• MAP, FMD study results

• New Mexican milk powder rules

• USDEC calls for retaliatory tariffs on Canada

• Market Summary: GDT falls again

• EU milk production
• USDEC’s March International Demand Analysis

• USDEC endorses Alexis Taylor nomination

• ITC comments highlight dairy impact on jobs, economy

• Lockdowns weighing on China’s economy

• Yili plans big dairy investments

• McDonald’s exits Russia

• Company news: Granarolo, Nature One, Upstate Niagara

 

Study quantifies impact of USDA MAP, FMD programs
Public-private partnership programs that help farmers build markets overseas boosted U.S. agricultural exports by an average of $9.6 billion annually from 1977-2019, according to the results of a new study released this week by the U.S. Agricultural Export Development Council (USAEDC). That growth represents nearly 14% of total agricultural export value. Every $1 invested in the programs returned an average of $24.50, the report found.

The study was commissioned by the U.S. Grains Council on behalf of USAEDC members to evaluate USDA’s Market Access Program (MAP) and Foreign Market Development (FMD) program. The findings reaffirm the results of previous studies on the effectiveness of the programs, attesting to the success and value of those programs in helping to fuel U.S. ag exports.

In addition to export value growth, the study found that from 2002-2019, MAP and FMD:

• Increased farm cash receipts by $12.2 billion (+3.4%).
  
  
• Annually contributed $45 billion in U.S. economic output and $22.3 billion to U.S. GDP.
  
  
• Created an estimated 225,800 jobs across the entire economy.

“The export programs not only boost the entire agricultural sector, but they also have a multiplier effect throughout the entire U.S. economy, supporting jobs and income in a range of industries,” said Lorena Alfaro, executive director of USAEDC.

USDEC is a member of USAEDC and receives MAP and FMD funds.

“MAP and FMD play a critical role in USDEC cheese and ingredient programming,” said USDEC President and CEO Krysta Harden. “Without such public-private partnerships supporting our market development efforts, U.S. dairy exports would not be where they are today. These programs are highly effective in helping us raise the profile of and build demand for U.S. dairy around the world.”

To download the 73-page study, click here. To learn more about the impact of MAP and FMD, visit www.AgExportsCount.org.

June 3 webinar to outline new Mexican policy to enforce compliance with NOM-222 at port of entry
On May 9, Mexico published an amendment in its Official Gazette (Diario Oficial de la Federación or DOF) outlining how the country will begin enforcing compliance with milk powder regulation NOM-222-SCFI/SAGARPA-2018 at the port of entry.

USDEC actively participated in the rule-making process for this amendment. As a result, the version published on May 9 contains a less burdensome and restrictive procedure for U.S. milk powder suppliers than the one initially proposed and also ensures non-discriminatory treatment with respect to domestic producers.

The amendment will enter into force 60 calendar days after DOF publication, which is July 9, 2022. For details, including how it impacts Mexican milk powder imports and the procedure to demonstrate compliance, see the USDEC May 18 Member Alert.

Webinar set for June 3
USDEC’s Market Access and Regulatory Affairs team will conduct a webinar on Friday, June 3, at 11 a.m. ET, for members interested in learning more about the changes in the requirements to export products subject to NOM-222. For additional information, contact Oscar Ferrara oferrara@usdec.org or Diego Abarca at dabarca@usdecmexico.com.

USDEC calls for retaliatory tariffs on Canada
The new dairy tariff rate quota (TRQ) allocation policies Canada published this week fail to address the glaring problems of its original proposal (see Global Dairy eBrief, 3/11/22), leaving U.S. dairy suppliers far short of the market access they were promised under the U.S.-Mexico-Canada Agreement (USMCA).

With Canada continuing to deny its USMCA market access obligations, USDEC and NMPF called on the U.S. government to levy retaliatory tariffs on the country.

“Unfortunately, Canada simply refuses to institute real reform, and such actions must have consequences,” said USDEC President and CEO Krysta Harden in a joint USDEC/NMPF press release on the new proposal. “Retaliatory tariffs are both fair and necessary in this circumstance, as clearly provided for by USMCA.”

The new proposal adds distributors as a new eligible group to receive TRQ allocations but continues to exclude retailers. USDA Secretary Tom Vilsack said that he spoke to his Canadian counterpart on the margins of a G7 ag ministers’ meeting last weekend and indicated he was “greatly disappointed” in Canada’s latest proposal. “There is a need for Canada to make a much better effort than they’re making right now,” Vilsack told Agri-Pulse.

Knowing Canada’s long history of sidestepping its dairy trade commitments, USDEC began working to ensure the nation would faithfully fulfill its USMCA obligations even prior to the deal’s implementation. USDEC strongly supported the dispute settlement challenge that resulted in the call for Canada to change its TRQ scheme and will continue to work with the U.S. government to deliver genuine compliance with the agreement.

GDT dips for fifth time in a row
The Global Dairy Trade (GDT) Price Index fell 2.9% at the May 17 auction—the fifth consecutive decline. The drop, however, was not as significant as it might seem. Its magnitude was driven by a 4.9% plunge in flagship WMP that itself was a result of a sharp correction in instant WMP prices.

Instant WMP prices had remained strong at recent auctions while regular WMP prices plunged. This week’s auction, which saw Fonterra Co-operative Group relax the maximum offer volumes on instant, helped narrow the oversized price gap with regular.

Other products fare better
Apart from the WMP decline, other major products showed only minor changes, and demand across most regions was solid.

SMP slipped 0.6% to an average winning price of US$4,116/MT; butter fell 1% to US$5,750MT (SGX-NZX futures markets were expecting a 3% fall); and cheddar inched down 0.1% to US$5,635/MT. AMF surprised pre-auction expectations, rising 0.6% to US$6,043/MT.

Many buyers who sat out the previous auction returned this time, taking advantage of the significantly lower price points after the 8.5% GDT Price Index plunge on May 3, as well as more subdued bidding from China. Middle Eastern and South and Central American buyers increased WMP purchasing vs. the previous auction and the same auction the previous year. Southeast Asia boosted AMF purchases. The Middle East led cheddar buying.

North Asia (China) was still the largest buyer overall, but purchasing was down from the previous auction in all categories except SMP as lockdowns continue to weigh on demand.

EU milk output down again in March
After a brief (and minor) upturn in EU27+UK year-over-year milk deliveries in February, production appears destined to decline again in March. With 24 countries reporting, March year-over-year EU27+UK milk deliveries were down 0.7%.

Fifteen of the 24 countries reporting recorded year-over-year declines, most notably Ireland -3.3%, Netherlands and UK -2.5% each, and France -1.2%. Italy led gains, with March output up 2.9%; Polish deliveries grew 1.8%.

Barring a strong showing from Germany (which has yet to state March results), the EU is likely to start the year with negative results in two of the first three months.

Southern Hemisphere
Elsewhere, Australian milk production declined 5% in March, compared to the previous year. For the 2021/22 season (July-June), Australia was running 3.2% behind.

Argentina shook off a drought-driven milk production decline in January, with a 3.6% increase in February. Argentine production was up a little over 1% for the year.

International Demand Analysis: Global dairy trade slides in March
Global dairy trade (milk solids equivalent) slipped 6% in March, matching the 6% total decline in the first quarter. Tight supplies and a dramatic slowdown in Chinese buying were the main drags on March volume, as they have been through much of the first three months.

Dairy ingredient trade saw the largest declines, but results varied significantly from product to product and market to market. To get all the details, read the latest edition USDEC’s latest International Demand Analysis.

The 85-page document is packed with charts, graphs and commentary, providing a forward-looking glimpse at global markets from a U.S. exporter point of view. It analyzes demand in key markets for cheese, NFDM/SMP, whey (HS Code 0404.10) and WPC80+, and also includes shorter summaries for lactose, butterfat and WMP. For questions, please contact William Loux at wloux@usdec.org.

  

USDEC endorses nomination of Alexis Taylor to top USDA trade post
USDEC praised the nomination of Alexis Taylor for the position of USDA Under Secretary of Trade and Foreign Agricultural Affairs. Taylor has been director of the Oregon Agriculture Department since 2016. Prior to that, she served 12 years in various government roles in Washington, D.C., with a focus on U.S. agricultural and trade policy. In her last position prior to Oregon, Taylor oversaw USDA’s Farm and Foreign Agricultural Services.

“With her wealth of leadership experience at both USDA and at the state level, Ms. Taylor is perfectly positioned to serve American farmers, the broader agricultural industry, and American workers throughout the agricultural supply chain in this indispensable role,” USDEC President and CEO Krysta Harden said in a joint USDEC/NMPF press release on the nomination. “The Senate should act quickly to confirm this outstanding nominee.”

Comments to ITC outline why dairy-supportive U.S. trade policy is key to U.S. jobs, economy
The U.S. dairy industry provides critical, well-paying jobs and generates about $750 billion in economic impact annually across the country, USDEC and NMPF told the International Trade Commission (ITC) this week. The joint comments filed by the organizations are in response to the ITC’s investigation into the “Distributional Effects of Trade and Trade Policy on U.S. Workers.”

USDEC and NMPF were clear: For the U.S. dairy industry to be successful and continue to support American farmers, workers and business, international trade is critical. Exports played a key role in underpinning U.S. dairy success in the present and will be instrumental to the sector’s ability to flourish in the future.

In the comments, USDEC Vice President, Global Economic Affairs, William Loux and Senior Vice President, Trade Policy, Shawna Morris outlined how dairy trade fits particularly well with the Biden Administration’s worker-centered trade policy, given that it provides 450,000 jobs and $19 billion in direct wages to workers in predominantly rural communities and employs a higher percentage of women both at the farm and processing plant levels than other food sectors.

“Moving forward, with dairy exports expected to expand, these impacts should only grow,” the comments note, “provided, of course, that the United States has a trade policy supportive of exports.” With the United States’ biggest competitors outpacing the U.S. in negotiating new trade agreements, the U.S. dairy disadvantage in certain key markets will continue to grow as long as the U.S delays reengaging in the global trade policy sphere in earnest, the letter concludes.

Chinese lockdowns continue, Shanghai targets June for reopening; China’s economy struggling
Shanghai authorities now say they expect to begin lifting the city-wide lockdown starting June 1, with a full return to normal activity by the middle of the month. Citizens are skeptical given multiple announcements over the past few weeks that the city was easing lockdowns were quickly reversed or failed altogether to come to fruition.

Consumer and business activity in Beijing and other cities remain restricted with the threat of a complete Shanghai-style closure still a possibility.

Hitting the economy
China’s zero-tolerance COVID policy continues to erode economic growth. Retail sales fell 11% in April compared to the previous year, far exceeding analyst expectations. It was the second month in a row of lower consumer spending. Factory production declined 3% and China’s unemployment rate reached 6.1%, the highest level since the start of the pandemic.

China maintains the economic downturn is short-term and will resolve itself when the current COVID scare is over. Economists say the country will need to deploy stimulus measures should the shutdowns continue much longer.

Supply chain trouble ahead
Trade remains significantly slowed, with Shanghai port activity down to levels not seen since the start of the pandemic in early 2020. When the lockdowns ease, the flood of exports is expected to create a new wave of U.S. port congestion and heightened container scarcity.

Maritime consultant Drewry estimates that the up to 260,000 TEU of cargo is sitting in Shanghai, delayed by the lockdowns. In other words, the equivalent of 26 fully loaded 10,000 TEU containerships will have to be found somehow in future months as business in China returns to normal just to handle the backlog. (The Loadstar, 5/19/22; Bloomberg, 5/18/22; Wall Street Journal, 5/16/22; Reuters, 5/16/22; AP, 5/13/22)

 

Yili to build mammoth integrated dairy operation in Hebei; earmarks millions more to expand production capacity
Chinese dairy giant Yili Group plans to build a $2.2-billion, vertically integrated dairy operation in Cangzhou, Hebei Province. Yili claims the farm portion of the project will house 240,000 cows, with 115,000 acres devoted to silage corn and 50,000 acres to alfalfa. The company says the planned processing plant will handle 4,000 MT of raw milk per day. It did not specify what types of products the facility would produce.

In addition to the Hebei project, Yili set aside another $2.2 billion for capacity improvements and potential acquisitions in 2022. The largest chunk (about $1.3 billion) is earmarked to expand and improve fluid milk operations and for potential fluid milk acquisitions. About $527 million will go toward expanding and upgrading milk powder manufacturing lines and potential acquisitions in the milk powder space.

Yili also expects to spend nearly $90 million on innovation projects and international expansion, with a focus on Southeast Asia. The company’s yogurt division is getting $24 million, and almost $200 million will go toward projects in mineral water, plant-based protein products, functional products and foods for special medical purposes. (USDEC China office)

McDonald’s to exit Russia
After more than three decades, McDonald’s is completely pulling out of Russia. Citing the humanitarian crisis in Ukraine and an unpredictable operating environment, the burger giant is selling its entire portfolio of 850 restaurants in Russia (some of which are licensed) to Russian licensee Alexander Govor. Govor operates 25 McDonald's units in Siberia.

All units will be de-branded, although the company will retain the McDonald’s trademark in Russia. The company expects to write-off up to $1.4 billion due to the exit.

McDonald’s had temporarily closed its company-owned Russian locations in March after Russia’s invasion of Ukraine. Analysts expect other Western chains to follow suit and completely sever ties with the country. (Bloomberg, 5/16/22; Reuters, 5/16/22; Restaurant Dive, 5/16/22)

Mergers, acquisitions and joint ventures
Italian dairy processor Granarolo acquired a 51% stake in Italian start-up White & Seeds. White & Seeds sells yogurt, protein bars, spreads and other protein-enhanced snacks and foods. … Australian dairy manufacturer Nature One Dairy bought the Hong Kong adult nutrition powder business of Fei Fah Medi Balm, including the Ripple and White H20 brands. Nature One expects the deal to bolster its presence in Hong Kong and China. Even though it plans to transfer production of Fei Fah Medi Balm products from a third-party contract manufacturer to its own milk powder plant in Victoria, the Hong Kong business will remain a standalone operation. (FoodBev.com, 5/16/22; DairyReporter.com, 5/16/22)

Company news briefs
Upstate Niagara Cooperative selected Kevin Ellis as its new CEO, replacing retiring chief executive Larry Webster. Ellis, currently CEO of Cayuga Milk Ingredients, will assume the position no later than Sept. 6, 2022. … France’s Bel Group separated the roles of chair and CEO. Current Chairman and CEO Antoine Fiévet named Cécile Béliot (deputy managing director since 2019) as the new CEO. Fiévet will remain chair. (Company reports; Livingston County News, 514/22)

• New study quantifies impact of USDA MAP, FMD programs
• Shawna Morris, others to discuss export challenges on Hoard’s DairyLivestream
• Shipping company announces Early Container Return Incentive Program
• USDEC discusses the benefits of international trade during congressional visits
• Rep. Costa meets with USDEC's operating committee and staff