• FMC says action coming on ports
• USDEC influences UN food system guidelines

• Market Talk: Harden talks administration changeover
• Save the date! Spring membership meeting

• Market Summary: Demand drives price gains

• Myanmar update

• USDA reaffirms food safety during pandemic

• New WTO director-general sets priorities

• Arla invests $850 million

 

FMC says action coming on port, shipping problems
Following an uproar from exporters and port users, Federal Maritime Commission (FMC) plans to order container carriers and port terminal operators servicing the ports of Los Angeles/Long Beach and New York/New Jersey to “provide information on their policies and practices related to container returns and container availability for exporters,” FMC said in a statement.

FMC plans to use the information to determine if the groups are meeting their legal obligations related to detention and demurrage practices, and may further utilize it as a basis for hearings, enforcement actions or further rulemaking.

The order comes after FMC Commissioner Rebecca Dye met this week with fellow commissioners to provide an update on the Fact Finding 29 investigations into the pandemic’s effect on the ocean shipping industry. Prior to that meeting, Dye said the FMC was contemplating “a big, huge step” to address port and shipping problems.

USDEC outlines issues, urges resolution
USDEC participated in a joint meeting with other agricultural sector organizations and several FMC commissioners the previous week to outline the problems facing U.S. ag exporters, including dairy. Shipping logistics, container availability and port congestion continue to hamper U.S. dairy and ag exporters, eroding a hard-won reputation as a reliable supplier.

Carriers continue to prioritize imports over exports, turning away export cargo in favor of sending empties back to Asia to reap sky-high Asia-U.S. freight revenues. Collectively, the problems are stranding U.S. agricultural exports here in the United States, making it impossible to deliver products to foreign customers in a timely manner—or at all.

USDEC also engaged with Commissioners Dye, Daniel Maffei and Carl Bentzel in webinars organized by the Agriculture Transportation Coalition (AgTC), focusing on resolving the most immediate issues. (USDEC is a member of the AgTC.)

Working group seeks solutions
USDEC is further taking part in a working group launched last week by the AgTC to catalyze greater outreach to FMC commissioners and urge action on these critical port issues.

Prior to this month, AgTC worked with its members, including USDEC, to compile a list of ongoing problems, including:

• Terminals so full they cannot accept return of empties or containers loaded with exports.
• Lack of appointments for truckers to enter terminal gates to retrieve import containers or bring in exports or empties.
• Carrier and chassis company agreements causing shortages of chassis to carry containers in and out of terminals.
• Extensive detention and demurrage charges.

The detention and demurrage charges are now, in aggregate, in the hundreds of millions of dollars. Most disconcerting, the carriers and terminals are charging these fees ($125 to $425 per container per day) even when it is not possible for the truckers or shippers to actually access the terminal to return or retrieve containers.

The FMC issued final Detention and Demurrage Guidelines last year that are supposed to prevent unjustified charges, but terminals and carriers are not complying, AgTC says.

Dye said the FMC has become more and more concerned with compliance rules on demurrage and detention after gathering data during the Fact Finding 29 investigation. Failure of carriers and terminal operators to adhere to the guidelines might constitute a violation of the Shipping Act of 1984. The information order will help provide input on the FMC’s next actions.

AgTC is seeking a more thorough solution: The FMC and Congress must take steps to assure there remains a viable commercial transportation system to serve our exports, the group said. The ongoing crisis is proving current enforcement, regulations and laws are insufficient.

No let-up
While USDEC works with AgTC and others in the agriculture sector to press for relief, challenges for exporters are expected to persist for now. The flood of imports continues, fueled by U.S. pandemic shopping habits.

Forecasts predict the Port of Los Angeles will handle 730,000 TEUs this month, up 34% from the previous year, and 775,000 TEUs in March, a gain of 72%. The National Retail Federation predicted last month that imports would produce record levels of container volumes at major U.S. gateways into the summer.

Average time for inbound ships at anchor waiting for a berth at Los Angeles/Long Beach has risen to eight days (up from three days when congestion started to snowball in November and zero days during normal operations). More than one-quarter of shipments have dwell times in excess of five days (that compares to less than 5% for the first half of 2020).

Container lines said yesterday that they are looking to divert cargo ships from the Port of Los Angeles to other destinations to ease the backlog. Talks are ongoing with the Ports of Oakland and Seattle/Tacoma. However, delays are already starting to grow at alternate ports due to diversions and rerouting. (USDEC staff; AgTC; Bloomberg, 2/18/21, 2/17/21; The Loadstar, 2/18/21; Supply Chain Dive, 2/16/21, 2/11/21)

USDEC influences outcome of UN guidelines on food systems
USDEC efforts to defend dairy nutrition, consumption and trade on a global level continue to pay dividends. Most recently, the UN Committee on World Food Security (CFS) endorsed voluntary guidelines for countries to achieve sustainable food systems that USDEC played an important role in shaping. The guidelines are significant because they will feed directly into the 2021 UN Food Systems Summit this September and are expected to shape global food policies and investments into the future.

The UN Food Systems Summit offers the opportunity to reinforce the essential role of dairy as a sustainable, affordable nutrition source. But it also carries a threat that dairy and other animal-based foods will lose out to a plant-only agenda driven by certain European-based institutions and activists. Early drafts of the CFS guidelines, in fact, did not support dairy production or animal agriculture.

Defending dairy and science
Recognizing the negative impact these earlier drafts of the CFS guidelines could have on U.S. dairy exports, USDEC’s Vice President for Codex and International Regulatory Affairs, Nick Gardner, and our Trade Policy team engaged with USDA and others active in the process, such as the Global Dairy Platform (GDP) and the International Dairy Federation. Consistent with USDEC goals across all discussions on food systems, this outreach stressed science- and evidence-based outcomes in support of dairy as part of a nutritious and sustainable diet (see last year’s U.S. Dairy Export Blog story, “USDEC Highlights Dairy’s Important Role in the Global Food System in Lead Up to 2021 United Nations Summit”). To complement USDEC’s work with the U.S. government, DMI (working through GDP) engaged directly in the technical drafting process.

The final version of the guidelines endorsed by CFS include the following positive dairy developments:

• While earlier drafts sought to characterize all animal-sourced and processed foods as not sustainable, the final guidelines do not define specific foods, such as dairy and meat, as inherently sustainable or not.
• The guidelines call for implementation in a manner consistent with international trade obligations.
• The document does not denigrate international trade or suggest that trade is a major driver of unsustainable food systems, as had been suggested in earlier drafts.
• The definition for “nutritious foods” establishes criteria that dairy meets.
• The definition of “healthy diets” creates opportunities for dairy without being prescriptive.
• Antimicrobial resistance is addressed in a balanced and globally representative manner, focusing on science and risk-based approaches consistent with international standards, guidelines and recommendations.
• The document reflects the diversity of the global food system and rejects a one-size-fits-all approach.
• Sustainable food systems are defined in a positive way that reflect all three legs of the sustainability stool: economic, social and environmental. Too often, organizations focus only on environmental aspects of sustainability.
• The focus on malnutrition and under-nutrition in children, defining them as conditions that must be overcome to achieve the UN’s 2030 Agenda for Sustainable Development, supports dairy’s role in helping to support child nutrition.

Click here for a more thorough overview of key dairy accomplishments in the guidelines. For more information, contact Nick Gardner at ngardner@usdec.org.

Market Talk video: Harden discusses USDA changeover
Get an insider’s take of the USDA transition process from USDEC COO and former USDA Deputy Secretary Krysta Harden in the latest USDEC Market Talk video (Episode 12). USDEC Analyst William Loux asks Harden about all the moving parts associated with an administration changeover.

“It is a dynamic, exciting time but one that really calls for close attention, being involved, being vocal and making sure dairy interests are being considered as these folks are being appointed and in some cases confirmed by the Senate,” Harden tells Loux.

But the United States cannot wait for all the appointments to move ahead on matters critical to dairy and trade, Harden notes: “The world does not stop and say let’s wait for the U.S. to catch up.”

That is one of the benefits of USDEC President and CEO Tom Vilsack’s nomination to resume leadership as Secretary of USDA after serving in that same position for eight years in the Obama administration. (A full Senate vote on the Secretary’s nomination is scheduled for Feb. 23.)

“Secretary Vilsack certainly knows trade and he certainly knows dairy,” says Harden. “He is going to be able to be an advocate for agriculture and for trade on day one. There is no learning curve there.”

Listen to the full 20-minute interview here.

 

Save the dates: spring membership meeting April 19-21
USDEC plans to hold the spring membership meeting virtually April 19-21. As in the fall meeting, programming will take place over the course of 2-3 hours each day. Mark your calendars, invite colleagues involved in exports at your company and stay tuned for further details in the coming weeks.

 

Demand drives GDT prices
Broad-based demand drove across-the-board gains at the Feb. 16 Global Dairy Trade (GDT) auction, as prices significantly exceeded futures market expectations. Most products saw price hikes across all contract periods, testifying to demand strength, even after seven straight increases in the GDT Price Index.

WMP jumped 4.4% to US$3,615/MT, its highest price since 2014. SMP edged up 0.3% to US$3,207/MT; butter (+2.0%) rose for the 10^th straight auction, hitting US$5,129/MT; AMF increased 1.1% to US$5,527/MT; and cheddar increased for its sixth straight event, rising 2.4% to US$4,268/MT. (A volume reduction supported the cheddar increase. Prior to the auction, Fonterra cut the volume of cheddar on offer by 110 MT for the Feb. 16 auction and by 570 MT for the March 2021-February 2022 year, citing better sales options via other channels.)

China was the main market mover, as buyers showed up despite concerns that the Lunar New Year holiday might keep them away. But China wasn’t the only bidder pushing prices upward.

Southeast Asia increased milk powder purchasing, despite higher New Zealand prices—another reason to believe shipping delays here are undercutting U.S. exports. The auction showed increased interest in WMP from Africa and Latin America in WMP and AMF; in butter from the EU; and in AMF from Southeast Asia and Latin America.

China demand expected to continue
Import demand in China shows no signs of abating. Chinese milk powder inventories are reportedly falling, with SMP stocks at a three-year low and WMP coming down to levels commensurate with 2019 levels. China’s top 10 dairy processors reported overall production up 3% in 2020, but milk powder production down more than 9% as more raw milk was channeled to fluid products. A government push to increase dairy consumption to boost overall nutrition continues to drive demand, particularly for fluid milk.

Already high Chinese raw milk prices hit a January record, and a repeat is expected in February, keeping imports competitive.

Apart from China, other positive demand news may be setting up in the form of oil prices. Recent gains in oil prices (spurred by OPEC+ cutbacks and projections of a 2021 demand rebound) could lift dairy demand in oil-producing nations in the Middle East/North Africa and Latin America.

Other factors behind the run-up
From a price standpoint, U.S. products are favorably positioned and should remain that way for some time, barring unforeseen developments in U.S. government support programs. Uncertainty over the United States’ ability to deliver is likely providing some of the tailwinds we are seeing in international commodity pricing in the first quarter of 2021, and one of the reasons we saw price gains in near-term SMP contracts and stronger Southeast Asia participation at the Feb. 16 auction.

Milk production in the EU and New Zealand is lending further support. EU raw milk deliveries in December grew only about 0.4% vs. the previous year. The bloc’s two largest producers—France and Germany—continue to lag prior-year output, with French deliveries down 1.4% in December and Germany off by 1.1%. It marked five straight months of German declines, while France has been alternating monthly losses and gains since June 2020.

In New Zealand, even though recent rains improved pasture growth, weather concerns remain.

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 exports, because it increases import purchasing power. If line is trending down, currency is weakening vs. U.S. dollar (U.S. dollar is strengthening).  This is unfavorable for exports, because it decreases import purchasing power. Currency exchange rates are calculated for Wednesday of each week. Source: Oanda.com.

 

U.S. leaves Myanmar business decisions to companies—for now
In the absence of broad economic sanctions against Myanmar, the U.S. government is leaving decisions for U.S. companies selling to or operating in the nation up to the companies themselves. That report comes from Jonathan Gardner, USDEC senior vice president, market access and regulatory affairs (MARA), and Lee Su Yong, USDEC’s MARA manager in the Southeast Asia office, who took part in a U.S. Ambassador briefing on the Feb. 1 military coup in Myanmar.

U.S. Ambassador to Myanmar Thomas Vajda noted that U.S. businesses can still operate with caution that matches with the company principles and humanitarian core values. Current U.S. sanctions affect the Burmese military directly but not the Myanmar people.

Vajda said the U.S. government understands that these are difficult business decisions and is not asking businesses to pull out or scale down. Businesses are encouraged to work closely with their importers/distributors on how to move forward in the near term during these challenging times.

The situation, however, remains fluid and USDEC will provide updates on further developments as needed. (USDEC Southeast Asia office; USDEC staff)

USDA: No evidence of COVID transmission via food, packaging
USDA issued a press release reaffirming that despite billions of meals and food packages handled since the start of the pandemic, there is no credible evidence of food or food packaging associated with transmission of the virus that causes COVID-19. The release contains links to research and analysis on the topic, highlighting the absence of any connection between food and food packaging and the virus. If you or your customers have questions regarding COVID-19 and food or food packaging, the release is a good source for answers.

USDEC has been closely monitoring any references to virus transmission and food, food packaging and exports during the pandemic. China has expressed concerns about the virus on food and food packaging and issued new guidelines for domestic companies earlier this year. For more information on those, read the Feb. 3 USDEC Member Alert, “China COVID-19 testing and disinfection certificate for products and packaging,” or see coverage in the Feb. 5 issue of Global Dairy eBrief.

New WTO director-general sets priorities
The WTO officially selected Nigerian economist and former finance minister Ngozi Okonjo-Iweala to lead the group as director-general. Okonjo-Iweala admitted that the organization faced numerous challenges, but “working together we can collectively make the WTO stronger, more agile and better adapted to the realities of today.”

She said her first priority would be to address the pandemic and trade in medical supplies and vaccines before tackling larger structural issues like dispute settlement reform, ecommerce, new disciplines on subsidies and China. Her term officially begins March 1 and runs through Aug. 21, 2025, but it can be renewed. (New York Times, 2/15/21; World Trade Online, 2/16/21, 2/15/21)

 

Arla to invest $850 million in 2021 despite “year of uncertainty”
Arla Foods plans to invest €700 million (about US$850 million) this year on plant expansions/upgrades, calcium initiative and its sustainability agenda. Major projects include the completion of a powder tower in Pronsfeld, Germany, a mozzarella expansion in Branderup, Denmark, and upgrades to its production site in Bahrain.

“2021 will be another year of uncertainty and global disruption as the COVID-19 crisis stretches into the year and the first signs of recession are starting to show,” said CEO Peter Tuborgh. “But it is also a year where we hopefully will see the world open up again as vaccines are rolled out, so I am cautiously optimistic for 2021.” (Company reports)

Kerry buys Biosearch Life, studies restructuring
Ireland’s Kerry Group is buying Spain’s Biosearch Life, a manufacturer of ingredients for nutraceutical and functional foods. Grupo Lactalis Iberia owns a 29.5% stake in Biosearch Life and is selling its entire stake as part of the deal.

Kerry also said it is undertaking a strategic review of its dairy business in Britain and Ireland. Kerry Co-operative Creameries was rumored last month to be a leading candidate to purchase the operations and is still considered a frontrunner should Kerry Group opt to sell. But the manufacturer said it was “evaluating several options.”

In addition, the Group has decided to consolidate part of its business in Mexico and Malaysia and instead build a services division that can scale in size to deliver “more efficient and consistent service globally.” (Reuters, 2/16/21: Agriland, 2/16/21)

Company news briefs
Beston Global Food secured A$15.6 million (about US$12 million) to fund stage two of its Jervois, South Australia, lactoferrin plant expansion project. The project, when completed, will produce 20 MT of lactoferrin per year. The facility also produces mozzarella. (The Market Herald, 2/7/21)

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