HIGHLIGHTS: MAY 5, 2023
• Codex and GI wins
• March U.S. dairy exports decline
• U.S. cheese at Food and Hotel Asia
• Market Summary: GDT up for second straight auction
• Letter seeks end to unfair railroad detention and demurrage charges
• April updates to USDEC Export Guide
• Westland to build lactoferrin plant
• Company news: Fonterra, Junlebao, Remilk
Featured
USDEC delivers Codex and GI wins, strengthens relationships in Oceania
USDEC’s work in multilateral organizations is critical to achieving a level playing field for U.S. dairy exporters and to reducing trade barriers. That work is constant and relies on building strategic relationships and formal partnerships to deliver wins for science-based standards and priority outcomes.
USDEC holds line on GIs, equivalence in Codex
In the latest example, the Codex Committee on Food Import and Export Inspection and Certification Systems (CCFICS) met this week in Hobart, Tasmania, Australia. Nick Gardner, USDEC’s senior vice president, Sustainability and Multilateral Affairs (SAMA), was there to engage in high-stakes Codex negotiations on critical dairy trade issues while strengthening relationships with key partners in Oceania to deliver future wins via coordinated engagement on issues of mutual benefit.
Gardner attended the meeting as the head of delegation for the International Dairy Federation (IDF). Several significant items were up for debate at the Committee, requiring USDEC to coordinate a sophisticated advocacy effort ahead of the meeting, leveraging U.S. government relationships and mobilizing partners and dairy colleagues to maximize impact.
The most concerning issue for dairy exports under discussion were food fraud guidelines. Although the guidelines currently include text that excludes geographical indications (GIs) from their scope, the EU has spent the last 18 months pushing to include GIs, which would lend Codex legitimacy to their efforts to brand non-European cheeses with common names like “feta” and “parmesan” as fraudulent.
Fortunately, USDEC was able to mobilize allies in Oceania, Latin America and the Caribbean, bring IDF on board, and encourage a full-court press by the U.S. government to prevent an EU victory in Hobart. As a result of the collective efforts, the language excluding GIs from scope remains in the guidelines, although it will be subject to further discussion at future meetings of CCFICS.
Many delegations went on record in support of excluding GIs, and guidance will be sought from the highest authorities of Codex to confirm that GIs are outside of the scope of CCFICS. USDEC will remain closely engaged with this issue as negotiations continue to finalize the guideline, though the significant outreach done ahead of this week’s meeting puts us in a strong position to complete the work at the next meeting of CCFICS.
Nick Gardner, USDEC senior vice president, SAMA, and Melissa Cameron, human health and nutrition policy manager at Dairy Australia and a fellow IDF colleague, during a break in the action at the Codex Committee on Food Import and Export Inspection and Certification Systems (CCFICS) this week in Australia.
Also on the Codex docket was work on guidelines on equivalence. After several years of painstaking negotiations, the guidelines on equivalence of National Food Control Systems advanced toward adoption. Notably, those guidelines include numerous revisions supported by USDEC that ensure they cannot be misused by dairy competitors to shortcut equivalence concepts found in the WTO agreements to unfairly access markets.
Progress made towards greater collaboration
Taking advantage of the location of the CCFICS meeting, Gardner also met with colleagues from Dairy Australia at their headquarters in Melbourne to explore areas of cooperation, common interest and collaboration. Dairy Australia, funded by Australian dairy farmers, is the national organization representing the interests of the Australian dairy sector.
Talks centered on opportunities to work together to advance science-based standards, common approaches to sustainability, and dairy-positive nutritional guidance. Opportunities also abound to work together with our respective governments on trade policy issues, including GIs, and to push back on increasingly aggressive efforts by the EU to establish trade barriers in third countries.
At a time when the EU has stepped up its efforts to promote its trade interests and agenda around the world and through the multilateral system, increased collaboration between USDEC and Dairy Australia can deliver wins. In fact, Dairy Australia was one of USDEC’s most important allies ahead of and during the CCFICS that resulted in securing the positive outcome on GIs.
Gardner is making a quick stop in New Zealand on his way back stateside to explore similar collaboration opportunities. He will also discuss New Zealand’s recent and forthcoming environmental regulations that could significantly impact their dairy production. Stay tuned for additional insights and developments in future editions of the USDEC Global Dairy eBrief.
U.S. dairy exports fall for first time in a year
Year-over-year (YOY) U.S. dairy exports slipped 0.4% in milk solids equivalent (MSE) terms in March (-910 MT), marking the first MSE decline in exactly a year. (March 2022 U.S. MSE exports fell 0.5% before going on an 11-month streak of YOY gains.)
Because of the strong U.S. performance in January, year-to-date value and volume still posted healthy growth for the first quarter (1Q). U.S. dairy export volume rose 5% (+25,398 MT MSE) and value increased 3% (+$65 million). And on the volume side, most key product categories held their own for the quarter: NFDM/SMP (+3%), cheese (+4%), MPC (+13%), WPC80+ (+18%) and lactose (+26%).
However, headwinds from increased competition, inflation, economic uncertainty, and lackluster Chinese demand are taking a toll and should challenge U.S. suppliers through at least mid-year when we expect EU milk production gains to soften and China’s appetite to recover more fully.
Other March highlights include:
- Total U.S. dairy export volume to Latin America (Mexico, Central and South America and the Caribbean) expanded by 23% (+17,110 MT). Cheese and NFDM/SMP led the way. U.S. cheese shipments to the region grew 20% (+3,918 MT) versus the previous March, while NFDM/SMP jumped 37% (+14,003 MT).
- U.S. NFDM/SMP exports to Mexico set an all-time record at 42,391 MT. The only other time U.S. NFDM/SMP shipments to Mexico topped 40,000 MT in a single month was in October of 2016 when volume reached 42,303 MT.
- U.S. WPC80+ exports grew 30% (+1,581 MT) to a record 6,828 MT. Broad-based gains across geographies were behind the all-time high, with the biggest increase coming from China (+209%, +1,219 MT).
- While total lower-protein whey exports (0404.10) declined 6% (-2,928 MT), U.S. sweet whey shipments increased 8% (+1,631 MT).
- YOY U.S. lactose exports grew 18% (+6,002 MT).
For more on March and first-quarter U.S. dairy export results, read the U.S. Dairy Exporter Blog story, “U.S. dairy exports dip for first time in a year,” and visit the interactive charts in the U.S. Exports section of the USDEC Data Hub.
Events
Tastings spark U.S. cheese interest at Food & Hotel Asia
The USA Cheese Guild (USACG) and its 10 participating U.S. dairy suppliers welcomed a myriad of guests to the USDEC booth at Food & Hotel Asia (FHA) – Food & Beverage. The annual exposition targeting the global food and hospitality community took place April 25-28 at the Singapore Expo.
Ranging from food manufacturers and distributors to supermarket retailers and culinary professionals, the USA Cheese Guild Pavilion was abuzz with engaging meetings and prospective conversations.
The pavilion drew a crowd as Chef Muhammad Imran, USACG chef consultant, used USDEC members’ cheeses to create Jalapeno Monterey Jack Cheese Poppers with Ranch Dressing and Garganelli Pasta Carbonara. The demo and tasting demonstrated the versatility and craftsmanship of U.S. cheese.
“I know that booth visitors were impressed with Chef Imran’s creations because the tastings were wiped out in less than 10 minutes,” says Dali Ghazalay, regional director, USDEC Southeast Asia.
Non-exhibiting members also visited the USDEC booth and made full use of the space to engage their customers and prospective leads.
Attendees stop by the USDEC booth to taste and learn more about U.S. cheeses at last week’s Food & Hotel Asia.
Market Summary
GDT rises for second straight auction
The Global Dairy Trade (GDT) Price Index gained 2.5%—the second increase in a row and a positive, if not definitive, signal of a potential market rebound. Flagship WMP led the way, rising 5% (to US$3,230MT) and recording its biggest dollar gain since last August.
North Asia (China) dominated WMP purchasing, taking nearly two-thirds of the volume on offer. While WMP showed a marked improvement, lower volumes on offer (vs. the previous event as well as the same event last year) played a role, as did tighter supply in general in the face of higher returns from alternate product streams.
SMP prices lifted 1.5% (to US$2,787/MT) on the strength of gains in near-term contracts (Contract 1 rose 8.4%; Contract 2 increased 3.2%), but saw declines of 1.4-3.2% in Contracts 3-5. While North Asia led purchasing in SMP as well, it roughly split the volume sold with the Middle East, Southeast Asia/Oceania and the EU.
Cheddar continues to recover, jumping 4.5% (to US$4,561/MT). That marks three straight healthy gains after prices plummeted in March by over $1,000/MT. The last three auctions saw cheddar make up more than half of that loss.
Overall, it’s still too early to suggest that markets will continue to move up or even remain steady. Demand questions and concerns are as relevant today as they were six months ago. Declining farmgate milk prices have yet to significantly impact production. On the other hand, China remains a wild card and it is continuing to show some green shoots of demand recovery.
Supply Chain
USDEC seeks to close detention and demurrage loophole in Ocean Shipping Reform Act
USDEC and NMPF co-signed a letter coordinated by the National Retail Federation calling on Congress to address a gap in the Ocean Shipping Reform Act (OSRA) in the area of detention and demurrage fees. The OSRA is not preventing railroads from charging detention and demurrage fees to exporters for factors outside of the exporters’ control. The problem is a lack of jurisdictional clarity between the Federal Maritime Commission (FMC) and the Surface Transportation Board.
“The lack of clear statutory authority for the FMC to address unreasonable rail storage charges assessed under ocean carrier through bills of lading is a gap that must be clarified,” the letter states.
The letter does not suggest that railroads would or should be regulated by the FMC. It asks Congress to establish a new requirement under OSRA clarifying that rail storage charges assessed under ocean bills of lading for through transportation should be billed through the contracting ocean carrier and subject to OSRA demurrage and detention invoicing requirements.
Market Access and Regulatory Affairs
USDEC updates 74 Export Guide documents in April
USDEC’s Market Access and Regulatory Affairs (MARA) team updated or revised 74 documents in the USDEC Export Guide last month. Changes include:
Volume 1: Tariffs and Classification
- Iran: Updated tariff codes and rates across the tariff schedule.
- Israel: Noted tariff eliminations on several products, including yogurt, acidified and fermented milk (0403); other food preparations (1901.90.2900); other sauces and seasonings (2103.90.9000); ice cream (2105), and milk albumin (3502.20).
- Thailand: Noted changes to tariff codes for whey products under 0404.10.
Volume 2: Import Requirements
- Australia: Added updated cheese and butter certificate in APHIS Veterinary Certificate section.
- China: Added FAS and FDA contact information for issues related to the China Import Food Enterprise Registration (CIFER) system login to the U.S. Dairy Plant Registration or Approval section.
- Egypt: Updated the Halal Certificate section to reflect information from importers, but not officially stated, that halal certificate implementation has been delayed until the end of the year.
- Indonesia: Added two new required documents for Entry Import Permit (SKI) approval to the Product Registration/Approval section; added 11 new seaports and two new airports to the Specific Entry Point section; added updated SGS Datasheet to the Pre-shipment Inspection in the U.S. section; noted that the manufacturer’s name and address are now required on the Certificate of Analysis.
Volume 3: Compositional Standards and Labeling Requirements
- Brazil: Revised food additives regulation.
- China: Updated processed cheese standard, noting that it now requires products containing 15% to 50% of cheese to be called “cheese products,” while products containing over 50% of cheese need to be named “processed cheese.”
- Morocco: Updated Labeling Requirements; all compositional standards modified to incorporate new standards for contaminants and microbiological criteria.
Every month, USDEC’s Market Access team emails a list of guide updates to interested members. If there is anyone at your company who should be included on the distribution list for that email in the future, please contact Jessica Smith at jsmith@usdec.org.
Company News
NZ’s Westland to build lactoferrin plant
New Zealand dairy processor Westland Milk Products is building a new NZ$70-million lactoferrin plant (about US$43 million) at its South Island facility at Hokitika. Westland, owned by China’s Yili Group, said the investment would more than triple its lactoferrin capacity (currently 20 MT per year) and make the company one of the top three lactoferrin producers in the world. It expects to begin construction in the first half of 2024 and estimates that the plant will take about 16 months to complete. The facility will produce spray-dried lactoferrin, while Westland’s existing lactoferrin supply is produced via freeze-drying.
The investment follows a NZ$40-million expansion (about US$25 million) at Hokitika that doubled butter production (see Global Dairy eBrief, 7/29/22). (Company reports)
Fonterra opens fifth Chinese innovation center
New Zealand’s Fonterra Co-operative Group opened a fifth new application center in China. The latest location—in Shenzhen in southern China—will concentrate on beverage applications, whereas the previous four units focus on food. “Part of the success of our foodservice business in China has been driven by the application centers, which allow us to better support our customers and better understand Chinese consumer preferences,” said Fonterra Greater China chief executive Teh-han Chow. (Stuff.co.nz, 4/25/23)
Company news briefs
China’s Junlebao, in cooperation with local government, is investing $434 million to build a new fluid milk, dairy beverages and yogurt plant in Jiangmen, Guangdong Province. The facility will supply six provinces: Guangdong, Guangxi, Hunan, Jiangxi, Fujian and Hainan. … Israeli regulators approved Remilk’s lab-grown protein for food use. The approval follows an agreement made last year between Remilk and Central Bottling Co. (the Israeli franchisee for Coca-Cola) to produce a line of dairy products made with the protein. (USDEC China office; Company news)
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