HIGHLIGHTS: JANUARY 6, 2023
• November U.S. export results
• India updates health certificate requirements
• MARA and Ingredients advisory groups meet in February
• Market Summary: increasingly bearish
• China copes with COVID surge
• ALIC butter tender set for January
• Brazil Dairy and Products Annual
• December updates to USDEC Export Guide
• Baladna considers building in Algeria
• Company news: Milk Specialties Global, Fonterra, AMPI, Nestlé
Featured
U.S. dairy exports increase 9% in November
U.S. dairy suppliers posted another strong month in November, with export volume (milk solids equivalent) rising 9% over the previous November. It was the eighth straight month of year-over-year growth, making another record year a certainty when December numbers are posted on Feb.7.
U.S. dairy export value grew 23% to $798.9 million, lifting the year-to-date total to $8.88 billion. U.S. export value through 11 months is already $1.18 billion over the full calendar-year value of 2021.
Cheese and whey lead
The reliable growth of cheese (+13%, +4,282 MT) and whey products (+17%, +8,018 MT) kept U.S. export volume on its positive trajectory in November. U.S. supplier saw cheese gains across geographies, with sales up to Japan (+56%, +1,424 MT), Australia (+56%, +1,432 MT), Mexico (+15%, +1,370 MT), and the Middle East/North Africa (+81%, +1,204 MT).
U.S. whey exports increased 17% (+8,018 MT) in November, as a huge increase to China (+71%, +11,948 MT) helped offset declines in other regions. WPC80+ continues to rebound after a slow start to the year, with November volume up 31% (+1,231 MT). Japan continues to lead the growth with volume up 68% (+631 MT) for the month. (For more on cheese and whey trends, read this week’s U.S. Dairy Exporter Blog post, “New year, same story: U.S. dairy exports keep growing.”)
Key results apart from cheese and whey include:
- U.S. butter exports jumped 160% (+5,192 MT) in November, largely on the strength of a 268% increase in volume (+3,656 MT) to Canada.
- U.S. NFDM/SMP fell 3% (-2,185 MT). A 36% increase in exports to Mexico (+9,701 MT) could not make up for significant declines to South America (-61%, -5,907 MT) and Southeast Asia (-18%, -4,325 MT).
- U.S. lactose exports rose 9% (+3,189 MT), led by a 55% increase to Japan (+2,065 MT) and an eight-fold increase in volume to Brazil (+1,107 MT).
For more on November trade results, visit the U.S. Exports section of USDEC Data Hub and experiment with the interactive charts.
India updates food safety health certificate scope
The Food Safety and Standards Authority of India (FSSAI) has updated the list of products requiring its model health certificate beginning Jan. 1, 2023, for a fourth time. The latest iteration updates the three earlier versions that were all dated Dec. 28, 2022.
The version of the list that was posted on the FSSAI website on Jan. 6, 2023, adds whey proteins to the list, in addition to lactose which was added in an earlier update. Therefore, it is now expected that FSSAI will demand its model dairy certificate for lactose of HS 1702.11, whey proteins of 3502.20 and protein concentrates of 2106.10, as well as for basic dairy products of Chapter 4 (milk powder, whey powder, butter, cheese, etc.) and ice cream of HS 2105.
At this time, USDEC is under the impression that lactose for pharmaceutical purposes will not require this food safety model certificate; however, we would caution members that FSSAI continues to make changes to the scope of products for which its certificate is required.
As a reminder, the U.S. government (USG) has not agreed to endorse this FSSAI model certificate, which requires feed attestations inconsistent with World Organisation for Animal Health's (WOAH) science-based guidance and demands that the USG attest to meeting Indian regulations. This FSSAI certificate is now required in addition to the Department of Animal Husbandry and Dairying (DAHD) certificate, which the USG will also not endorse. Please see Volume 2 of the USDEC Export Guide for additional details and links to these certificates.
Please also note that FSSAI is expected to begin enforcing its plant registration requirements on Feb. 1, 2023, and milk and milk products, nutraceuticals and infant formula are all within the scope of this requirement. The USG is currently evaluating the feasibility of assembling the required plant lists. Additional details are also in Volume 2 of the USDEC Export Guide.
USDEC is aware that members have significant interest in exporting to India and will continue to work closely with the USG to find solutions to the market access challenges. Please contact Sandra Benson at sbenson@usdec.org with any questions.
Events
USDEC’s MARA and Ingredients advisory groups to meet in February
USDEC’s Market Access and Regulatory Affairs (MARA) Advisory Group (MAG) will meet Feb. 14 in Houston, Texas. The MAG meeting will provide regional updates on regulatory issues in key export markets, ongoing MARA projects, logistics challenges and other market access issues.
On the following day, Feb. 15, the USDEC Ingredients Advisory Group (IAG) will hold its winter meeting. The IAG convenes at least twice a year to give members a chance to help shape USDEC’s strategic priorities and ensure that those priorities effectively align with commercial business interests.
USDEC will provide hotel information and an agenda as they become available. For more information on the MARA Advisory Group, please contact Jessica Smith at jsmith@usdec.org. For additional information on the IAG, please contact Vikki Nicholson-West at vnicholson-west@usdec.org.
Market Summary
Markets looking increasingly bearish
The Global Dairy Trade (GDT) Price Index started the year on a down note, dropping 2.8% at the Jan. 3 auction. Prices for all major products declined across all contract periods, with the exception of a flat result in Contract 3 for cheddar.
Improved milk production (the rebound in Europe, steady gains in the U.S., and expectations for an improved back shoulder to the New Zealand season) coupled with ongoing demand headwinds (China’s COVID challenges, inflation and global economic uncertainty, and the prolonged war in Ukraine) have created a wholly bearish pricing atmosphere.
North Asia (China) dominated the auction this week and was the top buyer in WMP, SMP, butter, AMF and cheddar. On the plus side, North Asian SMP, butter, AMF and cheddar buying topped both the previous auction and the same auction the previous year. Middle East demand for SMP and butter improved, as did African purchases of WMP and butter and South and Central American demand for WMP. While Southeast Asia increased purchases of WMP, the region was quiet for all other commodities.
Buyers across the board were unwilling to pay the last auction’s prices much less bid price levels up. As a result, the average winning SMP price declined 4.3% to US$2,838/MT, the lowest since November 2020. AMF fell 5.1% to US$5,395/MT. Butter fell for the fourth straight auction, dropping 2.8% to US$4,479/MT. And WMP declined “only” 1.4% to US$3,208/MT, the lowest level since December 2020.
China struggling with COVID challenge
According to China’s own National Health Commission, as many as 248 million people contracted COVID-19 in the first 20 days of December. Nearly 37 million likely contracted it in a single day—Dec. 20—the agency said. To put that into perspective, the previous global record for most cases in a single day was 4 million, recorded on Jan. 19, 2022.
COVID-19 is sweeping through China as most health experts predicted it would. The numbers mentioned above are inexact because China is no longer officially tracking cases. In addition, it is keeping a tight lid on the number of COVID deaths. The country claims only 25 COVID deaths from Dec. 1 through the New Year, a number belied by reports from funeral homes and crematoriums across the country. Part of the reason for the reported low death count also stems from the government’s decision to significantly narrow the definition of what is considered a COVID death.
While there are signs that new cases numbers may have peaked in Beijing, the same cannot be said for much of the rest of the country. In addition, even after China emerges from this initial post-zero-tolerance-policy wave, health experts predict a second wave in March, possibly bigger than the first.
Consumption drags
In terms of dairy consumption, conditions remain challenging. Businesses are reporting major portions of the workforce ill at home with COVID. Other people are staying home to avoid the virus. Restaurants, hotels and shops have had to close due to manpower shortages. South China Morning Post reported that, as online purchases of food and medicine surged to meet the needs of those quarantining in their residences, the country was running out of delivery drivers to bring people their orders.
While consumption should pick up as China emerges from the current wave the government is also acting to boost demand moving forward. In late December, China’s central bank promised to increase targeted stimulus measures for key areas and industries damaged by the pandemic, in part to “support the expansion of domestic demand.” The government said it planned to increase household incomes “through multiple channels,” but it has yet to provide details. (Reuters, 1/3/23; Bloomberg, 1/3/23,12/30/22,12/23/22; Financial Times, 1/3/23; Channel News Asia, 1/2/23)
ALIC slates January butter tender
Japan’s Agriculture and Livestock Industries Corp. (ALIC) announced plans for a new SBS butter tender for 1,000 MT for Jan. 26. Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) will announce tender plans for the remainder of the fiscal year (through March 31, 2023) after it reviews the supply situation. For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410.
One more USDA Dairy and Products Annual
At year-end, USDA released the Brazil Dairy and Products Annual for 2022. Most of the agency’s country-by-country dairy analyses were published in October and early November. To download the Brazil report, click here.
Market Access & Regulatory Affairs
USDEC updates 139 Export Guide documents in December
USDEC’s Market Access and Regulatory Affairs (MARA) team updated or revised 139 documents in the USDEC Export Guide last month. Changes include:
Volume 1: Tariffs and Classification
- Bahrain: Updated tariff codes for yogurt, sweetened condensed milk and milk-based beverages.
Volume 2: Import Requirements
- China: Included announcement that starting Jan. 8, 2023, COVID testing will no longer be required for monitoring cold-chain and non-cold-chain goods.
- Egypt: Eliminated legalization requirements; included notice that halal certificate requirement is delayed until March 31, 2023.
- New Zealand: Updated certificate requirements for products re-exported to Australia; updated container cleanliness declaration and advanced cargo reporting.
- Vietnam: Updated the Mandatory Testing/Inspection Upon Entry section to indicate that milk and milk products will be tested for salmonella, and animal feed will be tested for foot and mouth disease. Dairy products no longer require a certificate of origin.
Volume 3: Compositional Standards and Labeling Requirements
- Colombia: Incorporated new microbiological criteria into all applicable standards. Added a link to the front-of-pack labeling requirements.
- GCC: Posted revisions to the following standards: edam cheese, frozen yogurt, gouda cheese, fermented milk products, milk fat products, mozzarella cheese, lactose, sweetened condensed skimmed milk analogue, and sterilized milk.
- Taiwan: Added a new packaging standard, and updated milk and milk powder 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.
Company News
Baladna eyes Algerian dairy project
Qatari milk producer and dairy processor Baladna Food Industries is exploring a large-scale dairy project in Algeria. Late last year, Baladna representatives and officials from Algeria’s Ministry of Agriculture visited a model farm project in the west of the country and presented plans for a 25,000-acre dairy farm and processing facility. The company is conducting a feasibility study on the soil and climate in the area, and depending on the results, it could launch the project by the beginning of 2024.
Founded in 2017 in Qatar, the vertically integrated dairy company has been on a global expansion streak over the past few years. It has farm-to-bottle dairy projects in various stages of development in Malaysia, Indonesia and the Philippines, and last year purchased a minority stake in Egyptian dairy, juice and cooking product company Juhayna Food Industries. (USDEC Middle East/North Africa office)
Mergers, acquisitions and joint ventures
California-based private equity firm Butterfly purchased Minnesota-based Milk Specialties Global. Current Milk Specialties CEO, Dave Lenzmeier, will continue to lead the business. Lenzmeier said he expects the acquisition will enable the company “to achieve a new level of growth.” … The European Commission approved the creation of a new joint venture between Dutch food and nutrition company Royal DSM and New Zealand’s Fonterra Co-operative Group. The new company, Tasman, will be headquartered in the Netherlands and will develop, produce and market fermentation-derived dairy proteins. (Company reports; Agriland, 12/28/22)
Company news briefs
A Jan. 2 fire destroyed a butter storage room at the Associated Milk Producers Inc. (AMPI) plant in Portage, Wisconsin. Firefighters contained the blaze but not before butter runoff flowed into other areas of the plant and into storm sewers and a neighboring canal. Operations were temporarily halted on Jan. 3, and AMPI told Dairy Herd Management that cleanup would begin as soon as possible. … U.S. food giant Mars Inc. completed its new ice cream factory in Guangzhou, China, two months ahead of schedule. … Nestlé began testing its first animal-free milk product in California. The drink, branded Cowabunga, was developed with California-based food bio-tech start-up Perfect Day using precision fermentation technology. … Mead Johnson China launched a new adult nutrition brand called Agijoy. The product is designed for consumers over 50 and reportedly contains 23 nutrients (it is rich in protein and selenium) and lactoferrin. (USDEC China office; Company reports; Dairy Herd Management, 1/3/23; WMTV, 1/2/23; FoodBev.com, 12/22/22)
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