HIGHLIGHTS: November 5, 2021
• September dairy export data
• Durkin testifies on port crisis
• Letter outlines U.S. dairy trade priorities in Asia
• Virtual ingredients trade mission for South America
• Join USDEC’s China dairy protein webinar
• Market Summary: Tight markets trigger GDT surge
• Canada raises milk price
• Interactive dairy Data Hub
• USDEC at COP26
• USDEC strengthens regulatory ties in SEA
• Cheese promos going strong in South Korea
• Company news: Granarolo, Yili, Bubs
Featured
Record September cheese and SMP shipments keep U.S. dairy exports on torrid pace
Global demand for U.S. dairy remained strong in September, keeping U.S. dairy suppliers on track for a second consecutive year of record export volume. U.S. dairy exports (milk solids equivalent) grew 14% compared to September 2020. Through three quarters, they were up 12%.
U.S. dairy export value growth accelerated, rising 28% in September to $655 million, driven by higher international commodity prices and U.S. suppliers shipping out a growing volume of higher value products.
September’s big gain put U.S. dairy export value (in addition to volume) on pace for a record year. U.S. international sales through three quarters were $5.82 billion.
Cheese and milk powder
The United States saw gains across all major product categories, but cheese and NFDM/SMP paced the overall increase by posting September records.
U.S. NFDM/SMP shipments grew 16% (+9,760 MT) to 70,101 MT. It was the first time volume cracked the 70,000-ton mark in September. Mexico’s rebound continued, with NFDM/SMP exports to the country up 19% (+4,260 MT). NFDM/SMP shipments to China (+95%, +2,844 MT) and Southeast Asia (+11%, +2,632 MT) also contributed.
U.S. cheese shipments, bolstered by the ongoing global recovery of foodservice operations, grew 20% (+5,793 MT) to 34,104 MT. It was the first time the United States shipped more than 30,000 MT in September.
U.S. cheese exports to Mexico jumped 45% to 8,870 MT. While that percentage was inflated by a pandemic-impacted 2020, the volume was a September record for U.S. cheese to Mexico.
Elsewhere, the 2021 surge in U.S. cheese sales to Central America continued in September, with volume up 60% (+1,079 MT) and shipments to Japan jumped 27% (+773 MT).
More results …
For a complete rundown on September U.S. dairy export data, including regions to watch into 2022 and other product results, read the U.S. Dairy Exporter Blog story, “Increases across the board keep U.S. dairy exports on pace for another record year.” Also check out the interactive charts in the U.S. Export Data section of the USDEC Data Hub.
Durkin testifies at House hearing on port crisis
Mike Durkin, President and CEO of Leprino Foods, called on Congress to act on ocean shipping legislation, address critical transport-industry labor shortages, increase port hours of operation, and take other steps to help American agricultural producers reach foreign markets effectively. Durkin spoke before a U.S. House Agriculture Committee hearing on how the supply chain crisis is impacting markets for Leprino and the U.S. dairy industry.
“This export crisis may well result in irreparable harm to American agriculture as customers around the world are questioning the U.S. dairy industry’s reliability as a supplier,” he said in a prepared statement.
Leprino has been an integral part of USDEC’s Supply Chain Working Group created early this year, bringing the voice of dairy to government officials. In addition, USDEC worked closely with Leprino and Durkin on the main messages to the Hill and the administration to find solutions to the U.S. port crisis and supply chain, including labor.
“The strain of shipping challenges is taking a heavy toll on dairy exporters, which is why it was so important that the House Agriculture Committee heard today from companies such as Leprino Foods that are doing everything possible to hang onto foreign customers yet are still bearing the brunt of this problem,” said USDEC President and CEO Krysta Harden in a joint USDEC/NMPF press release on the testimony. “The present situation can’t be sustained long-term. We need Congress and the administration to move swiftly to improve the efficiency and fairness of supply chains.”
USDEC Executive Vice President for Policy Development and Strategy Jaime Castaneda and a handful of ag representatives met with USDA Monday to discuss options on how to use the $500 million earmarked by USDA in September to provide relief to farmers and food producers from agricultural market disruptions, including transportation challenges (see Global Dairy eBrief, 10/1/21).
Latest news from the ports
A mix of positive and negative supply chain news continues to roll in from U.S. ports. Late last week, the Biden administration announced the “Emerging Projects Agreement,” a partnership between the federal government and state of California created to fast-track multiple logistics projects on the West Coast. The deal will make available two federal loan programs for infrastructure projects like upgrading highways and ports, developing warehousing and expanding rail capacity. Neither the Biden administration nor the state of California provided specifics on exact plans.
Separately, Carriers Maersk and MSC are dropping Seattle from service this week due to port congestion. At the same time, the Ports of Seattle and Tacoma are looking at expanding terminal hours to help improve bottlenecks.
To help clear congestion at the Port of Long Beach, the port reached an agreement with Utah Inland Port and Union Pacific for containers to be hauled to Salt Lake City for onward dispatch by truck or rail.
On a sidenote: Major ocean carriers continue to rake in record profits. Carriers are upgrading their profit estimates (the latest of a series of upgrades). Shipping consultant Drewry estimated that profit at a whopping $150 billion in October. Now, consultant Vespucci Maritime believes it will be closer to $200 billion.
And French-owned ocean carrier CMA CGM announced it was acquiring Port of Los Angeles terminal operator Fenix Marine Services for $2.3 billion. The terminal is the third largest at the Los-Angeles-Long Beach port complex. The carrier said it made the deal to “manage efficiently our port operations on the West Coast of the United States.”
Letter to deputy USTR affirms U.S. dairy trade priorities in Asia
USDEC and NMPF sent a joint letter congratulating Sarah Bianchi on her confirmation as Deputy U.S. Trade Representative, as well as highlighting the importance of trade to the U.S. dairy sector and outlining U.S. dairy trade priorities in Asia. Bianchi’s portfolio includes Asia, Africa, Investment, Services, Textiles and Industrial competitiveness.
The letter notes that several of the key markets in which American dairy farmers and manufacturers hope to see the administration make market access inroads are in Asia. It emphasizes three specific priorities:
- Pursuit of new trade agreements in key Asia markets, such as Japan, Vietnam and Southeast Asia.
- Use of other avenues such as Trade & Investment Framework Agreements, existing U.S. FTA tools to build upon current agreements, and other bilateral negotiations to address barriers to greater market access (such as securing Most Favored Nation tariff reductions and resolving nontariff barriers to trade).
- Securing greater tariff parity for U.S. exports to China, including year-long waivers for tariff codes impacted by Chinese retaliatory tariffs, removal of retaliatory tariffs entirely and, ultimately, lowering Chinese dairy tariffs to levels on par with those faced by New Zealand.
Events
Meet South American dairy ingredient customers from the comfort of your office
USDEC is holding a Virtual Trade Mission targeting South American dairy ingredient buyers on Nov. 16-18. We invite members to participate in the mission to network and connect with customers in a key growth region at a time when COVID-19 complications continue to limit in-person activities.
The mission will kick off with a keynote event to introduce and discuss market demands in South America. Two days of one-to-one meetings with R&D, purchasing, logistical and related staff from regional customers will follow. Those meetings are split as follows: one day will focus on Spanish speaking customers (Chile, Colombia and Peru); one day will focus on Brazilian customers. Spanish-to-English and Portuguese-to-English interpreters will be provided for all three days.
USDEC will schedule the one-to-one meetings to leave members free to focus on preparing for the event. If you have questions about the Virtual Trade Mission or are interested in participating—and if you have specific customers you would like to meet—please notify Allison Guzman at aguzman@usdec.org as soon as possible.
Join USDEC protein webinar targeting China in December
Global demand for WPC80+ has been steadily rising for years and 2021 is no exception, particularly in China. U.S. WPC80+ exports to China grew to 11,691 MT through August, an increase of 37% compared to the previous year, and well on their way to a record.
USDEC has been promoting application innovation with U.S. dairy proteins in collaboration with Jiangnan University, and we continue to build bridges between Chinese end-user demand and our members’ supply. The latest activity is a protein webinar scheduled for the morning of Dec. 2 (Dec. 1, U.S. time).
We invite members to participate in the event to showcase applications for their milk or whey protein ingredients that might be relevant for Chinese food and beverage manufacturers and importers. Don't miss this chance to engage with potential customers in China.
Members interested in participating should contact Annie Bienvenue at abienvenue@usdec.org as soon as possible. A limited number of spots are available, and they will be allocated on a first-come, first-served basis.
Market Summary
Tight markets send SMP, cheese to new highs
The Global Dairy Trade (GDT) Price Index jumped 4.3% at the Nov. 2 auction. SMP (+6.6% to US$3,627/MT) and cheddar (+14.1% to US$5,058/MT) reached their highest levels in about seven years, as buyers looked to secure product in the face of an uncertain supply landscape. For SMP, it was the seventh straight auction price increase dating back to July.
Prices rose across all contract periods for nearly all products. The average WMP price increased 2.7% to US$3,921/MT, butter rose 4.7% to US$5,350/MT and AMF grew 4.2% to US$6,384/MT (highest AMF price since February 2018).
Demand was strong across geographies. North Asia (China) remained the largest buyer, although the percentage of WMP and SMP volumes purchased by North Asia dropped compared the same auction last year and from the Oct. 23 auction. Instead, Africa, the Middle East and Southeast Asia purchased more year-over-year in WMP, SMP, butter and AMF. The Middle East and Africa also purchased more cheddar than the previous year, with Africa leading all cheese buyers at the auction. African demand is robust, with the region also increasing volume over the Oct. 19 auction across milk powder, AMF and cheddar.
There is clearly concern over supply, given the latest milk production numbers coming from Oceania, the EU and the U.S. But while WMP and butter are still down from their 2021 peaks, SMP and cheddar have arrived at levels that typically temper buyer interest.
Mexico joins list of 2021 Dairy and Products Annuals releases
USDA released the Mexico Dairy and Products Annual, running this year’s total number of releases to 14. To download each report, click on the respective country or region: Algeria, Brazil, Bulgaria, Canada, Chile, China, Indonesia, Japan, Korea, Mexico, New Zealand, the Philippines, Taiwan and Ukraine.
Canada raises farmgate milk prices
Citing rising farmer input costs, the Canadian Dairy Commission recommended an increase of 8.4% in the national farmgate milk price. The CDC reviews the price annually as part of Canada’s supply-managed dairy system, but the increase is significantly higher than typical hikes. In the previous two years, the increase was around 2%. With approval by provincial authorities, the increase would be implemented starting Feb. 1, 2022. It is expected to drive significant retail price hikes for Canadian-made dairy products next year.
Check out the USDEC Data Hub
USDEC’s new Data Hub section at usdec.org 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 in the newsletter, we will feature one of the Data Hub charts. This week, to offer some perspective on the major changes posted at the Nov. 2 Global Dairy Trade auction, we’ve included international price graph for NFDM/SMP dating back to 2010. You can find it at the Data Hub under the Dairy Prices tab.
We encourage you to visit the Data Hub and experiment with interactive version of this and other charts, graphs and tables. If you have any questions regarding information, please contact William Loux at wloux@usdec.org.
NFDM/SMP prices are at their highest level since 2014 and the price gap by origin has been narrowing.
Sustainability and Multilateral Affairs
USDEC supports climate-smart agriculture at COP26
USDEC, representing U.S. dairy, highlighted the U.S. dairy sustainability story and the industry’s ongoing role as a leader in climate-smart agriculture at the 2021 UN Climate Change Conference, referred to as COP26, that kicked off this week in Glasgow. USDEC expressed strong support for two major agricultural initiatives that will help reduce dairy’s environmental impact while providing innovations that advance sustainability, global competitiveness and food security.
AIM and Pathways to Dairy Net Zero
Those two initiatives are the Agriculture Innovation Mission (AIM) for Climate and the Pathways to Dairy Net Zero.
AIM for Climate, which officially launched this week, seeks to support sustainability progress in agriculture making it part of the solution, while building resiliency and providing innovative tools and resources for producers. The initiative was launched by the U.S. and UAE and already has the backing of 31 countries and nearly 50 multi-national organizations and companies. USDA Secretary Tom Vilsack spoke about AIM for Climate and its potential benefits for dairy in Glasgow this morning.
Pathways to Dairy Net Zero was created by Global Dairy Platform and, with the backing of USDEC and other partners such as the U.S. Agency for International Development (USAID), seeks to reduce the environmental impact of the sector as a whole. The Pathways initiative is an important effort that shows the world that the global dairy industry is serious about addressing environmental impact while doubling down on the important role that dairy has in the future of the global food system. At a time when many detractors are looking for ways to marginalize the role of dairy, this is a critical initiative on which the industry must stand together pre-competitively.
USDEC’s support
“Our aim is to advance innovative solutions that make dairy part of the solution while implementing sustainable practices that are profitable for U.S. dairy producers, processors and exporters,” said Nick Gardner, USDEC senior vice president, sustainability and multilateral affairs, who is at COP26 in Glasgow, Scotland.
Gardner’s attendance at COP26 builds on USDEC’s sustainability leadership and engagement displayed during the recent UN Food Systems Summit (FSS), in which USDEC and fellow dairy organizations strengthened collaborative relationships and spoke with one voice on the importance of dairy in the global food system and how U.S. dairy can be an environmental solution.
“USDEC is and will continue to take an increasingly active role in the global food systems dialogue to proactively address potential challenges for U.S. farmers, processors and exporters,” said Gardner.
USDEC raises U.S. dairy profile at event for private sector and multilateral organizations
USDEC’s ramped up presence in global multilateral activities and organizations, like the UN FSS, is increasingly getting the organization recognized as a leader in science-based policies and standards and an authoritative source on sustainable nutrition.
Most recently, USDEC’s Nick Gardner, senior vice president, sustainability and multilateral affairs, was invited to speak at an outreach event organized by the Private Sector Mechanism (PSM) to the UN Committee on World Food Security (CFS). The panel discussion focused on exploring the relevance of the FSS in policymaking and how to operationalize the Voluntary Guidelines on Food Systems and Nutrition (VGFSyN), a science-based food systems policy tool that USDEC helped shape when it was drafted by the CFS last year.
Gardner highlighted the importance of the VGFSyN process, which was transparent, participatory and science-based, and touted its relevance as governments look for solutions that make their food systems more nutritious and sustainable. He also discussed the importance of trade, the role of dairy in the food system and the necessity for the U.S. dairy industry to engage global policymakers.
Market Access & Regulatory Affairs
USDEC strengthens ties with U.S.-ASEAN Business Council to facilitate market access
One of the challenges of building U.S. dairy export business in Southeast Asia is the lack of consistent, harmonized regulations and standards among countries belonging to the Association of Southeast Asia Nations (ASEAN). USDEC actively engages with Foreign Ag Service posts, local government agencies and the industry in ASEAN to promote favorable market access, but this week further raised U.S. dairy’s profile and influence by deepening our relationship with the U.S.-ASEAN Business Council (USABC).
USABC’s mission is to support members’ business objectives by removing constraints on trade and investment activities in ASEAN, and elevating the importance of the U.S.-ASEAN economic relationship to American and ASEAN public policy makers and business leaders. The group is made up of major multi-national businesses across all industries; USDEC is the first association that USABC has accepted as a member.
“Our membership in USABC will give us a platform to bring up regulatory dairy issues on a region-wide basis—to get U.S. dairy issues on the USABC agenda,” says Jonathan Gardner, senior vice president, Market Access and Regulatory Affairs. “It will set the stage for a stronger U.S. dairy presence, emphasizing that USDEC is not only engaged in Southeast Asia but also a partner in the region.”
USDA Briefing
An example of that deepening relationship: USABC invited USDEC to participate in a USDA Briefing this week held in conjunction with the 43rd meeting of the ASEAN Minister on Agriculture and Forestry.
USDA’s Jason Hafemeister, Acting Deputy Under Secretary for Trade and Foreign Agricultural Affairs in Trade, represented USDA. Krysta Harden, USDEC President and CEO, Vikki Nicholson, Senior Vice President, Global Ingredients Marketing, and Dali Ghazalay, USDEC Regional Director for the Southeast Asia office, represented the U.S. dairy trade viewpoint.
Harden emphasized the importance of the Southeast Asian markets to the U.S. dairy industry and the need for continuous U.S. government engagement to include dairy in all discussions on market access and easing market entry barriers, both at the ASEAN level as well as in talks with individual countries.
USDEC Programs
Series of USDEC promotions seek to lift U.S. demand in South Korea
The USDEC Cheese Team and USDEC Korea office organized a series of fourth-quarter 2021 activities to bolster U.S. cheese demand by getting more U.S. cheese in the minds and mouths of Korean customers. Those activities have a strong online component and focus on educating consumers about U.S. cheese varieties and at-home consumption. They include:
- Wine Works and Hyundai stores. USDEC Korea is launching a U.S. cheese platter promotion at Wine Works wine shops in Hyundai department stores. The program includes developing cheese platters specifically for white, red and sparkling wines as well as two to three menus items under the themes “U.S. Cheese Festival” or “Enjoy U.S. Cheese.” The platters will be sold to retail wine customers while the menu items will be sold for on-premise consumption as well as through the delivery app “Hyundai to Home.”
To kick off the event this month, online shoppers who purchase certain wines will receive free cheese platters.
Wine Works is a very trendy shop in Korea and activities that take place there often going viral online.
Also through Hyundai, USDEC Korea is working with the retailer’s chef and sommelier to make YouTube content introducing the platters, with information on the featured cheese varieties, pairings and tips on how to enjoy them. In a further online focus, USDEC is working with several influencers to introduce U.S. cheeses on their Instagram accounts, recounting their experiences, recommended pairings, hashtags to promote the cheeses and how to purchase them.
- Coupang. USDEC Korea worked with major South Korean ecommerce platform Coupang to develop an online banner to put U.S. cheese front and center in shoppers’ minds. The banner ran on the website in October and will appear again in December as end-of-year holiday parties ramp up at-home cheese demand.
The Coupang banner.
- Cookbook. Chef Kim Eun-hee is an example of how USDEC activities build upon one another. Chef Eun-hee participated in a USDEC cheese seminar in 2019 and was so impressed she consulted with USDEC about using U.S. specialty cheeses on her latest cookbook Salad. The book, which features recipes with U.S. jack, blue and cream cheese, is already in its second print run and also available from eight online bookstores.
Company News
Granarolo buys U.S., Italian cheese companies
Italy-based cheese and fresh dairy products maker Granarolo acquired Connecticut fresh cheese company Calabro Cheese Corp. and fellow Italian cheesemaker Mario Costa. Granarolo said the Calabro acquisition, which includes a plant in East Haven, Conn., will help the company build a “strategic platform to import and distribute a wide range” of cheeses from Italy. The acquisition of Mario Costa (which includes a plant outside of Novara, Italy) expands Granarolo’s Italian milk pool and extends its cheese portfolio into gorgonzola. (Company reports; FoodBev.com, 10/26/21)
Mergers, acquisitions and joint ventures
China’s Yili Industrial Group, through its Hong Kong subsidiary Jingang Trade Holding Co., purchased a 34% stake in Hong Kong-listed goat milk formula maker Ausnutria Dairy. Yili said the deal will bolster its share of China’s infant formula market as well as facilitate the company’s entry into nutrition products, where Ausnutria has significant operations. . . . China dairy processor New Hope Dairy purchased a 5% stake in Singapore-based AustAsia Investment Holdings, AustAsia acquired two of Fonterra Co-operative Group’s Chinese dairy farms earlier this year (see Global Dairy eBrief, 7/2/21). (Company reports)
Company news briefs
Ireland’s Dairygold Co-operative Society launched Aerabo brand whole milk powder for adults in China. The company projects the compound annual growth rate for adult milk powder market in China at 15-20% over the next three year. . . . Australian goat milk infant formula maker Bubs expanded into cow’s milk products with the launch of its new “Family Nutrition” line of milk powders. The company says it has already signed supply agreements for the new line with distribution and retail partners in China, Malaysia, Singapore, Vietnam, East Africa and the Pacific Islands beginning in the second quarter of 2022. . . . Starbucks plans to open 2,000 net new locations in the current fiscal year (which started in October). That would be its largest expansion in four years. About 75% of the new units are destined for international locations, including China. . . . Subway signed a development deal with Everstone Group, a private investment firm focused on South Asia. Everstone plans to develop 2,000 new Subway units in India, Sri Lanka and Bangladesh over the next 10 years, more than tripling the company’s presence in the region. (USDEC China office; Company reports; Restaurant Business, 11/2/21, 11/1/21)
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