HIGHLIGHTS: MAY 27, 2022
• Recap: USDEC mission to Rome
• U.S. initiates second challenge to Canada’s TRQs
• NOM-222 webinar details
• U.S. CDE to host seminar on permeate in baked goods
• Market Summary: Chinese imports fall in April
• Indonesia lifts palm oil ban
• NZ milk output drops again
• Castaneda strengthens LatAm ties
• Biden Administration launches IPEF
• Methane challenges and opportunities
• USDA releases CCAP details
• ILWU seeks negotiation delay
• Morris talks supply chain on DairyLivestream
• Starbucks, Arla exit Russia
• Company news: Meiji, Wells, Lactalis
Featured
Mission to Rome highlights U.S. dairy’s nutrition, environmental contributions to partners and UN decision-makers
USDEC President and CEO Krysta Harden headed a USDEC staff delegation to Rome this week focused on showcasing U.S. dairy’s critical role in nutrition security, sustainable food systems, climate-smart agriculture and international trade.
In a series of meetings, the delegation spoke with Ambassador Cindy McCain, the U.S. Permanent Representative to the United Nations Agencies in Rome; representatives from Argentina, Australia, the Netherlands, the UK and other nations; senior officials from the UN Food and Agriculture Organization (FAO), and additional diplomats and decision makers. In addition, USDEC held a reception welcoming diplomatic leaders from G-77 countries plus China to build collaborations and explore partnerships.
Ambassador Cindy McCain, the U.S. Permanent Representative to the United Nations Agencies in Rome, and USDEC President and CEO Krysta Harden.
USDEC’s goal was to encourage the Rome-based UN agencies and missions to ensure that all multilateral organizations and negotiations advance science-based, trade-facilitative approaches in all food-related work and to highlight how the dairy sector and dairy trade drive food security and sustainability around the world.
“With the world facing simultaneous crises of a protracted COVID pandemic, increasing food system disruptions due to climate change, and the war in Ukraine, now is the time to embrace U.S. dairy as a global nutritional and environmental solution,” said Harden.
Krysta Harden (center), Nick Gardner (third from left) and Shawna Morris (third from right) welcomed a group of UN G77 dignitaries at a USDEC-organized dinner this week in Rome. USDEC’s Janice Giddens (not shown) also attended the event as part of the USDEC delegation. Attendees discussed dairy’s role in food security, sustainability, child nutrition and empowering women, and how U.S. dairy exports can help fill food and nutrient gaps.
UN listening
The UN’s recent food security resolution demonstrates that USDEC efforts are resonating and agencies like FAO should seek the input and expertise of groups like the U.S. Dairy Export Council. The resolution recognizes the critical role the private sector plays in supporting sustainable food systems and stresses the need for further efforts to strengthen strategic partnerships with the private sector.
The resolution goes on to voice support for member states and stakeholders “to keep food and agriculture supply chains functioning” through an array of activities, including rearing livestock and ensuring the continued trade in and movement of food and livestock.
“That resolution is emblematic of why we are engaging with FAO,” said USDEC Senior Vice President, Sustainability and Multilateral Affairs Nick Gardner, who also traveled to Rome as part of the USDEC delegation. “The UN’s recognition of the important role that trade, the private sector and livestock play in sustainable food systems is due in part to engagement by groups like USDEC demonstrating and communicating their commitment to sustainable production that benefits people, communities and the planet.”
U.S. initiates second USMCA dispute settlement panel over Canada’s TRQs
On Wednesday, U.S. Trade Representative Katherine Tai announced that the United States was—for the second time—challenging Canada’s dairy tariff rate quota (TRQ) system under U.S. Mexico-Canada Agreement dispute settlement procedures. Ambassador Tai cited Canada’s refusal to make allocations available to eligible applicants as well as its failure to fully allocate its annual dairy TRQs and instead parcel out a few months’ quota at a time.
“I am deeply troubled by Canada’s decision to expand its dairy tariff-rate quota restrictions,” Ambassador Tai said. “We communicated clearly to Canada that its new policies are not consistent with the USMCA and prevent U.S. workers, producers, farmers, and exporters from getting the full benefit of the market access that Canada committed to under the USMCA.”
Tai pledged to work closely with USDA and in consultation with stakeholders to obtain Canada’s full compliance with its USMCA commitments.
USDEC and NMPF applauded the move in a joint press release, and USDEC President and CEO Krysta Harden highlighted the broader potential fallout from Canada’s noncompliance.
“If we allow Canada to simply ignore its clear obligations, it will set a dangerous and damaging precedent for future trade disputes that will reach far beyond the millions of jobs supported by the American dairy industry,” she said.
Events
June 3 webinar to clarify Mexico’s NOM-222 milk powder imports requirements
USDEC's Market Access and Regulatory Affairs team will conduct a webinar on Friday, June 3, at 10:30 a.m. ET, for members interested in learning about the changes in the requirements to export products subject to Mexico’s NOM-222. No registration is necessary. To access the webinar, simply click here at the appointed time on June 3 (use passcode: 719315). Please see our May 18 Member Alert for additional information on the new rules or contact Oscar Ferrara at oferrara@usdec.org.
U.S. CDE to host hybrid seminar on U.S. dairy permeate use in bakery products
The U.S. Center for Dairy Excellence (U.S. CDE) in Singapore, in cooperation with the Singapore Bakery & Confectionery Trade Association (SBCTA), will hold a hybrid seminar next week highlighting U.S. dairy permeate opportunities in the bakery sector. A limited number of attendees can participate in person at the CDE (in line with current Singapore COVID restrictions), while others from across Southeast Asia can join online.
Part of USDEC’s “Ideation and Innovation and Ignition Series,” the two-hour session takes place June 1 from 2-4 p.m. Singapore time. The primary target audience includes SBCTA members, product formulators, R&D personnel and food technologists in the bakery and confectionery industries.
Anoo Pothen, director-consumer insights at USDEC’s Southeast Asia office, and Martin Teo, technical director – food applications, will lead the seminar, highlighting permeate’s functionality and versatility and sharing its appeal as an ingredient solution to heighten bakery innovation.
SBCTA’s mission is to connect and collaborate with professionals in the bakery industry locally and internationally to “promote, prosper and fire the passion for the bakery arts industry in Singapore.”
Market Summary
Chinese imports down again in April
Chinese dairy imports (all suppliers) fell again in April. It marked the third time in the first four months that year-over-year import volume declined.
Chinese demand has slackened considerably this year. Restaurant closures and grocery shopping restrictions caused by ongoing, widespread, severe pandemic lockdowns are part of the reason. Since March, millions of consumers simply have fewer consumption occasions. Those same lockdowns are eroding Chinese economic growth, which might not be having an immediate impact on dairy import demand but is likely to do so should China’s zero-tolerance COVID policy continue to disrupt everyday life.
But as noted in USDEC’s latest International Demand Analysis, China’s dairy imports were looking weaker even before the lockdowns began to bite. Whey imports have declined seven straight months dating back to October 2021 due to China’s struggling hog sector. Volume over that seven-month period was down 33% (-153,068 MT) from October 2020-April 2021. April volume was down 28%.
The second reason for the widespread downturn is the sheer size of China’s dairy appetite in 2021. The country destroyed previous buying records across almost all major product categories last year. The comparables from 2021 would be tough to match in any year, let alone a year with the massive disruptions to business and personal life from COVID lockdowns.
April numbers
The situation adds up to an April import decline of 21% in dairy product tonnage compared to the previous year. Apart from small gains in butter (+7%, +655 MT), WPC80+ (+14%, +452 MT) and infant formula (+0.5%, +100 MT), volumes fell significantly across most product categories in April.
Year-over-year Chinese SMP imports plunged 31% (-11,382 MT) in April, cheese fell 29% (-4,374 MT), WMP dropped 9% (-5,709 MT), fluid milk and cream declined 25% (-25,102 MT), AMF dove 57% (-3,476 MT) and lactose slipped -4% (-472 MT).
Year to date through April, Chinese dairy imports were down 13% compared to the first four months of 2021. But compared to the first four months of 2020, Chinese dairy imports this year were up 14%.
Indonesia lifts palm oil export ban
Indonesia lifted its ban on palm oil exports, citing sufficient domestic palm oil supplies to meet local needs. The country introduced the measure three weeks ago to protect domestic supplies and limit price hikes in light of food inflation and product availability concerns stemming from Russia’s invasion of Ukraine.
In conjunction with lifting the ban, the country also imposed new rules requiring a domestic market inventory of 10 million MT of cooking oil and enacted a new export permit system for palm oil suppliers aimed at ensuring stocks. Even though markets fell in the immediate aftermath of the lifting of the ban, USDEC expects palm oil supplies to remain tight and prices to remain elevated for some time.
NZ milk output falls for ninth straight month
Heavy rains in February helped limit New Zealand’s year-over-year milk production decline in March to 1.9%. But a return of poor weather undermined pasture growth, sending year-over-year output down 5.6% in April. It was the ninth straight month of year-over-year declines for the country with no end in sight. Eleven months through the 2021/22 season, New Zealand milk production was down 4.1%.
While the decline is significant, keep in mind that New Zealand did have a record strong finish to the 2020/21 year, so this season’s back-shoulder decline is somewhat inflated. April 2022 output, in fact, exceeded the April 2019 and 2020 average by 5%.
Potentially more troublesome for New Zealand is how current conditions are setting up the next season. As of Mid-May, the NZX Pasture Growth Index was sitting at its lowest level of the past five years.
USDA releases dairy semi-annuals
USDA began releasing the 2022 Dairy and Products Semi-Annuals. The agency released two so far: Australia and New Zealand. To download the reports, click on the respective country: Australia and New Zealand.
Trade Policy
USDEC seeks common ground with Latin American dairy sector at FEPALE meeting
USDEC Executive Vice President for Policy Development and Strategy Jaime Castaneda was in Colombia this week to take part in the Pan American Dairy Federation’s (FEPALE’s) first in-person executive committee meeting since before the pandemic. Castaneda participated in his role as FEPALE vice president.
USDEC has been working closely with FEPALE for over a decade, but more recently expanded engagement as part of a broader effort to build bridges with overseas organizations and authorities to support dairy’s image, grow consumption and promote trade for the mutual long-term benefit of all parties.
FEPALE’s membership includes representatives from 17 Latin American countries. This week’s executive committee meeting covered a range of current issues, including sustainability, dairy policies (such as legislative proposals that undermine dairy consumption), the upcoming Pan American Dairy Congress in Ecuador in October, and work related to Codex (including generating support for science-based, trade facilitative standards in Codex) and the World Health Organization.
USDEC’s work with FEPALE aims to create a genuine partnership with the Latin American dairy sector while also educating it about U.S. dairy.
Left to right: Eduardo Schwerter, president of FEPALE and dairy producer from Chile, Jaime Castaneda, vice president of FEPALE and USDEC executive vice president for policy development and strategy, and Ariel Londinsky, general manager of FEPALE.
Biden Administration launches Indo-Pacific Economic Framework effort
USDEC welcomed the official launch of the Indo-Pacific Economic Framework (IPEF) this week. The IPEF aims to strengthen U.S. ties with key trading partners in the Indo-Pacific region. Twelve countries (besides the U.S.) are set to take part: Australia, Brunei, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. (Click here for a White House fact sheet on the IPEF.)
The framework will focus on four pillars aimed at: increasing trade ties in the region, strengthening global supply chains, promoting clean energy and decarbonization, and establishing new rules on taxes and anti-corruption. Tariff reductions will not be part of the talks. Instead, the initiative will focus on benefits to business through increased transparency and reduced non-tariff barriers.
USTR Ambassador Katherine Tai said the U.S. will pursue commitments that “facilitate agricultural trade through science-based decision-making.”
“This will help our farmers, our ranchers and our fishers gain certainty for getting their products to the region,” she said.
Growth potential
Expanding economies and rising consumer dairy demand in Southeast Asia and the broader Indo-Pacific region have the potential to fuel dairy exports to the region well into the future.
“If IPEF is crafted to include meaningful market access improvements and address non-tariff barriers, then these regional trends will help drive economic benefits for American farmers, dairy manufacturers and industry workers for decades to come,” USDEC President and CEO Krysta Harden said in a joint USDEC/NMPF press release on the announcement.
While supporting the use of IPEF and other targeted trade tools to advance exports, USDEC and NMPF continue to call for comprehensive trade agreements around the world and especially in the Asia-Pacific, where competitors like the EU and Oceania have been especially active.
USDEC and NMPF submitted comments to USTR in April, outlining a series of priorities to be addressed during the IPEF discussions, including negotiations on lowering dairy Most Favored Nation (MFN) tariffs, removing onerous red tape for facility registration in Indonesia, and protections for common food names.
Next steps
Because the IPEF is not a comprehensive free trade agreement, U.S. officials believe the timeline for reaching a deal will be shorter. Bloomberg reports a U.S. official citing 12-18 months to achieve substantive commitments.
The U.S. is also allowing participants to choose which of the four pillar areas they will participate in. The Biden Administration hopes members will decide which elements they will sign on for by mid-June.
The final deal also will include a mechanism for other countries to join the IPEF. (USDEC staff; The White House; Bloomberg, 5/23/22; World Trade Online, 5/23/22)
Sustainability and Multilateral Affairs
Dairy Sustainability Alliance panel highlights methane pledge, opportunities for U.S. dairy
At last week’s spring meeting of the Innovation Center for U.S. Dairy’s Dairy Sustainability Alliance, USDEC Senior Vice President, Sustainability and Multilateral Affairs Nick Gardner moderated a panel of experts who explored the Global Methane Pledge and the opportunities it might create for U.S. dairy. The Dairy Sustainability Alliance is a multi-stakeholder group consisting of more than 165 companies and organizations from across the dairy industry.
While methane has long been part of the scientific discourse on greenhouse gas (GHG) emissions, it generally took a back seat to carbon dioxide in public and scientific conversations on climate change—until last year. In 2021, focus on methane intensified with the publication of the UN Intergovernmental Panel on Climate Change report and the 2021 UN Climate Change Conference (COP 26). COP 26 served as the backdrop for the U.S. and EU to launch the Global Methane Pledge, which calls for signatories to take voluntary actions to contribute to efforts to reduce global methane emissions by at least 30% from 2020 to 2030.
Currently, 112 countries joined the pledge, as have nearly 30 organizations, including the Global Dairy Platform.
USDEC’s Nick Gardner (left), senior vice president, Sustainability and Multilateral Affairs, moderated a panel discussion on the Global Methane Pledge and opportunities for U.S. dairy at last week’s Dairy Sustainability Alliance spring meeting in Oakbrook, Illinois. Seated left to right: Tim Kurt, scientific program director, Foundation for Food & Agriculture Research; Juan Tricarico, vice president of environmental research, Dairy Management Inc. and the Innovation Center for U.S. Dairy; Elena Rice, chief scientific officer and head of R&D, Genus.
Dairy opportunity
“Although the world’s focus is now squarely on methane, the U.S. dairy industry has prioritized methane for more than a decade, which is not only something we should be proud of but leaves us poised to lead and to turn attention on methane into an opportunity,” said Gardner.
Gardner cited a series of existing programs that support U.S. dairy methane reduction, including the Greener Cattle Initiative and the U.S. Net Zero Initiative.
Gardner and the expert panel outlined why methane is garnering greater attention, and how the U.S. dairy industry can work together not just to navigate the complex policy landscape but to turn it into the opportunity to differentiate and promote U.S. dairy products on the world market.
Supply Chain
USDA announces details of container assistance program
USDA released details of its Commodity Container Assistance Program (CCAP). The initiative will provide funding from the Farm Service Agency (FSA) to exporters to reduce the costs of sourcing containers at the Oakland and Seattle-Tacoma “pop-up” port locations. For more information on how the CCAP works, including eligibility, payment rates and how to apply for assistance, visit USDA’s Commodity Container Assistance Program web page.
USDEC and NMPF issued a joint press release thanking USDA for the support it is providing to U.S. ag exporters. Both groups are working with USDA to identify key port locations, including inland terminals, to replicate the pop-up initiative.
Dockworkers reportedly looking to delay contract talks
Journal of Commerce reported that the International Longshore and Warehouse Union (ILWU) has requested that contract negotiations with the Pacific Maritime Authority (PMA) be postponed. The PMA directed questions about a potential postponement to the ILWU; the ILWU did not respond to queries. Just last week, both sides vowed to negotiate daily “until an agreement is reached.”
At press time, the status of the talks was unclear. Mario Cordero, executive director of the Port of Long Beach, said he remained optimistic. While the two sides might not agree on a contract prior to the expiration of the current contract on June 30, “they will resolve their differences within a reasonable time,” he said.
Port of Los Angeles Executive Director Gene Seroka added that there is “no need to worry right now” about negotiations, although he made those comments prior to the report that the ILWU requested a delay.
Previous contract talks in 2002, 2008 and 2014 were marred by work slowdowns and employee lockouts. Journal of Commerce reports that the White House has made it clear to the PMA and the ILWU that it will tolerate neither of those leveraging tactics this time around. (Journal of Commerce, 5/20/22; Bloomberg, 5/20/22)
Morris talks supply chain on DairyLivestream webinar
A four-person panel, including USDEC Senior Vice President, Trade Policy, Shawna Morris, updated listeners on the latest developments in the ongoing supply chain crisis during the May 18 Hoard’s Dairyman DairyLivestream webinar.
“Clearly by now, the commercial situation has not sorted itself out, and clearly where we are now is not sustainable,” Morris said.
Morris and co-panelists Gabriel Sevilla, vice president, sales and marketing, Proliant Inc.; Andrew Hwang, manager of business development and international marketing, Port of Oakland; and Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, outlined the problems facing U.S. dairy suppliers and the work underway to address the delays and high costs. Hoard’s Managing Editor Corey Geiger moderated the session.
To watch the archived version of the informative one-hour webinar and hear what all the panelists had to say, click here.
Company News
Starbucks, Arla follow McDonald’s out of Russia
A week after McDonald’s sold its operations in Russia and exited the country (see Global Dairy eBrief, 5/20/22), Starbucks announced it would “no longer have a brand presence” in Russia and Arla Foods said it sold its Russian operations to local management.
Both Starbucks and Arla suspended all operations in the market in March. The coffee retailer has been in Russia for 15 years, building its network to 130 stores—all of them franchised. The company did not indicate the cost of the closures but did say it would continue paying its nearly 2,000 employees in Russia for six months and help them find new jobs.
Arla had already reduced its business in Russia in 2014 after the country banned all European dairy exports. The company said its remaining holdings in Russia were primarily warehouses. (CNBC, 5/23/22; just-food.com, 5/18/22)
Meiji undertakes Chinese expansion
Japan’s Meiji is significantly increasing its presence in mainland China. The company is spending more than $370 million to build new production facilities in Tianjin, Guangzhou and Shanghai. The Tianjin facility will manufacture fluid milk and yogurt; the company did not identify the products for the other two plants, but it did also say it was planning to re-enter the Chinese infant formula market after exiting the business nine years ago. (USDEC China office)
Wells expands again
U.S. ice cream giant Wells Enterprises plans to spend $70 million to add production lines and upgrade equipment at its Le Mars, Iowa, facilities. The project follows a string of acquisitions and investments that began in 2019 and added plants in New York, New Jersey and Nevada to the Wells manufacturing network. The company says the new project aims to “optimize our manufacturing footprint and help set us up for future growth.” (Des Moines Register, 5/20/22)
Mergers, acquisitions and joint ventures
French dairy behemoth Lactalis acquired Australian yogurt-maker Jalna Dairy Foods. The acquisition includes a plant in Melbourne and a dairy farm in northern Victoria. (just-food.com, 5/21/22)
Company news briefs
Vertically-integrated Qatari dairy company Baladna expects to complete evaporated milk and butter processing additions to its Qatar manufacturing plant in early 2023. (USDEC Middle East/North Africa office)
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