• South America trip highlights U.S. export potential

• Canadian TRQ proposal under fire

• Update on U.S. CDE activities in Singapore

• January trade data results
• Membership renewal deadline March 15

• USDEC’s Gardner hosts meeting with Codex Chair

• IAG meeting plots 2023 programs

• Register now: transportation issues in the U.S. supply chain

• Submit questions for DMI’s Barb O’Brien

• Market Summary: food prices at record high

• USDEC Data Hub: U.S. cheese exports

• U.S. dairy ingredient workshops blossom in Mexico

• USDEC supports carrier antitrust bill

• COVID surge in China, Hong Kong

• Dairy processors, food chains halt Russian business

• Company news: Fonterra, Danone, Baladna

 

Trip to Colombia and Peru paves path for U.S. dairy export gains
USDEC President and CEO Krysta Harden and other USDEC team members traveled to South America this week for a series of meetings designed to increase exports to two of the region's most promising countries: Colombia and Peru. Both markets as U.S. FTA partners and the agreements’ phasing down of tariff barriers has expanded U.S. dairy export opportunities.

With growing economies and a strong desire for cheese and animal protein, Colombia and Peru have been increasing their consumption of dairy products and consequently their imports. South America has been a good market for U.S. dairy exporters in recent years, and USDEC sees strong potential for more growth.

“This trip confirmed our assessment that limited domestic milk production combined with increasing demand and lower tariffs will make Colombia and Peru ripe markets for our members to increase their exports for years to come,” said Harden.

Harden and her team, including representatives from USDEC’s South American office, met with local dairy trade associations, leading importers of U.S. dairy products, local retailers and processors, local government officials and U.S. officials based in Latin America.

“Our message was consistent wherever we went,” said Harden. “USDEC member companies are sustainable and reliable exporters interested in collaborating with private and public sectors to increase our presence in South America.”

 

USDEC South America office representative Clarice Nagata (far left), USDEC Senior Vice President, Global Ingredients Marketing, Vikki Nicholson-West (second from left), President and CEO Krysta Harden (third from right) and USDEC South America office representatives Carolina Nascimento (second from right) and Paola Gutierrez (far right), join members of the leadership team from Colombian importer/distributor Centurion Foods.

Criticism strong against Canadian TRQ proposal
USDEC and U.S. officials fervently responded to Canada’s deeply deficient proposal to modify its tariff rate quota (TRQ) system to align with its U.S.-Mexico-Canada Agreement (USMCA) trade obligations (see Global Dairy eBrief, 3/4/22, and this USDEC press release).

USDEC Senior Vice President Trade Policy Shawna Morris highlighted the problems with the proposal in an interview this week with Canada’s Financial Post.

“You still have the same setup, whereby we’re effectively forced to primarily sell to our competitors,” Morris said. “That, in my view, is exactly what the Canadian goal is here, to make it look as if there have been changes made in response to the panel’s verdict without actually changing very much on the ground.”

“We had a deal,” she said. “We expect both parties to live up to that deal.”

USDEC is working with the U.S. government on the next steps in response to Canada’s offer, as well as with congressional supporters.

Letter to USTR
One such House of Representatives supporter, Rep. Elise Stefanik (R-NY), already sent a letter to USTR Ambassador Katherine Tai criticizing the Canadian proposal.

“These changes come nowhere close to providing American dairy producers with the market access they were promised under USMCA,” she wrote. “Canada’s proposal appears designed to arrive at effectively the same result that its current system delivers.”

The letter urges Ambassador Tai to reject the proposal and continue working to ensure that Canada abides by its original USMCA commitments.

U.S. CDE caps first two months of 2022 activities with visit from U.S. Embassy ag attaché
Despite the ongoing pandemic and associated restrictions, the U.S. Center for Dairy Excellence (U.S. CDE) continues to move ahead with a full agenda of engagements aimed at elevating the reach and impact of USDEC export expansion efforts in Southeast Asia. While restrictions are still stringent compared to the United States, Singapore has relaxed some of its COVID-19 rules and the U.S. CDE is receiving local visitors—such as customers, USDEC members and key opinion leaders—in groups of five or less.

Just this week, the U.S. CDE welcomed Timothy Harrison, regional agricultural attaché for the U.S. Embassy for Malaysia, Singapore, Brunei and Papua New Guinea. USDEC Regional Director for the Southeast Asia office Dali Ghazalay gave Harrison a tour of the facility to emphasize how staff—using the resources made available through the U.S. CDE—are working to inspire local-friendly product innovation with U.S. dairy ingredients, lift dairy demand, elevate the profile of the U.S. dairy industry and ultimately spur U.S. dairy exports to the region.

A cross-section of a growing menu of local-friendly foods made with U.S. dairy ingredients, many developed by Martin Teo, technical director-food applications, Southeast Asia, in collaboration with Singapore Polytechnic’s Food Innovation and Resource Centre.

Timothy Harrison, regional agricultural attaché for the U.S. Embassy based in Malaysia, and Dali Ghazalay, USDEC Regional Director for the Southeast Asia office, toast to the success of the U.S. Center for Dairy Excellence in Singapore with a Tangy Yuzu Protina Colada made with U.S. whey protein isolate.

Harrison affirmed USDEC’s assessment of opportunities in Southeast Asia and lauded the U.S. CDE and its approach.

“This facility really puts USDEC in a great position to engage and to build that partnership with the local industry. As the U.S., we’re not just saying ‘Here’s what we have, take it or leave it,’ we’re saying, ‘Let’s start a conversation, let’s work together to innovate, to come up with new and better products that meet the needs of the consumers here,’” Harrison said. “It is a strong signal: we want to engage; we aren’t going anywhere.”

The U.S. CDE is home base to a continuous flow of activities that utilize its unique resources and staffing and maximize the investment. In the words of Harrison, “It is a strong platform for USDEC to really engage with the region and with customers and really push the needle for U.S. dairy exports.”

The tour by Harrison was the latest in a series of stakeholder visits this year. Among the mix of engagements in the first two months, the U.S. CDE hosted:

• Visits from the local staff of three USDEC members for trade-servicing meetings and a facility tour.
  
  
• Meetings with representatives from Singapore Polytechnic’s Food Innovation and Resource Centre (FIRC), USDEC’s research and product ideation partner in the region. Martin Teo, technical director-food applications, Southeast Asia, discussed the ongoing FIRC collaboration, the next steps for 2021 projects, upcoming 2022 projects and engagement opportunities to share results with the regional food and beverage sector.
  
  
• A technical training consultation session with R&D staff from five food and beverage companies staff and the founder of a popular local snack manufacturer focusing on health and wellness innovation opportunities with U.S. dairy proteins.

Steady work continues to capitalize on rising dairy demand from Southeast Asia’s growing middle class (and their desire to improve nutrition) and expanding regional food and beverage manufacturing industry. USDEC will continue to provide U.S. CDE updates in Global Dairy eBrief to keep members and farmers abreast of progress.

U.S. cheese exports up, NDM/SMP and whey down in January
U.S. dairy export value rose and volume fell in January. On the volume side, strong gains in cheese, butterfat and lactose were insufficient to offset declines in whey and NDM/SMP. Overall U.S. export volume (milk solids equivalent) fell 3% short of the prior year. It was the second straight monthly decline in export volume.

On the value side, high international commodity prices and strong sales of higher-value-per-unit products—like cheese and butter—helped drive export value up 16% compared to the previous year. It was the 12th consecutive month of increased value.

Cheese, milk powder and whey
U.S. cheese export volume rose 17% year over year in January—the seventh straight month of gains. But unlike recent months, growth was more concentrated, driven primarily by strong gains to Mexico (+74%, +3,223 MT), with additional growth from Australia (+81%, +1,131 MT), the Caribbean (+27%, +369 MT) and Southeast Asia (+30%, +364 MT).

U.S. NDM/SMP sales to Southeast Asia grew 9% (+2,117 MT) in January, following up a strong fourth quarter of 2021. Shipments to China nearly doubled (+1,672 MT). But hefty declines to Mexico (-15%, -3,587 MT), South America (-47%, -2,544 MT) and the Middle East/North Africa (-41%, -1,246 MT) outweighed those bright spots, sending total year-over-year NDM/SMP exports down 6% in January.

In whey, reduced Chinese demand and tight U.S. sweet whey supplies contributed to a 41% decline in U.S. whey shipments (HS Code 0404.10). That meant nearly 10,000 MT less whey shipped in January 2022 than the previous year. The decline in Chinese purchasing traces back to the country’s struggling pig farmers and reduced incentives to expand herds.

Tight U.S. whey supplies stem from a 12% reduction in U.S. dry whey production in the second half of 2021, caused by milk production slowing and demand for protein in the health and wellness sector pushing more whey towards WPC80 and WPI.

For a more in-depth look at U.S. dairy exports in January, read the U.S. Dairy Exporter Blog post, “Dairy export value keeps climbing in January even as supply constrains volume.” Also, go to the U.S. Exports tab of the USDEC Data Hub and try out the interactive charts.

 

Membership renewal deadline next week
The March 15 membership-renewal deadline is fast approaching. Companies that have not already paid or have not notified USDEC that they plan to re-up may lose access to all USDEC resources after that date. If you have any questions about renewal or would like to contact USDEC to indicate your plans to renew, please reach out to Weston Abels at wabels@usdec.org. Thank you, and we appreciate your support!

 

USDEC-hosted meeting with Codex Chair spotlights EU efforts to undermine science-based approach to standards
Last week, USDEC’s senior vice president, Sustainability and Multilateral Affairs Nick Gardner, in his capacity as head of the U.S. Food Industry Codex Coalition (FICC), hosted a meeting with the newly elected Chair of the Codex Alimentarius Commission, Dr. Steve Wearne. FICC’s main message was clear: Maintain Codex’s science-based approach to standards-setting and enforce the rules.

FICC, which USDEC has led since 2018, includes more than 50 food companies and trade associations involved in standards-setting activities at Codex. Wearne reached out to FICC to gather input from private sector stakeholders on key issues currently under discussion at Codex.

The meeting served as an opportunity to spotlight USDEC’s continued Codex leadership and highlight Codex issues that are critical to maintaining and growing U.S. dairy exports. Key among them were the importance of science as the core of the Codex decision-making process, the necessity of upholding Codex rules and the legitimate and vital role that industry plays in Codex by providing expertise, data and practical experience.

This is a critical time for Codex as the EU steps up its attempts to incorporate non-science-based provisions into the Codex process and undermine procedures to advance their regional agendas and their exports. USDEC’s leadership in FICC and ongoing work with allied groups in Latin America are essential to networking and building the coalitions needed to deliver Codex outcomes of critical importance to U.S. dairy.

IAG meeting lays foundation for USDEC 2023 ingredient programs
USDEC would like to thank all members who participated in last week’s Ingredients Advisory Group (IAG) meeting in Los Angeles. Due to the pandemic, it was the first in-person IAG get-together in two years.

The purpose of the winter IAG meeting is to gather member input and ensure that USDEC’s strategic direction and market priorities for the subsequent year (2023 in this case) align with member needs and desires.

The meeting featured a recap of 2021 activities from the Ingredients Team as well as presentations from across USDEC departments to review consumer and lifestyle trends, food and beverage trends, dairy production and trade trends, regulatory developments and business dynamics.

Re-examining those evolving market forces and their implications for U.S. dairy export competitiveness is foundational to the planning process. Making sure USDEC marketing strategies and priorities are optimized to be responsive and adaptive to market realities in the coming year puts the U.S. in the best position to identify and seize future opportunities while mitigating challenges.

Decisions made
The meeting confirmed target audiences (primarily business-to-business) and focus markets (Mexico, China, Southeast Asia, Japan, Brazil, South Korea, Colombia and the Middle East/North Africa). In addition, it validated the four Program Pillars of health and wellness, category penetration and innovation, “Why U.S. Dairy” marketing, and technical marketing services.

The Ingredients Team will use the information to develop a proposal on 2023 program tactics, which it will present for approval at the fall 2022 IAG meeting. USDEC will notify IAG members of the date and other details of the meeting as soon as they are known. For more information, please contact Allison Guzman at aguzman@usdec.org.

A look at the supply chain: transportation issues in the dairy industry
USDEC is bringing together a panel of experts from the rail and trucking industries to delve into some of the supply chain challenges facing U.S. dairy exporters and what the future may hold for the logistics of exporting. On March 29, at the USDEC Spring Annual Membership Meeting, Michele Cooper, CEO, Florida Dairy Farmers, will moderate a panel featuring Jon Eisen, director, Intermodal Motor Carriers Conference, American Trucking Association; J. Fred Miller Jr., assistant general counsel and government affairs liaison, Association of American Railroads; and Joe Coote, president, global ingredients division, Darigold.

Register now to hear what promises to be an in-depth and insightful take on the top challenge currently facing U.S. dairy suppliers. The meeting takes place March 28-29 at the Westin Denver Downtown in Denver, Colorado.

The supply chain panel is just one of the information-packed sessions slated for the meeting. For the complete schedule, download the full preliminary agenda.

As was the case with the fall meeting, the spring conference will offer the option to attend in-person or participate virtually. The meeting will be held in accordance with local public health safety guidelines, and USDEC will continue to monitor COVID-19 developments and adjust plans if needed. If you have any questions about registration, please contact Weston Abels at wabels@usdec.org.

Submit questions for DMI chief Barb O’Brien in lead-up to spring USDEC meeting
After opening remarks from USDEC President and CEO Krysta Harden and Vice-Chair Alex Peterson, the USDEC Spring Annual Membership Meeting will welcome Barb O’Brien, president and CEO of Dairy Management Inc. (DMI). Harden will moderate a 20-minute Q&A session with O’Brien. We invite members to submit questions they might have for O’Brien about her thoughts on dairy exports and her plans for DMI. If you have any questions you would like to ask, please email them to Luke Waring at lwaring@usdec.org.

 

Food prices hit record high; no end in sight
The UN Food and Agriculture Organization (FAO) Food Price Index hit a record high in February. The dairy portion of the index rose for the sixth straight month to its highest level since 2013.

While it is too early to determine exactly how Russia’s invasion of Ukraine will impact dairy and food pricing, the war has driven up energy and fertilizer prices and is interfering with planting season in Ukraine, one of the world’s largest grain suppliers, laying the groundwork to potentially accelerate inflation and raising the prospect of food shortages as the year proceeds.

The International Monetary Fund warned that the war and resulting sanctions on Russia would have a “severe impact on the global economy.”

International dairy commodity prices show few signs of slowing their rise. Every new milk production report from the major producers continues to point to year-over-year shortfalls (January output from Australia fell 6%) and rising input costs are likely to deter production growth, making chances for a significant supply response dubious.

USDEC Data Hub: cheese exports
The USDEC Data Hub 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, Global Dairy eBrief will feature a Data Hub chart. This week’s issue highlights U.S. cheese exports in January. You can find the graph at the Data Hub under the U.S. Exports tab.

We encourage you to visit the Data Hub and experiment with an interactive version of this and other charts, graphs and tables. If you have any questions regarding the information, please contact William Loux at wloux@usdec.org.

Extremely slow demand in January 2021 depressed Mexican cheese purchasing last year and was a factor in the healthy overall U.S. cheese export increase in January 2022.

 

U.S. dairy ingredient workshops in Mexico lead to university course, buying groups
What started as a series of six planned USDEC dairy ingredient workshops in Mexico in 2020 has yielded results well beyond initial expectations. The series, held in partnership with regional universities and Mexican dairy and baking associations, grew to 50 workshops in 2021 attracting more than 940 attendees. Moving forward, it will continue in 2022 in several Mexican cities and expand to additional countries in the region, including Guatemala and the Dominican Republic.

In addition, this year after consultations with USDEC’s Mexico office, Tec de Monterrey, one of Mexico’s leading food technology schools, took the unique step of creating a for-credit class to teach students how to use U.S. dairy ingredients in the manufacture of native Mexican cheeses. Plus, a mid-size Mexican cheesemaker and distributor that participated in the workshops and saw the benefits of incorporating U.S. dairy ingredients in cheese manufacturing got together with peers to form buying coalitions in three regions in Mexico. The groups hope to buy in larger quantities, making purchases more economical.

The workshops are notable for many reasons, including targeting an often overlooked and difficult to reach buying sector: small and mid-size cheesemakers and bakers. For a more in-depth look at the program, its genesis and its goals, read the U.S. Dairy Exporter Blog post, “Tapping a new dairy ingredient growth market in Mexico.”

USDEC urges passage of carrier antitrust legislation
USDEC and NMPF issued statements this week throwing their support behind the Ocean Shipping Antitrust Enforcement Act (H.R. 6864). The bipartisan bill, sponsored by Reps. Jim Costa (D-CA), Adrian Smith (R-NE), John Garamendi (D-CA), and Dusty Johnson (R-SD), would repeal certain antitrust exemptions for ocean common carriers.

Support for the bill is part of USDEC’s multi-pronged efforts to find solutions to the supply chain crisis that is significantly costing U.S. dairy exporters in terms of lost revenues and global reputation for reliability.

COVID surging in China, Hong Kong
The COVID spotlight is returning to China, with the country recording its highest daily total of new cases since the virus’s original spread in Wuhan more than two years ago. China reported outbreaks in the eastern port cities of Shanghai and Qingdao, the southern province of Guangdong and the northeastern province of Jilin.

Soaring case numbers in Hong Kong are contributing to the Guangdong totals. Last week, Hong Kong posted its highest daily COVID levels since the start of the pandemic—multiple days of 50,000+ new cases. It simultaneously became the place with the highest COVID-19 death rate in the world.

Hong Kong schools are closed and restaurants have restricted hours, but the government is considering a stricter region-wide lockdown.

China meanwhile continues its zero-tolerance COVID policy, engaging in mass testing, lockdowns and border and business closures, which has been effective at limiting mass outbreaks but costly and laborious. Chinese health experts are reportedly exploring options to pivot away from the zero-tolerance model toward a living-with-COVID plan aligned with most of the rest of the world. (Wall Street Journal, 3/7/22; Bloomberg, 3/5/22)

 

Dairies, foodservice chains suspend Russian operations
A growing list of companies with business in Russia are halting or suspending operations—in whole or in part—in protest of the country’s war on Ukraine.

• Denmark-based Arla Foods suspended all operations, including exports.
• Finland’s Valio closed its processed cheese plant near Moscow after earlier halting exports to Russia as well as imports of ingredients and packaging materials from Russia.
• France’s Danone suspended investment projects in Russia, but said it would continue production and distribution of dairy products and infant formula to meet the population’s essential food needs.
• McDonald’s temporarily closed 847 company-owned stores in Russia and 108 units in Ukraine.
• PepsiCo said it would suspend all investment in Russia and all sales of beverages, but would continue to operate its Russian dairy business in part to support its 20,000 Russian employees and 40,000 ag workers who supply the operations.
• Starbucks temporarily closed its 130 stores, which are operated by franchisee Alshaya Group, based in Kuwait.
• Yum Brands Inc. is pausing Russian investment and suspending operations at all 50 Pizza Hut stores (in partnership with its master franchisee) and 70 company-owned KFC stores.
  
  
• A number of other U.S. foodservice chains, including Subway, Papa John's and Domino's, are redirecting their profits from Russian operations to support humanitarian efforts. But the because their businesses in Russia are franchised (and supplies usually sourced independent of the franchisor), they cannot shut the operations down without the franchisees' cooperation. (AP, 3/9/22; Nation's Restaurant News, 3/9/22; Reuters, 3/8/22; Dow Jones Newswires, 3/7/22; FoodBev.com, 3/7/22)

Mergers, acquisitions and joint ventures
New Zealand's Fonterra Co-operative Group and India's Future Consumer Ltd. decided to end their Indian joint venture: Fonterra Future Dairy. Fonterra cited business disruptions caused by the pandemic as the reason. It said it would continue to operate in India through its Anchor Food Professionals foodservice arm and its ingredients business. ... Danone reportedly reached a strategic cooperation agreement with China-based infant formula, rice powder and nutritional supplement maker Eurbest Nutritional Food. Danone said it plans to “invest and develop” Eurbest’s infant formula factory and products. … Qatari dairy company Baladna paid QAR67 million (about US$18 million) for a 5% stake in Egyptian dairy, juice and cooking product company Juhayna Food Industries. (USDEC Middle East/North Africa office; Company reports; just-food.com, 3/7/22)

• Dairy export value keeps climbing in January even as supply constrains volume
• On International Women’s Day, USDEC shares these stirring words from our president and CEO, Krysta Harden
• Harden celebrated International Women’s Day with leaders of a Colombian food company
• Harden visited supermarket in Colombia that had 30 U.S. cheese options
• Tapping a new dairy ingredient growth market in Mexico