• Shipping issues continue
• USDEC calls for cooperation on Codex

• SIGN UP: FTA compliance webinar
• REGISTER: spring membership meeting

• NOMINATE: dairy sustainability awards

• Market Summary: GDT correction

• Mexico: NOM-51 update

• UK health certificate information

• Tai confirmed as USTR

• Harden named to carbon solutions task force

• Glanbia seeks to limit milk peaks

• Company news: Fonterra, FrieslandCampina, Danone, Meiji

 

Port issues show few signs of easing
Shipping delays continue to plague U.S. dairy suppliers, and recent analyses support beliefs that port congestion, equipment shortages and booking problems will last through the summer and possibly into the fourth quarter. Trade flows into the U.S. show no signs of abating.

The ports of Los Angeles and Long Beach recorded their busiest February in history. They took in nearly 790,000 containers, a 21% increase over February 2019 and a 53% increase over pandemic-impacted February 2020. At the same time, loaded containers shipped out of Los Angeles/Long Beach in February declined 15% from the previous year.

The Global Port Tracker report from the National Retail Federation and maritime consultant Hackett Associates estimates high double-digit increases in container volume through June.

The activity continues being driven by increased consumer demand as the U.S. population continues to replace paid “experiences” (trips, concerts, dine-in restaurants, etc.) by buying goods. The National Retail Federation forecasts that 2021 could be a year of record sales growth, with retailers “importing huge amounts of merchandise to meet the demand.”

With the new COVID-19 Relief Bill putting stimulus money in people’s pockets and much of the population still taking a cautious approach to returning to normal activities, U.S. consumers may very likely sustain heightened levels of purchasing.

“There is presently no sign in the economy that the demand boom into the U.S. will slow down in the short term,” said Lars Jensen, CEO and partner of SeaIntelligence Consulting. “At the same time, there is no sign from the operational side of the container shipping industry that the bottleneck effects will be resolved in the short term.”

What U.S. customers are saying
Customers in most regions are still reporting delays from all dairy suppliers, not just the United States. But delays for U.S. dairy products are most severe.

Delay times vary by country but range anywhere from one week to five months. At least one Southeast Asian buyer reported a five-month holdup for U.S. whey protein products.

Customers in Southeast Asia, South Korea and the Middle East have expressed concerns about ingredient and cheese shortages. Some are working longer lead times into their orders to ensure supply stability. The USDEC Middle East office has had to delay in-store activities a couple times because of lack of U.S. cheese.

One exception to reports of universal delays is the Middle East, where buyers cite problems with U.S. dairy shipments but minimal issues with dairy imports from the EU.

Problems are not only at U.S. ports but other major global trade centers. At transit points like Singapore, for example, ships are waiting up to three weeks to unload. Vessels are missing connections, vessels are overbooked and transshipment containers are getting rolled.

Snapshot from this week
On the positive side, the daily number of container ships at anchor off the ports of Los Angeles and Long Beach waiting to unload has fallen from the mid 30s to the mid 20s over the last month.

Dwell times at the terminal at the Port of Los Angeles, while still excessive, also showed signs of improvement in February. Container dwell on terminals was 4.1 days, down from five in January. And street dwell time waiting for warehouse space averaged 6.3 days for a 40-foot container in February, which is down from 7.6 in January.

At the same time, while L.A./Long Beach appears to be slowly improving, other ports are worsening. The number of ships waiting daily to enter the ports of Oakland and Savannah, for example, have risen from 10-15 in mid-February to about 20 this week. (USDEC offices in China, Japan, Middle East/North Africa, South Korea, Southeast Asia office; Supply Chain Dive, 3/17/21; Wall Street Journal, 3/17/21, 3/15/21; Bloomberg, 3/16/21, 3/12/21; Journal of Commerce, 3/15/21; Logistics Management, 3/8/21)

USDEC calls for cooperation on Codex
This week, USDEC, acting in its capacity as the lead of the Food Industry Codex Coalition (FICC), organized a letter from 47 food and agriculture organizations to USDA Secretary Tom Vilsack to highlight the importance of the U.S. developing a comprehensive strategy to preserve the mission of the Codex Alimentarius Commission. (Codex is the international agency responsible for creating a level global playing field through the development of international standards for food and agriculture products.)

“Codex’s commitment to science-based decision making, risk assessment, transparency and participation by all relevant stakeholders makes it exceptional and critical to U.S. food and agricultural producers,” the letter states. “Yet, these commitments are increasingly being challenged by certain international stakeholders that seek to advance their national or regional trade agendas, try to push Codex beyond its scope and mandate, and/or undermine other foundational Codex values. United States leadership and resolute engagement with Codex is needed now more than ever.”

Efforts by the U.S. Codex Office in recent years, supported by a robust interagency process, transparency with stakeholders, coordinated international outreach and steadfast support by USDA leadership, have already protected the institution of Codex, enhanced food safety and benefited U.S. producers and consumers. But many important and unresolved issues remain before the organization, making this a critical time for the United States to redouble its commitment.

USDEC’s leadership on the letter is part of our Codex strategy prioritizing science and proactively supporting work that protects dairy market access and advances a level playing field for U.S. dairy exporters.

Free trade agreement compliance webinar
USDEC’s Market Access and Regulatory Affairs team has partnered with Sidley Austin LLP to offer training on free trade agreement (FTA) compliance to USDEC processor and trader members, free of charge, on Wednesday, April 7, 2021, from 2-3 p.m. ET.

Meredith DeMent of Sidley Austin will review how to determine whether your product qualifies for preferential tariff treatment under U.S. FTAs, which preference criterion to choose, accumulation, transit and transshipment requirements, FTA certificates of origin, recordkeeping requirements and origin verification.

Click here to register.

Please contact Sandra Benson at sbenson@usdec.org with questions.

Spring membership meeting registration now open
Register now for the USDEC Spring Membership Meeting. The meeting is taking place virtually again this year over the course of four days from April 19-22. Download the preliminary agenda to see the list of sessions and the high-profile speaker lineup. Don’t miss:

• Opening remarks by USDEC’s new President and CEO Krysta Harden.
• Sheryl Connelly, manager of consumer trends and futuring, Ford Motor Co., speak on upcoming trends that will revolutionize your business.
• Sam Kass, food entrepreneur and former White House chef and senior policy advisor for nutrition, discuss U.S. dairy and the upcoming UN Food Systems Summit.
• Jason Hafemeister, acting USDA Under Secretary, Trade and Foreign Agricultural Affairs, provide an update on U.S. trade policy.
• Author and geopolitical analyst Peter Zeihan speak during a session called, “A World Without China.”
• USDEC staff from departments across the organization—market access, trade policy, cheese, ingredients, strategy and insights, and communications—outline activities aimed at supporting U.S. dairy export growth.

Watch your email inboxes and Global Dairy eBrief for more on the membership meeting and individual sessions in the coming weeks. For questions, please contact Luke Waring at lwaring@usdec.org or Weston Abels at wabels@usdec.org.

U.S. Dairy Sustainability Award deadline next Friday
One week remains to nominate your company or a deserving peer for the Innovation Center for U.S. Dairy’s 2021 U.S. Dairy Sustainability Awards. All nominees are due by 11:59 p.m. CST on March 26.

The awards recognize dairy farms, businesses and collaborative partnerships that go above and beyond to improve their communities, the environment and their bottom line. If your company fits that description or you know of a company who deserves the recognition, please file a nomination form at the Innovation Center for U.S. Dairy’s nominations guidelines page. There is no fee to enter.

U.S. Dairy has a great sustainability story to tell. We know U.S. dairy manufacturers are devoting significant time and resources toward becoming socially responsible companies. Competitions like the sustainability awards are excellent opportunities to spread U.S. dairy sustainability efforts to a broader audience, while at the same time addressing negative misperceptions about dairy’s environmental impact.

Membership renewal deadline March 31
The USDEC membership renewal deadline is March 31, 2021. Please send your renewal today to avoid losing access to the members-only portions of the USDEC website (including the USDEC Export Guide), the members-only Global Dairy eBrief newsletter and other member benefits. If you have questions about renewal, please contact Luke Waring at lwaring@usdec.org.

 

In line for correction, GDT prices do just that
The Global Dairy Trade (GDT) Price Index fell for the first time in over four months at the March 16 auction, dropping 3.8% to US$4,089/ton. The decline was not surprising given the historic gains seen at the March 2 auction when WMP soared 21% and butter jumped 14%, reaching multi-year highs.

Not only were NZX futures markets pointing to a decline for both WMP and butter, but Fonterra also increased the WMP volume on offer for March 16 by 3,500 MT (and volumes for the next 12 months by 11,500 MT).

The WMP price fell 6.2% to U$4,083/MT, with declines across all contract periods. Butter slipped 2.8% to US$5,659/MT, ending its streak of price gains at 11 auctions.

Demand tailwinds
Demand remains solid, although China continues to be the primary market driver, winning 77% of product sold this week. China is also the sole reason why WMP prices remain at the lofty +US$4,000/MT level.

SMP increased 0.7% to US$3,350/MT, with China leading the buying. AMF rose 3.7% to US$6,155/MT, with demand across buying regions led by the Middle East.

A number of factors support continued demand and price strength through the second quarter: the ongoing vaccine rollout, restaurant reopenings and increased traffic, the onset of the Northern Hemisphere spring and a return to outdoor dining, the upcoming Ramadan holiday, an economic rebound (the Organization for Economic Cooperation and Development lifted its 2021 growth projection from 4.2% to 5.6% last week), rising oil prices and government support efforts, including the massive U.S. $1.9-trillion COVID-19 Relief Bill.

ASF coming back strong in China
African Swine Fever (ASF) has made a comeback in China. The nation’s sow herd has reportedly been declining 3-5% per month since December as new ASF outbreaks are raising slaughter numbers, and other viruses (like foot-and-mouth and porcine epidemic diarrhea) also take a toll. The setback is particularly harsh in northern provinces.

China reported that its pig herd had returned to 90% of its pre-ASF size in November 2020, but by all accounts, that percentage has slipped since.

So far, the resurgence of ASF and complications from other diseases are not impacting demand for feed whey and permeate. Chinese farmers continue efforts to rebuild their pig herds. The setback may prolong elevated whey import demand since analysts are now extending estimates for a full recovery of China’s pig herd (which had been expected this year) until 2022 or 2023.

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 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.

 

Mexico to extend use of temporary stickers and decals for NOM-51
On March 11, the government of Mexico published on Economia's website a Draft Interinstitutional Agreement extending the use of temporary stickers and decals to comply with NOM-51 front-of-pack (FOP) labeling requirements. Once published in the Official Gazette, this agreement will provide a 60-day non-enforcement “grace period” from April 1 to May 31, 2021, in which, producers, importers, and marketers will not be penalized for non-compliance of products subject to NOM-51.

Once this period is over, all imported products that arrive on or after May 1, 2021, must comply with NOM-051 and the corresponding FOP warnings and precautionary claims at the point of sale (i.e., permanent labels).

The agreement is available for comment on the National Regulatory Improvement Commission (CONAMER) website. Click here to read a copy of the document (Spanish). Also, USDA/FAS released a GAIN report providing a summary of the draft interinstitutional agreement. If you have any additional questions about NOM-51, please contact Oscar Ferrara at oferrara@usdec.org.

AMS provides information on requirements for UK health certificate
The transition to new health certificates for the UK will take place for all shipments certified on or after April 1, 2021. AMS Dairy Grading has confirmed that it will continue to issue EU dairy and composite health certificates for shipments to the UK through March 31, 2021, and that UK authorities will also continue to accept these EU certificates if they were issued no later than March 31, even if the shipment arrives after that date.

Additionally, starting April 1, 2021, AMS says it will be able to process the UK’s new replacement health certificate even if the replacement is not yet available in eDocs. The new UK certificates mirror the EU certificates now in use and do not include any of the changes to the EU’s dairy and composite certificates described in the USDEC Member Alerts of January 4 and March 8 of this year.

Please note: AMS currently understands that the UK’s dairy plant list is based on (and will likely continue to be based on) the EU’s dairy plant list. If you are exporting to the UK, you should make sure that your exporting facility’s information is accurately included in the FDA’s Unified Registration and Listing System (FURLS) Export Listing Module (ELM), which is used by the EU for its dairy plant list. Further information regarding the ELM can be found in the EU link in Volume 2 of the USDEC Export Guide.

A full overview of the UK’s import requirements will be included in Volume 2 of the USDEC Export Guide by the end of this month. Until then, if you have any questions, please see the current UK document in Volume 2 of the USDEC Export Guide or contact Bryan Jacoby at bjacoby@usdec.org.

Senate confirms Tai as USTR
The Senate voted 98-0 on Wednesday to confirm Katherine Tai as U.S. Trade Representative. USDEC and NMPF issued a joint press release applauding the decision. USDEC and NMPF have enjoyed a long history of working with Tai during numerous negotiations, including the U.S.-Mexico-Canada Agreement and the Trans-Pacific Partnership. Her strategic insight, dedication and ardent efforts to improve trade policies for U.S. farmers, workers and businesses across the country speak highly to the leadership she will bring to USTR’s critical mission, the groups said.

 

Harden named to carbon solutions task force
USDEC President and CEO Krysta Harden will represent U.S. dairy on the Bipartisan Policy Center’s Farm and Forest Carbon Solutions Task Force. Co-chaired by former U.S. Senators Heidi Heitkamp and Saxby Chambliss, the task force will help shape policy recommendations that enhance the role of American agriculture and forestry as valuable natural climate solutions.

The eighteen members of the task force will meet throughout the year to “bring important voices to the conversation” on how to advance voluntary, land-based solutions for carbon management, said Sen. Chambliss.

Speaking for dairy
In her role on the task force, Harden will ensure that U.S. dairy has a voice and seat at the table in light of the integral role climate concerns are playing in global markets. Representing the industry, her goal is to work closely with NMPF and other groups to convey how U.S. efforts can marry into addressing global demands by both advocating for U.S. dairy’s unique needs and challenges in this space and ensure that commitments to innovation and sustainability are recognized as key to agriculture and forestry’s role in reducing carbon emissions.

Given the rising number of pledges by global corporations to net-zero emissions, the market for carbon credits is expected to grow significantly over the next decade and could be a potential source of revenue for farmers in an expanding industry such as dairy. If the U.S. can establish an efficient and workable framework for generating and marketing verifiable land-based carbon credits, farmers, ranchers and forest owners stand to generate substantial new streams of income while contributing to a climate solution.

As key competitors such as the EU and New Zealand advance their own climate policies and increasingly drive global debate surrounding this topic, U.S. actions on these policies carry great weight for U.S. exporters’ ability to remain competitive and positively market their products.

Coronavirus: fight not over, despite vaccines
While U.S. COVID-19 cases remain relatively stable, the world as a whole is not faring as well. New coronavirus cases rose for the third straight week last week, jumping 10% with more than 3 million new cases reported.

Nation-by-nation conditions continue to widely vary. Brazil overtook the United States as the country with the most new daily cases and deaths. New COVID-19 cases in much of the EU have been rising since mid-February, as the bloc’s vaccination drive stumbled. Countries like the Philippines saw the highest numbers of new cases in seven months, while Italy, Jordan, Kuwait, Peru and others tightened controls to limit the virus spread.

On the other hand, Japan plans to lift the state of emergency declaration for Tokyo—the last remaining area sporting the label—on March 21, while Malaysia, Saudi Arabia, the UAE, Vietnam and others also relaxed various control measures.

Chile is showing that a good vaccine program alone may not be sufficient to halt the virus. The country is a leader in vaccine distribution, dosing about a quarter of its population in a matter of weeks. At the same time, the country is facing around 5,000 new cases per day, numbers it hasn’t seen since mid-2020.

Vaccinations are progressing in most countries, but typically at a slow speed, and supplies continue to lag.

In other COVID-19-related news
The following came in from USDEC overseas offices:

China

• Chinese foodservice sales in the first two months of the year jumped 69% over January-February 2020, when China was dealing with the initial COVID-19 outbreak. At $109 billion, sales were at near pre-pandemic 2019 levels.

Japan

• Household spending on dairy products rose 6% in January (vs. the previous year). That marks the 12^th straight month of year-over-year dairy purchasing gains, driven largely by restricted restaurant hours and people staying home in line with emergency declarations issued over the past year.
  
  
• The Japanese government projects butter inventories at 39,300 MT and SMP at 87,600 MT at the end of March. Those numbers, respectively, are up 40% and 15% from March 2020. Butter has been hit particularly hard by sluggish foodservice sales, despite increased at-home use.

Mexico

• The Mexican Restaurant Association reported January-February 2021 restaurant sales fell about 75% compared to the first two months of 2020 (prior to the arrival of COVID-19 in Mexico). That being said, foodservice sales are gradually beginning to improve. Home delivery, sales including pizza, rose 42% year-over-year in February. A recent decision to increase hotel occupancy rates to 80% capacity ahead of the Easter holiday is expected to provide a further lift, assuming it does not result in a new wave of COVID cases.

Southeast Asia

• Unlike China, foodservice revenues in Singapore continue to lag. January sales fell 25% compared to the previous year. Catering and dine-in-restaurants posted the largest declines. Fast-food sales, food-court and café sales dropped 7%. (USDEC overseas offices in China, Japan, Mexico, Middle East/North Africa, South America, South Korea, Southeast Asia and Vietnam; Wall Street Journal, 3/12/21)

 

Glanbia okays measure to limit milk output
Glanbia Ireland approved a policy aimed at limiting excessive growth by its suppliers during the spring flush—April, May and June. Farmers who exceed previous production peaks by more than 5% during those months will be paid 30% less for all excess milk. Glanbia is basing the 5% increase on each farm’s peak production volume in April, May and June in either 2018, 2019 or 2020, whichever is highest.

Glanbia suppliers loudly criticized the plan, saying it’s a first step toward supply management. The company said the policy is “temporary,” and aimed at trying to manage peak season milk production growth. Glanbia said it will use any money saved through the scheme to incentivize milk production on the shoulders of the flush. (Agriland, 3/16/21; Irish Independent, 3/15/21)

Fonterra to sell Chinese joint venture farms
Fonterra Co-operative Group provided a divestment update in its half-year results announcement this week. The company and its joint venture partner plan to sell their farms in China, a move that aligns with Fonterra’s focus on New Zealand milk. The company also reduced its shareholding Beingmate from almost 4% to just short of 3% and expects to reduce its holdings to zero by the end of the financial year. (Company reports)

FrieslandCampina, Domty form cheese joint venture
FrieslandCampina and Egyptian cheese manufacturer Arabian Food Industries (Domty) formed a joint venture to focus on supplying cheese to Africa and the Middle East. FrieslandCampina said that it expects the joint venture “will bring exciting innovations that will create new cheese propositions that are more healthy, affordable and accessible” to consumers across both regions. (Company reports)

Meiji creates new business in Vietnam
Japan’s Meiji is establishing a new unit in Vietnam to import and sell infant formula and capitalize on the country’s higher birth rate. About 1.5 million more babies are born every year in Vietnam vs. Japan. Meiji Food Vietnam will launch April 1. The company has no immediate plans to set up manufacturing in Vietnam. (Nikkei Asian Review, 3/13/21)

Frisian Flag breaks ground on Indonesian plant
Frisian Flag, a subsidiary of Dutch dairy giant FrieslandCampina, broke ground on a new $265-million manufacturing plant in the Cikarang industrial district of West Java. The facility, originally announced last year, will produce packaged fluid milk, condensed milk and creamers. The company expects to sell about 90% of production in export markets and 10% domestically. It plans to start commercial operations in 2023. (USDEC Southeast Asia office; Jakarta Post, 3/15/21)

Danone gets new leadership
According to a plan announced earlier this month (see Global Dairy eBrief, 3/5/21), Danone Chairman and CEO Emmanuel Faber was supposed to remain chairman but give up his CEO title once the company found a new chief executive. Instead, he stepped down from both positions this week under pressure from activist investors who were not satisfied with the earlier plan. Gilles Schnepp took over as nonexecutive chairman; two senior Danone executives—Shane Grant and Véronique Penchienati-Bosetta—will lead the company while it searches for a new CEO. (Wall Street Journal, 3/15/21)

• Nominations are now open for the 2021 U.S. Dairy Sustainability Awards
• Great article from Hoard’s Dairyman honoring Alan Levitt
• Dairy proteins a top choice for delivering the desired protein boost (retweet)
• A salute to women in the dairy industry (retweet)