Central America for WMP; Southeast Asia for SMP and AMF; and the Middle East and Southeast Asia for butter.

The message: demand remains strong, and buyers (perhaps even more concerned about potential shipping delays after the Suez Canal incident) were more willing to pay to ensure supply. Moving forward, prices appear fairly firm for the time being.

NZX, SGX sign partnership
New Zealand’s Exchange (NZX) and Singapore Exchange (SGX) signed a strategic partnership agreement to grow the NZX dairy derivatives market. NZX plans to delist its suite of dairy derivative contracts from the NZX Derivatives Market, followed by equivalent contracts being relisted on SGX.

NZX said the deal will “leverage SGX’s global market connectivity, strong Asian presence and international distribution” to scale growth and liquidity. NZX will continue to provide dairy product development expertise, market research and product support and will lead engagements with the dairy industry. The deal will take effect in the second half of this year.

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.

If line is trending up, currency is strengthening vs. U.S. dollar (U.S. dollar is weakening). This is favorable for U.S. competitiveness. If line is trending down, currency is weakening vs. U.S. dollar (U.S. dollar is strengthening). This is unfavorable for U.S. competitiveness. Currency exchange rates are calculated for Wednesday of each week. Source: Oanda.com.

USDEC researches global dairy market opportunities impacted by shifting trade policies
In late 2020, the USDEC Trade Policy Team launched a series of research projects after identifying a need for market insights into countries engaged in U.S. trade negotiations or that recently concluded agreements. These studies focused on identifying opportunities or challenges for U.S. dairy exports given a range of policy issues as well as market access scenarios in the targeted countries.

1. U.S. Cheese and Ingredient Export Opportunities in the United Kingdom
   USDEC commissioned this report to explore opportunities for U.S. cheeses, whey, condensed milk and other ingredients under various tariff concession scenarios in the context of the mid-stream U.S.-UK trade talks. Due to the sensitive nature of the findings, we are limiting its distribution to the U.S. government negotiators as the Biden Administration evaluates the U.S.-UK free trade agreement discussions.
2. U.S. Dairy Export Opportunities in Kenya
   Given negotiations launched last year toward a U.S.-Kenya trade agreement, USDEC initiated research last fall into both short- and long-term market opportunities for U.S. dairy products in the Kenyan market.
3. Analysis of Canada Dairy Pricing Post-USMCA Implementation
   This study examines Canada’s progress toward meeting its USMCA obligations and quantifies the economic benefit to U.S. producers and manufacturers as a result of the deal. In light of our ongoing discussions with the U.S. government regarding the prospect for further USMCA enforcement actions, we have limited the distribution of the report for now due to sensitive information.
4. Identification of Targets Prime for Most-Favored Nation (MFN) Dairy Tariff Reductions
   Building upon the success MFN reductions USDEC secured in 2020 for select dairy exports to Vietnam, the trade policy team launched research into additional countries prime for unilateral dairy tariff easements. The study evaluates tariff disparities between the U.S. and trade competitors and forecasts demand for dairy products in the targeted markets.
5. Analysis of U.S. Dairy Exports Benefits to the Mexican Dairy Industry
   A rise of anti-import sentiment in Mexico prompted the Trade Policy Team to quantify the benefits U.S. dairy exports have had for Mexican consumers and domestic producers alike. This study gained widespread press coverage in Mexico illustrating the value of U.S. dairy products in our largest export destination.

USDEC is also currently researching dairy demand in Sub-Saharan Africa and taking a deeper dive into UK cheese opportunities. We will provide members updates as these projects progress. If you have further questions on any of the research, please do not hesitate to reach out to Tony Rice at trice@usdec.org.

Food groups reiterate support for U.S.-China trade deal, further negotiations
A group of 36 organizations from the U.S. Food and Agriculture Dialogue for Trade, including USDEC and NMPF, co-signed a letter to USTR Katherine Tai and USDA Secretary Tom Vilsack encouraging the continuation of the U.S.-China Phase 1 agreement and supporting de-escalation of trade tensions.

The letter was accompanied by a seven-page memo outlining the Phase 1 deal by agricultural sector. USDEC and NMPF contributed to the letter and compiled the dairy section for the memo.

Dairy asks
The dairy portion of the memo reiterates the important gains achieved through the Phase 1 agreement and outlines outstanding U.S.-China dairy trade issues that still need to be addressed.

It encourages de-escalation through continued negotiations and subsequent removal of retaliatory dairy tariffs. In the absence of outright tariff elimination, it urges changes to the application-based tariff waiver system, allowing year-long tariff waivers open to all importers, as is currently the case for certain whey products.

“U.S. dairy producers and manufacturers are seeking stability and assurances of more dependable market access conditions,” the memo notes.

A more predictable trading environment will deliver a more level playing field with U.S. dairy export competitors and lead to U.S. dairy exports playing a larger role in helping China fulfill the agricultural purchase commitments outlined in the Phase 1 agreement, the memo states.

USDEC updates 14 sections in Export Guide in March
The Market Access and Regulatory Affairs team updated 14 documents in the USDEC Export Guide in March. Some of the changes include:

Volume 2: Import Requirements

• Korea: Added new certificate required as of July 1.
• Malaysia: Added clarification that AMS sanitary certificate is the appropriate certificate for dairy; update the approved plant list.
• United Kingdom: Added the UK as a “new” country, separate from the EU.

Volume 3: Standards and Labeling

• Mexico: Noted the two-month delay in enforcement for front-of-pack labeling.
• Taiwan: Updated food additives.

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

Glanbia modifies peak milk management system
Glanbia Ireland modified a policy announced last month aimed at limiting peak milk production volumes from its suppliers (See Global Dairy eBrief, 3/19/21). Under the revised policy, rather than reducing payments for farmers who exceed prescribed production gains, the company is now offering to pay for milk not produced. And rather than penalize all farms who exceed established production levels, the company will allow small producers to increase output by 10% each year for the duration of the policy.

Even though Glanbia said a number of suppliers are willing to commit to scaling back, Irish farmer organizations continue to criticize the plan and some farmers are reportedly seeking to become dual suppliers with other dairies to circumvent the peak milk controls. (Irish Independent, 4/6/21; Agriland, 3/30/21)

Mergers, acquisitions and joint ventures
Fonterra completed the sale of its two wholly-owned China farming hubs to Inner Mongolia Youran Dairy for NZ$552 million (about US$388 million). Fonterra said it will continue to grow its markets for New Zealand milk in China “through new products, applications and close partnerships with our customers” . . . German dairy processor The Meggle Group purchased Bavarian cheesemaker Stegmann Emmentaler Käsereien from French dairy co-op Sodiaal. Stegmann operates plants in Kempten and Altusried, Germany. Its sales are about €120 million (about US$143 million) . . . UK-based Nomad Foods purchased Fortenova Group’s Frozen Food Business Group (FFBG). About half of FFBG’s revenues (or about $165 million) come from ice cream, a new category for Nomad. (Company reports; DairyReporter.com, 4/6/21, 3/30/21)

• In radio interview, Krysta Harden emphasizes the importance of exports
• Harden will be panelist at Farm Journal Foundation’s Speaker Series event, April 14
• Tariffs took a toll, but we’re making progress in trade with China, Harden tells Agri-Pulse
• The dairy checkoff is working with NFL players to promote nutritious smoothies
• Dairy farmers using cow power to achieve carbon neutrality by 2050 (retweet)