• The need for TPA renewal

• Customer video: Export Exchange

• Market Summary: NZ exports soar in May

• House letter calls for Chief Ag Negotiator

• Member input needed: Colombia dairy safeguard inquiry

• USDA critical for antimicrobial efforts

• EU CAP reform package

• Company news: Fonterra, Agri-Mark, Yili

TPA renewal vital to dairy export growth
USDEC and NMPF called on the Biden administration to seek renewal of Trade Promotion Authority (TPA) after it lapsed on July 1. TPA is a vital tool for U.S. trade policy. It lays out congressional expectations for trade agreements and establishes a clear pathway for congressional input. Without TPA, it would be virtually impossible to negotiate a deal and obtain congressional approval.

With our largest competitors—Australia, New Zealand and the EU—continuing to push forward with their own bilateral and regional trade agreements that provide advantageous dairy access, the U.S. is in danger of losing export ground if it does not follow suit.

“We need to catch up with trading partners who have been speeding ahead with trade deals that give them a leg up over us in foreign markets,” said USDEC President and CEO Krysta Harden in a joint USDEC/NMPF press release on the matter. “Renewing our commitment to the global community and restoring American leadership starts with renewing TPA, so that U.S. dairy can realize new opportunities in places such as southeast Asia, Africa, South America and the UK.”

The most recent TPA authorization came in 2015 as part of a broader trade priorities legislation package. The call for renewal comes on the one-year anniversary of the U.S.-Mexico-Canada Agreement (USMCA), which was enacted with the help of TPA.

Export Exchange puts shipping issues into perspective
In the latest USDEC Export Exchange video, USDEC Analysts William Loux and Stephen Cain highlight U.S. capacity to serve export markets and how U.S. suppliers are taking action to shorten shipping delays that have plagued U.S. agricultural exports since late last year. The quarterly Export Exchange series aims to provide overseas buyers with accurate, timely information on U.S. dairy market conditions and reassure them that the U.S. is an attractive and reliable source for dairy products.

In this installment, Loux explains that shipping delays are not unique to U.S. exports but have been a global problem since November 2020. He also points out that U.S. dairy suppliers are aware of the challenges and have been working to shorten delays by shifting deliveries away from the U.S. bottleneck at the Ports of Los Angeles and Long Beach to the Pacific Northwest, the East Coast and the Gulf of Mexico.

The Export Exchange series is subtitled and translated for key markets and is available through the USDEC microsites for those nations. Direct your customers to the following links to see the latest edition in Chinese, Japanese, Spanish and Portuguese. The episode is also translated to Korean and Vietnamese (but not subtitled). A Chinese translation is in the works.

NZ May exports suggest China demand holding strong for now
New Zealand dairy exports grew nearly 20% in May, compared to the previous year, setting a record for the month. Unsurprisingly, Chinese demand led the rally.

Year-over-year volume to China grew more than 75% in May. Sizable gains came nearly across the board:

• Kiwi WMP shipments to China nearly doubled to 67,896 MT, easily a May record.
• SMP exports increased 67% (+5,264 MT).
• Cheese shipments rose 61% (+3,331 MT).
• Butter leapt 150% (+3,993 MT).
• Fluid milk and cream soared 125% (+8,475 MT).

The increases to China mitigated year-over-year declines to other regions, most prominently the Middle East/North Africa (MENA), where volume slipped 27% in May (-11,288 MT). New Zealand shipments of milk powder (WMP -37%, SMP -71%) and butterfat (-16%) shipments brought down the MENA total.

The performance lifted New Zealand market share of Chinese dairy imports to more than 40% from an average of about 27% in May of 2018-2020.

The lag-time relationship between New Zealand export reporting and Chinese import reporting suggests more strong import numbers might be in the cards when China releases June trade data later this month.

Prices soften
International commodity prices are flat to lower, but U.S. prices remain at a considerable advantage in NFDM/SMP, cheese and butter.

EU SMP and butter, while still at elevated levels, came off their early June peaks over the last couple weeks. NZX derivatives markets continue to predict Oceania powder and butter prices ticking slowly lower through at least September.

That being said, demand expectations remain positive.

China’s pig herd
The Chinese government reports that the nation’s pig herd is at 98% of pre-African Swine Fever levels even with additional outbreaks during the first half of the year. While whey demand for feed has held strong so far this year, declining domestic Chinese pork prices and high overall feed costs have eroded margins for domestic farmers. The profitability situation has reduced some of the incentive for the rapid pig production growth we’ve seen over the last year-plus. That is assuming that the 98% herd recovery number is correct. Many analysts continue to question the accuracy of the Chinese government’s pig data.

CoBank report on Southeast Asia
CoBank released a five-page report outlining the opportunities and challenges for U.S. dairy exporters in Southeast Asia. The conclusion: The opportunity is huge. The challenge: U.S. processors must be versatile and be able to produce a wide range of products, including low-, medium- and high-heat SMP, and a mix of protein levels for whey, to meet the varying needs of different populations in the region. Click here to read and download, “U.S. Dairy Processors Must Be Versatile to Compete in Southeast Asia.”

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.

House letter calls for appointment of Chief Ag Negotiator
A group of approximately 30 U.S. Representatives co-signed a letter calling for President Biden to nominate a Chief Agricultural Negotiator to the U.S. Trade Representative’s Office. USDEC outreach to congressional offices helped build support for the letter, which was led by Reps. Jodey Arrington (R-Texas) and Jimmy Panetta (D-Calif.).

The document outlines the importance of trade to U.S. farmers and food processors as well as the benefits U.S. ag exports, including dairy, bring to the overall U.S. economy. The message echoes many of the points contained in a food and agriculture industry letter to President Biden sent in May, which USDEC worked with others to craft and secure support for. The Chief Agricultural Negotiator’s role is instrumental in prioritizing agriculture in trade agreements and eliminating non-tariff trade barriers.

“To ensure that U.S. farmers and ranchers receive the full benefits of recent agreements and are prioritized as you explore new market access opportunities, it is imperative that the role of Chief Agricultural Negotiator is filled,” the letter states.

Colombia announces a dairy safeguard investigation; member input needed
USDEC is asking for member input no later than Wednesday, July 7, related to a new dairy safeguard investigation initiated by Colombia. On June 21, 2021, Colombia's Ministry of Commerce, Industry and Tourism (MCIT), Directorate of Foreign Trade, published its decision to initiate a bilateral safeguard investigation on imports of powdered milk from the United States. This investigation intends to determine if the increase of U.S. dry milk imports represents a threat to Colombia's domestic dairy sector.

The dairy products subject to this investigation are classified under the HS Codes 0402.10.10.00, 0402.10.90.00, 0402.21.11.00, 0402.21.19.00, 0402.21.91.00, 0402.21.99.00, 0402.29.11.00, 0402.29.19.00, 0402.29.91.00 and 0402.29.99.00.

According to supporting documentation included in the safeguard investigation, on March 8, 2021, the Colombian Ranchers Federation (FEDEGAN) requested that provisional and permanent bilateral safeguards in the form of an increase in the tariff rate be imposed on U.S. dairy exports classified under the HS codes above. FEDEGAN’s petition to request safeguards against U.S. dairy products is based on a significant increase in imports of dry milk over the last three years.

Please contact USDEC
This investigation will be conducted within the U.S.-Colombia Free Trade Agreement framework and the Colombian Decree 1820 of 2010 that establishes the applicable procedure for this case. If your company is exporting to Colombia any of the products included in this safeguard investigation and received a request from the Government of Colombia to provide information, please contact Jaime Castaneda, Tony Rice, Carolina Nascimento, Clarice Nagata and Oscar Ferrara. USDEC urges companies to work closely with their customers in Colombia to provide comments and trade data to MCIT.

In addition, we are asking members to submit information to USDEC on all shipments sent to Colombia from 2018 to 2021 and information regarding future lots (sold but not yet shipped) by no later than Wednesday, July 7. USDEC is gathering relevant trade data and commercial information to draft and submit a response to this investigation. All information shared with USDEC will be handled with absolute confidentiality.

Letter stresses USDA’s role in antimicrobial efforts
A group of 53 U.S. agriculture groups, including USDEC and NMPF, co-signed a letter to White House Chief of Staff Ron Klain urging that USDA serve as an equal voice with other U.S. public health agencies in determining U.S. positions on antimicrobial resistance or use in the context of the One Health Initiative. One Health is a collaborative, multidisciplinary effort to achieve optimal health outcomes for people, animals, plants and their shared environment.

“USDA understands the intricacies of agricultural production and the types, uses and regulation of antimicrobials in U.S. agriculture as well as the scientific underpinning justifying their use,” the letter states.

The letter emphasizes the important role USDA plays in forming public health and antimicrobial resistance policy. The agency is a crucial partner to agricultural producers, serving as a globally recognized and trusted leader in the development of science- and risk-based international standards at Codex, the World Organization for Animal Health the UN Food and Agriculture Organization and the World Health Organization.

USDEC antimicrobial work
USDEC’s Market Access team is working on multiple fronts to advance science-based recommendations on the use of antimicrobials and the prevention of antimicrobial resistance (AMR). The goal is to make sure that U.S. dairy farmers will continue to be able to use safe and effective antimicrobials and that other nations do not use AMR as a means to implement nontariff trade barriers.

 

EU says CAP reform package upgrades focus on environment, small farms
EU negotiators reached a deal on a Common Agricultural Policy (CAP) reform package that shifts money to encourage environmentally friendly production and reduces it in areas the EU deems as supporting more intensive farming practices. The total cost of the package, which runs from 2023-2027, is €387 billion (about US$460 billion).

The deal requires countries to spend 20% of payments on “eco-schemes” from 2023-2024, although what exactly qualifies as an “eco-scheme” is uncertain. That percentages rises to 25% of payments for 2025-2027. Separately, at least 35% of rural development funds must go to projects that promote environmental, climate and animal welfare projects.

All payments will be tied to complying with environmental rules, such as setting aside 3% of arable land for areas where nature can thrive. Farmers can also be penalized if they fail to conform to new labor and animal welfare rules.

Additional spending
Ten-percent of CAP funding is earmarked for smaller farmers while other provisions limit the definition of an “active” farmer. The measures seek to address criticisms from within the EU that existing CAP rules result in money going to those less in need—respectively, large farms and non-agricultural businesses.

The package also includes a €450-million (about US$535-million) crisis fund for major agricultural market disruptions, such as a pandemic.

Mixed reaction
The complete details of the plan were not released, but what was reported triggered mixed reaction from stakeholders. Environmental groups criticized it and claimed it does not go far enough in its sustainability measures such as by requiring member states to enact practices to decrease greenhouse gas emissions.

Some lawmakers said that the rules contain loopholes that fail to align farming with the EU’s climate targets.

In contrast, the European Milk Board said that the subsidies are too low for farmers to afford the necessary environmental investments.

The package still requires approval by the EU Parliament. A vote is expected in September. (Agriland, 6/30/21, 6/28/21; Euronews, 6/30/21; Euractiv, 6/30/21; Reuters, 6/25/21; RTE News, 6/25/21)

 

Fonterra sells joint-venture farms
Fonterra Co-operative Group and its joint venture partners sold two dairy farms in China’s Shandong Province to AustAsia Investment Holdings, a subsidiary of Singapore-based agri-food company Japfa. AustAsia paid US$116 million for the two farms, which house about 16,000 cows. The deal included two additional sites in Shandong that potentially could be developed into farms. The transaction, which follows the sales of two wholly-owned Fonterra farms in China earlier this year, completes the co-op’s exit from Chinese milk production. (Company reports; WattAgNet, 6/29/21)

Mergers, acquisitions and joint ventures
Norwegian Consumer products group Orkla purchased a 75% stake in Dutch pizza chain New York Pizza, which operates 232 franchised stores, primarily in the Netherlands but with aspirations for international expansion. (Company reports)

Company news briefs
Agri-Mark began a $16-million expansion at its Chateaugay, N.Y., plant. The project, part of a broader $30-million investment at Chateaugay, includes a new state-of-the-art cheese production room . . . Great Lakes Cheese has reportedly selected Franklinville, N.Y., as the location for its new $505-million cheese plant. The company dropped plans to build in Belvidere, N.Y., last month . . . Sartori Cheese is adding 22,000-sq.-ft. to its Plymouth, Wis., facility, enlarging the operation to more than 100,000-sq.-ft. The company expects to complete the project by November 2021 . . . China’s Yili Group established a new wholly-owned cheese division under the name Inner Mongolia Yijiahao Cheese Co. Yili is increasingly upbeat about cheese potential in China, after success with innovative products like shelf-stable lollipop-shaped processed cheese for children and adults and a baked cheese snack with dried fruit and nuts (made from imported Dutch natural cheese) . . . Dreyer’s Grand Ice Cream, a subsidiary of UK-based Froneri, is investing $145 million to expand its ice cream plant in Fort Wayne, Ind. . . . Shake Shack and its Chinese licensee Maxim’s Caterers plan to enter 10 new territories in China and add 63 more units by 2031 . . . Korean convenience-store chain emart24 opened its first Malaysian unit with plans for 300 total stores over the next five years. The company reports that ready-to-eat foods and fast food from convenience stores—a long-time trend in South Korea and Japan—are increasingly in demand in Malaysia. (USDEC China office; USDEC Southeast Asia office; New York State governor’s office; Food Market, 6/28/21; WFRV, 6/25/21; WGRZ, 6/24/21; Food Business News, 6/23/21)

 

• USDEC’s Mid-Year 2021 Global Dairy Business Review
• FAQ 8: What is fueling the dairy boom in Southeast Asia?
• FAQ 9: Why did USDEC build a dairy center in Southeast Asia?
• FAQ 10: Will U.S. dairy exports continue to rise?
• U.S. dairy permeate showcased in China (retweet)