HIGHLIGHTS: JUNE 10, 2022
• April trade data recap
• Harden talks sustainability partnerships
• U.S. CDE hosts permeate seminar
• Whey protein messaging in Korea
• Market Summary: GDT ends losing streak; China uncertainty
• Canadian farmers seek milk price hike
• ALIC slates butterfat, whey tenders
• Meshke testifies before Senate subcommittee
• McKalip nominated as chief ag negotiator
• MARA mission to Brazil
• May USDEC Export Guide updates
• Supply chain: OSRA vote expected next week
• FMC’s Dye issues supply chain Fact Finding report
• Dockworkers contract talks resume
• West Coast readies for increased imports
Featured
U.S. cheese exports star in April trade data
The United States had its best April ever for dairy exports in terms of milk solids equivalent (MSE), with suppliers shipping a record 213,193 MT to overseas markets. There wasn’t a big spike in any single category or to any single market, but rather solid volume numbers across most categories—even those that failed to match previous-year levels.
MSE volume increased a modest 1% over April 2021, with gains in cheese, butterfat, lactose, WPC80+, milk protein concentrate and others all contributing. Year to date through April, U.S. dairy export volume measured in MSE was less than 1% off of last year’s record pace.
April value totaled $845.6 million, second only to March 2022’s $859.6 million as the highest single-month total in history. Through the first four months of 2022, U.S. dairy export value was running 22% greater than the same period the previous year.
Product by product
Cheese remains the hottest U.S. export product, with year-over-year volume up for 10 consecutive months. After shipping a record 41,693 MT of cheese in March, U.S. suppliers repeated the performance in April with 41,375 MT in exports (+2%). It was the first time the United States ever exported more than 40,000 MT of cheese in two consecutive months.
Overall whey exports were essentially flat at 54,302 MT, although three of the four whey HS Codes—WPC (less than 80% protein), modified whey (mostly permeate) and WPC80+—actually posted gains. A 43% decline (-4,234 MT) in shipments of sweet whey to China negated that growth.
Butterfat also diverged by product: April U.S. AMF exports nearly quadrupled to 2,295 MT while butter exports fell for the first time in 17 months, dropping 10% to 4,476 MT. Together, that added up to a 25% increase in total butterfat exports for the month.
U.S. NFDM/SMP exports fell 6% to 73,529 MT in April. With U.S. supplies limited, traders focused on the two largest U.S. markets: Southeast Asia and Mexico. Shipments to Southeast Asia grew 30% (+7,570 MT) but volume to Mexico still slipped 5% (-1,246 MT). The real drag on volume was the Middle East/North Africa, with U.S. suppliers unable to duplicate last year’s spike in sales to the region, resulting in a 90% volume decline (-8,080 MT).
For a deeper look at April and year-to-date exports, read the U.S. Dairy Exporter Blog post, “U.S. dairy exports post record April.” Also, visit the U.S. Exports tab in the USDEC Data Hub and experiment with the interactive charts and graphs.
Harden discusses role of dairy sustainability partnerships
USDEC President and CEO Krysta Harden discussed the key role public-private partnerships are playing in helping the U.S. dairy industry reach its environmental stewardship goals at The Economist’s second annual Sustainability Week, June 6-9, in Washington, D.C. Those goals, greenhouse gas neutrality, optimized water usage and improved water quality by 2050, “cannot be done on the backs of farmers,” she said. “They are willing. But they need partners.”
Harden outlined partnerships the U.S. dairy industry has established in recent years based around sustainability goals, what the U.S. dairy industry is seeking from the government in terms of sustainability assistance and other challenges to meet the ambitious goals. For more details, read the U.S. Dairy Exporter Blog story, “The need for more dairy sustainability partnerships.”
Events
USDEC members participate in first live event at U.S. CDE: permeate use in bakery applications
Four representatives from three USDEC member companies participated in-person at the first live seminar held at the U.S. Center for Dairy Excellence (U.S. CDE) in Singapore. The June 1 hybrid event attracted 120 bakery and confectionery R&D staff, food formulators and food technologists—in-person and online—from across Southeast Asia.
Titled “Scaling New Heights in Bakery Innovation with U.S. Permeate,” the seminar featured a speaker lineup that outlined dairy permeate functionality and formulation advantages and how the U.S. dairy industry was prepared to assist food and beverage makers to develop innovative products suited to the tastes and nutritional needs of regional consumers. It is part of the USDEC Ingredient Team’s broader “Ideation and Innovation and Ignition Series” of programming to spur new product with U.S. whey products, milk powder and other ingredients.
In the test kitchen at USDEC’s U.S. Center for Dairy Excellence in Singapore, Martin Teo (white shirt, standing), Technical Director - Food Applications, USDEC Southeast Asia, highlights U.S. permeate's Southeast Asia-friendly innovation potential during the U.S. Permeate Product Showcase portion of the seminar. Cameras capture the action for online viewers.
As noted in last week’s Global Dairy eBrief, USDEC also used the occasion to unveil a new infographic outlining the growing popularity of permeate in global new product development. The infographic (in English) is tailored for Southeast Asian markets. A general English language version for global use is also available here. Translations into additional languages will be posted in the coming weeks.
The hybrid seminar is one of a series of events USDEC is planning for the U.S. CDE this year, taking into account ongoing COVID-19 travel and operating precautions. The next two seminars are being planned for July 13-15 (Healthy Snacking) and August 24 (Protein Beverages).
Beyond B:B customer engagement, the U.S. CDE this week also opened its doors to representatives of eight member companies participating in the USDEC Members Dialogue Meeting. USDEC Senior Vice President, Global Ingredients Marketing, Vikki Nicholson-West, in her second visit to Singapore and the center since April, led the meeting, providing updates on USDEC’s marketing strategies in Southeast Asia as well leading a group discussion on future challenges and growth opportunities in the “New Normal.”
Spreading whey protein messaging in Korea
Part of USDEC’s ingredient marketing strategy is to inspire innovation, utilization and consumption of U.S. dairy ingredients in mainstream health and wellness products aligned with consumer needs across life stages. The Korea office and Ingredients Team saw an opportunity to do just that in last month’s Korean Society of Food Culture conference in Seoul.
The Society has about 600 members from academia, industry, government and research institutes. Its mission is to identify the health and nutrition benefits of Korean foods and promote those products at home and abroad. One of the presentations at the May meeting was titled, “Changes in Purchasing Protein Source Products at Home,” a sign of rising interest in proteins and how they fit into the Korean diet.
USDEC saw the event as an opportunity to raise awareness of U.S. dairy protein benefits and how they could seamlessly be incorporated into traditional Korean cuisine to address local nutritional needs. USDEC provided whey protein samples and literature to all participants and took out a half-page ad about USDEC and U.S. dairy protein in the conference booklet.
Reaching more than 200 attendees, the activity complements USDEC’s earlier work in South Korea with the Korean Dietetic Association and ongoing work with the Korea Food Forum and the Korean Society of Sarcopenia in establishing new contacts and building relationships with food and nutrition academics and food and beverage industry personnel.
Market Summary
GDT losing streak ends at five auctions; China comeback may be slower than expected
At the June 7 trading event, the Global Dairy Trade (GDT) Price Index recorded its first increase since March 1, as Index gains in SMP, butter and AMF offset declines in WMP and cheddar. While the gains did not match futures market expectations heading into the auction, the Index still rose 1.5% and market sentiment does appear to have taken on a more bullish tone.
The easing of lockdowns in Shanghai, Beijing and other major Chinese cities created expectations for a renewal of China’s more aggressive presence at the auction, but it was Southeast Asia that really stepped up and drove gains. Southeast Asian buyers purchased the most SMP and WMP, topping volumes at both the May 17 auction and the same auction the previous year—a good sign for global demand. Southeast Asia also increased AMF, butter and cheddar buying.
China uncertainty
North Asia (China) still finished second but expectations for an immediate major Chinese consumer demand rebound appear to be fading. Media reports out of China point to strained household budgets caused by a month or more (depending on the city) of extreme lockdown, lost paychecks and drained savings accounts.
Chinese consumers also are reportedly uneasy about a potential return to quarantine conditions given China’s zero-tolerance COVID policy and ongoing testing requirements. As of yesterday, parts of Beijing and Shanghai went back on lockdown after a flare up of new cases. More than 2 million people were affected.
In addition to a new round of mass testing related to the new cases, residents must also be tested every 72 hours to do practically anything in public, including using public transportation. Restaurant dining bans are still widespread, and where bans have been lifted, businesses are reporting reduced traffic.
The Chinese government has put together a stimulus plan aimed at boosting the economy, but so far it lacks a major consumer spending component.
A more forceful return of Chinese buyers to the GDT platform looks like it may require additional time. But with prices reduced after five straight auction declines and a muted Northern Hemisphere milk production looking certain, other buyers were more than willing to step up and fill any gap in Chinese demand.
Price changes
SMP gained across all contract periods, with the average winning price rising 3% to US$4,240/MT. It was the first gain since the April 5 auction.
Butterfat outperformed market expectations with AMF rising 2.7% to US$6,201/MT and butter gaining 5.6% to US$6,068/MT. For butter, it was the first increase in seven auctions dating back to March 15.
The WMP average price rose 5.7% to US$4,158/MT, but the WMP GDT Index fell 0.3% due to sharp declines in higher-priced instant WMP in later contracts. With projected WMP auction volumes at six-year lows for the next six months, WMP appears to be on firmer ground than the Index decline would suggest.
Canadian dairy farmers seek milk price hike
Citing “exceptional circumstances,” Dairy Farmers of Canada requested a second hike in farmgate milk prices. The Canadian Dairy Commission already raised the price 8.4% earlier this year. Dairy prices are usually reviewed only once per year. Farmers say a second bump is required this year to offset inflated feed, fuel and fertilizer costs.
Canadian retail groups criticized the request, saying a second price hike would push retail dairy prices to untenable levels for consumers and increase food insecurity. The Commission said it would hold consultations and issue a decision around June 17. (The Canadian Press, 6/4/22)
ALIC sets butterfat, whey tenders
Japan’s Agriculture and Livestock Industries Corp. (ALIC) slated SBS tenders for butter, butteroil and whey for June-September. Dates and volumes are as follows:
- June 16: 900 MT of butter.
- June 23: 1,500 MT of whey and modified whey.
- July 14: 900 MT of butter.
- Aug. 4: 200 MT of butteroil.
- Aug. 25: 900 MT of butter.
- Sept. 15: 900 MT of butter.
- Sept. 22: 1,500 MT of whey and modified whey.
For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410.
Trade Policy
USDEC-NMPF director testifies before Congress on U.S. dairy trade priorities
Co-President and CEO of Associated Milk Producers Inc. (AMPI) and USDEC board member Sheryl Meshke called on Congress to insist that the government pursue additional market access opportunities and address export supply chain delays when she testified this week at a hearing of the Senate Agriculture Committee’s Subcommittee on Commodities.
Calling exports “absolutely essential” to the future of the U.S. dairy industry, Meshke described how major competitors are using robust trade policy to put the United States at a disadvantage in global markets. In order for the U.S. dairy industry to remain competitive, meet foreign demand and continue to benefit from rising overseas dairy consumption, it needs more effective trade policy tools, she said.
Meshke outlined a series of tools and measures that would help facilitate U.S. dairy trade. They included:
- New comprehensive trade agreements with key markets, such as the UK, Japan, Vietnam, Malaysia, Thailand, Indonesia and the Philippines.
- Utilization of additional policy tools such as the Indo-Pacific Economic Framework and Trade and Investment Framework Agreements to advance U.S. export interests.
- Enforcement of existing trade agreements, in particular, the U.S.-Mexico-Canada Agreement.
- Intensified efforts to defend the use of common food and beverage names against the EU’s aggressive campaign to utilize geographical indications to monopolize those names.
- Solutions to address export supply chain delays, including passing the Ocean Shipping Reform Act, expanding existing terminal “pop-up” sites and creating inland pop-up terminal yards, and providing incentives and “fast lanes” at terminals for perishable products like dairy.
- Strong U.S. leadership in global sustainability efforts.
“We need to make full use of every available trade tool—including the Indo-Pacific Economic Framework, the U.S.-Taiwan Initiative, and Trade and Investment Framework Agreements—to improve market access in key export markets,” USDEC President and CEO Krysta Harden said in a joint USDEC-NMPF press release on the testimony. “At the same time, we can’t leave comprehensive trade agreements on the cutting room floor. Exports underpin U.S. dairy’s success in the present and, backed by trade agreements, exports will support the industry’s growth in the future.”
USDEC supports McKalip as chief ag negotiator
President Biden nominated Doug McKalip to be the next Chief Agricultural Negotiator at the U.S. Trade Representative. McKalip has 29 years experience as an agricultural policy leader and trade expert in a variety of roles with USDA. Since March 2021, he has served as Senior Advisor to Secretary of Agriculture Tom Vilsack on all agricultural matters relating to trade, national security, animal and plant health regulations, and a wide portfolio of domestic and international issues.
“Doug has seen firsthand how opening new markets and lowering tariffs on American dairy products have been essential to the success or our farmers, manufacturers and workers,” said USDEC President and CEO Krysta Harden in a joint USDEC-NMPF press release on the nomination. “As Chief Agricultural Negotiator, he will have the opportunity to help us continue to grow and thrive through exports.”
Market Access and Regulatory Affairs
USDEC mission to Brazil seeks to resolve plant registration issues, build relationships, train South America staff
Members of USDEC’s Market Access and Regulatory Affairs (MARA) and Operations teams traveled to Brazil the week of May 23, for a series of meetings aimed at building relationships, resolving regulatory issues and training USDEC’s South American office on USDEC resources.
The trip featured face-to-face meetings and regulatory discussions with officials from the USDA Foreign Agriculture Service (FAS) and the Brazilian Ministry of Agriculture (MAPA) in Brasilia; and the Agriculture Trade Office (ATO) in São Paulo.
At FAS offices, MARA Senior Vice President Jonathan Gardner and Vice President Oscar Ferrara outlined for officials the recent changes in MAPA's plant and product registration system and provided feedback about the most common issues USDEC members are finding when using it. FAS agreed to work with USDEC to educate and assist members in navigating the new registration process and cooperate with MAPA to facilitate quick resolution of issues.
MARA representatives and FAS officials also met with MAPA's Product Registration Division Head Luciana Meneghetti and her staff members. Gardner and Ferrara used the opportunity to highlight the benefits of the new registration system, identify areas of improvement, and offer technical and scientific information about U.S. dairy products exported to Brazil to facilitate MAPA's internal approval process.
At the South American office, MARA Senior Director Eddy Fetzer and Manager Holly DeLidle delivered training on the updated USDEC Export Guide, including new interface capabilities, internal editing practices and information management to best serve USDEC membership. Kari Kwiatkowski, vice president, operations, trained South American office staff on the All-Fraud Prevention and Foreign Corrupt Practices Act to ensure best accounting and financial reporting practices.
May updates for USDEC Export Guide
The Market Access and Regulatory Affairs team updated 39 documents in the USDEC Export Guide in May. Some of the changes include:
Volume 1: Tariffs and Classification
- Japan: Updated to include Regional Comprehensive Economic Partnership tariff reductions.
Volume 2: Import requirements
- Brazil: Updated label registration section to indicate that companies must resubmit prior approvals in the paper-based system online. Instructions are included.
- Egypt: Updated plant and product registration/approval and payment restrictions.
- EU, EU transit certificate, and EU certificates for re-export: AMS issued new guidance on EU certificates, including a revised certificate of conformity (CoC). Exporters should transition to the new CoC ASAP.
- United Kingdom: Updated required health certificates and certificate template.
Volume 3: Compositional standards and labeling
- Argentina: Added front-of-pack requirements to labeling document.
- China: Updated food additives document.
- Colombia: Added the technical regulation on nutrition and front-of-pack nutritional labeling for excessive sodium, sugars and saturated fats (warning seals).
- Egypt: Added new general standard for cheese and updated soft cheese, semi hard cheese and hard cheese standards.
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.
Supply Chain
OSRA vote expected next week
Politico reports that the House will adopt and vote next week on the Senate version of the Ocean Shipping Reform Act (OSRA). The House version was initially included in a larger bill aimed at improving U.S competitiveness with China. However, concerns over timing and potential hiccups in a conference to reach a compromise on the overarching bill led House lawmakers to accept the Senate version of OSRA and vote on it separately.
USDEC is extremely grateful to Reps. Dusty Johnson (R-SD) and John Garamendi (D-CA), who co-sponsored the House version of the bill. We agree with their sentiment that “the House version is stronger, but we don’t want to let perfect be the enemy of the good.”
USDEC believes we need solutions to the supply chain crisis now and cannot wait any longer. USDEC will continue to work with members and the administration to ensure that the Federal Maritime Commission (FMC) uses all the power it has to ensure that U.S. agriculture products are able to fill containers.
Both bills grant the FMC significantly more authority for extensive rulemaking and potential crackdowns. USDEC and NMPF played a role in shaping each and building support for them and have repeatedly issued statements calling for swift passage of the legislation.
Dye fact-finding report makes 12 recommendations to address supply chain crisis
Federal Maritime Commissioner (FMC) Rebecca Dye released her “Final Report for Fact Finding 29”—the results of a two-year investigation into U.S. supply chain problems affecting U.S. exporters and importers. The FMC talked with hundreds of supply chain stakeholders over the course of the investigation, including U.S. importers, exporters, truckers and others. USDEC joined with other agricultural exporters in meeting with Commissioner Dye to voice U.S. dairy concerns over the supply chain constraints.
The report includes 12 recommendations she believes “will provide badly needed clarity and consistency in certain port and supply chain operations.” Those recommendations include:
- A rulemaking to provide coherence and clarity on empty container return practices.
- A rulemaking to provide coherence and clarity on earliest return date practices.
- Enhanced cooperation with USDA concerning container availability and other issues.
- A reinvigorated focus on extreme supply chain equipment dislocations in rail and other facilities across the country.
- Continued support for the new FMC “Ocean Carrier Compliance Program,” including a new requirement for ocean common carriers, seaports and marine terminals to employ an FMC compliance officer.
- A Commission investigation into practices relating to the numerous charges assessed by ocean common carriers, seaports and marine terminals.
No anti-competitive behavior
While providing recommendations to resolve the ongoing supply chain crisis, Dye said she found no evidence of anti-competitive behavior by ocean carriers. High freight rates are the result of supply and demand, complicated by extraordinary demand from U.S. consumers, COVID-19 obstacles and supply chain congestion, the report says.
To download and read the full report, including all 12 recommendations, click here.
The final report builds on Fact Finding 29 interim recommendations issued in July 2021. FMC said it has implemented all those recommendations that did not require legislative action. FMC commissioners still need to adopt the final recommendations before they can be implemented.
“I am eager to work with Commissioner Dye and our colleagues to implement the Final Recommendations, which will guide FMC in keeping big players in the ocean shipping industry accountable,” said FMC Chairman Daniel Maffei. (FMC; World Trade Online, 6/2/22; GCaptain, 5/31/22)
West Coast port contract talks resume
Contract negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) resumed last week after a 10-day stoppage (see Global Dairy eBrief, 5/27/22). Both sides are maintaining a media blackout during the talks and neither explained the postponement.
Journal of Commerce said that the two parties paused talks due to lack of progress. In addition, Journal of Commerce reported that the ILWU is in no rush to conclude negotiations before July 1, when the existing contract expires. The last three contract negotiations dating back to 2002 lasted beyond their respective contract expiration dates, sometimes resulting in work slowdowns.
Industry experts are still optimistic that this year’s negotiations will yield a new contract without worker-initiated slowdowns, despite the reported lack of progress and the contentious history between the ILWU and PMA. (Journal of Commerce, 6/1/22)
West Coast readies for potential import surge
While China’s major cities began emerging from lockdown on June 1, analysts believe it will take weeks or months for manufacturing and port operations to return to normal. Cities like Shanghai, for example, is reportedly maintaining limitations on truck movements in and around the city thereby extending logistical issues that slowed imports and exports over the past two months. The rebound in truck movement remains slow, with traffic at the start of the week only about one-third of its early March level.
It is too soon to tell how the country’s industrial rebound will impact traffic at U.S. West Coast ports, but port leaders expect imports to rise. The Port of Los Angeles was expecting this week’s inbound container volumes to exceed previous year volumes for the first time in two months. The Port of Long Beach is also projecting container volumes to rise heading into July.
In addition to an expected surge in container volume due to China’s post-lockdown ramp-up, port officials say they expect an early peak shipping season. Peak shipping typically begins in mid-August; this year it could start as early as the end of June. (Bloomberg, 6/7/22; The Loadstar, 6/6/22; Reuters, 6/5/22)
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