HIGHLIGHTS: January 10, 2025
• Calling for change to Canadian dairy policy
• East, Gulf Coast port strike averted
• USDEC ExEx Awards
• U.S. dairy exports decline in November
• FDA extends comment period for plant registration
• APHIS fee update
• USDEC works with ATO Guangzhou on ingredient education program
• Members, staff on trade and ag advisory committees
• Member opportunity: join the USDEC booth at IAlimentos and FoodTech Summit
• Market Summary: China imports rise for first time in a year
• GDT starts 2025 slowly
• EU farmers eye more protests
• December USDEC Export Guide updates
• Railroads look to avoid contract brinksmanship
• No end in sight to Red Sea shipping troubles
• Company news: Saputo, Danone, Lifeway, Ellsworth, Junlebao, Domino’s
Featured
Joint U.S.-Australia-New Zealand letter urges collective action to curtail Canadian dairy trade-distorting practices
Organizations representing the dairy industries of the United States, Australia and New Zealand sent a joint letter to trade and agriculture leaders of all three countries urging “collective and coordinated action” to address Canadian dairy policies that increasingly distort and undermine world dairy markets. USDEC, NMPF, the Australian Dairy Industry Council and Dairy Companies of New Zealand asked their agriculture and trade ministers to use “all the tools available to you” to address the problem.
Specifically, the letter cites ongoing concerns over Canadian exports of dairy protein products. Canada’s supply management system generates a surplus of dairy solids nonfat (SNF) that is not absorbed into domestic markets.
“Canada’s milk pricing mechanisms are purposefully designed to incentivize the disposal of that surplus on global markets through the intentional underpricing of dairy proteins,” the organizations note.
The system has created a situation in which Canadian dairy processors access SNF at prices significantly less than the Canadian cost of production, leading to the unfair export of a range of dairy protein products at artificially low prices, unfairly undercutting the competition, depressing markets and displacing longstanding commercial relationships. It also undermines the limited market access opportunities outside suppliers have to Canada.
The policy conflicts with several of Canada’s trade commitments, including the U.S.-Mexico-Canada Agreement (USMCA), the organizations note. The letter expresses concerns that the scheme has been so successful (export volumes are rising) that it will encourage investment in new processing capabilities to expand the harm already being caused.
The SNF scheme is just the latest in Canada’s long history of evading its dairy trade obligations. “The problem is not going away, and curbing the harm and ongoing risk that unfair and anti-competitive Canadian exports create for our industries is now a matter of urgency,” the letter concludes.
Through the past year, USDEC has urged the U.S. government to tackle the growing problem of Canadian dairy protein exports evading USMCA disciplines designed to reign in the global sales of those products which benefit from Canada’s artificially low pricing policies. In parallel, USDEC continues to stress the importance of using the upcoming USMCA review process to address Canada’s mishandling of its USMCA dairy tariff-rate-quotas in ways that impair U.S. exporters’ access.
Port strike averted; ILA and USMX agree on new dockworkers’ contract
On Wednesday night, the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reached a tentative agreement on a new six-year master contract. The deal averts a strike across East and Gulf Coast ports that was expected to start next week on Jan. 16, the day after last year’s contract extension expired.
The agreement must still be ratified by port employers and by tens of thousands of ILA members. The two sides agreed to continue operating under their current contract until union representatives can vote and USMX members can ratify the terms.
USDEC had been urging a resolution to the contract dispute for many months, most recently sending letters in December to President Biden and President-elect Trump calling on them to exert their influence on the negotiations (see Global Dairy eBrief, 12/20/24).
The new agreement would reportedly guarantee union jobs when certain technologies are implemented and includes—but is not limited to—the semi-automated cranes that had been a public focal point since the two sides reached a tentative wage deal late last year. The deal also preserves the 62% pay raise agreed to at the time and continues to bar fully automated terminals. (The Wall Street Journal, 1/8/25; Bloomberg, 1/8/25; The Loadstar, 1/9/25)
Elevated global dairy prices weigh on demand and U.S. exports in November
Year-over-year (YOY) U.S. dairy exports fell 9% in November in milk solids equivalent (MSE) terms. The size of the November shortfall dragged U.S. year-to-date (YTD) MSE volume back into the red. U.S. dairy exports were down 0.3% through the first 11 months compared to the same period the previous year.
U.S. suppliers have now posted two straight down months after what was a very strong third quarter in which U.S. dairy MSE exports rose 7% compared to the previous year. The aggregate U.S. volume shortfall the past two months after such a strong Q3 is emblematic of what has been a rollercoaster year from the start.
The latest decline stems in large part from slowing demand. Global demand eased in November, as dairy commodity prices (as measured by the UN Food and Agriculture Organization Food Price Index) rose to the highest level in more than a year. The U.S. was not alone in facing the demand headwinds created by elevated prices. While EU27 November data was unavailable at press time, New Zealand dairy export volume also fell for the month (-5% on a product volume basis).
Product performance varied
Product-by-product results varied widely. The most significant bright spot for the U.S. remained cheese, which posted its 11th consecutive YOY increase (+2%, +928 MT). While that was the smallest YOY cheese increase this year, U.S. suppliers were facing strong numbers from November 2023. November 2024 volume—39,503 MT—was actually right in line with the average monthly export volume of the previous five months (40,197 MT). Strong shipments to Latin America fueled the gains.
U.S. butterfat volume soared in November (+126%, +2,479 MT) as U.S. suppliers benefitted from the price gap with the EU and New Zealand, as well as strained European supplies.
On the downside, YOY U.S. NFDM/SMP exports dropped 20% (-13,277 MT) as shipments declined to nearly every major buyer: Southeast Asia -43% (-9,325 MT); Mexico -6% (-2,767 MT); South America -28% (-1,148 MT); and the Middle East/North Africa -34% (-748 MT).
In contrast, the November shortfall in low-protein whey (-11%, -4,926 MT) came almost solely from one market: China. The No. 1 U.S. whey buyer saw sales slip 24% (-5,345 MT).
For a deeper dive into November results, read the U.S. Dairy Exporter Blog story, “U.S. dairy exports drop 9% in November.” In addition, visit the USDEC Data Hub under the Research & Data tab at usdec.org and experiment with the interactive charts.
FDA extends comment period on proposed plant registration fee
On Dec. 23, the FDA announced that it would grant an extension to the comment period to the Nov. 8 Federal Register notice proposing fees for plant registration in the Export Listing Module (ELM) and soliciting general feedback on the ELM plant registration system. The new deadline is Feb. 21, which is the date that USDEC requested in our extension request. The fees would apply to the country export lists that FDA maintains for Chile, China, EU/UK and India.
Any members with feedback on the proposed fees for plant registration—which may be as high as $175 per plant, per country list, per year—or thoughts on any other general questions that FDA has posed on the ELM process should send feedback to Sandra Benson at sbenson@usdec.org by Jan. 31. See USDEC’s Nov. 14 Member Alert for more information on the original Federal Register notice and questions on which FDA is seeking input.
APHIS raises certificate fees
On Jan. 8, the Animal and Plant Health Inspection Service (APHIS) announced that it would be issuing adjusted user fee rates for the costs of providing certain goods and services, including export certification of animal products. APHIS will post the new fees on its website Friday, Jan. 10; they will also be announced in the Federal Register the same day. The new fees will be effective on Jan. 10 as well. The fee for export certificate endorsement is expected to increase to $101, which is nearly double the current rate of $101. See USDEC’s Jan. 8 Member Alert for more information.
USDEC teams with ATO Guangzhou on permeate education program
In the last quarter of 2024, ATO Guangzhou partnered with Sino-American Baking School (SABS) on a multi-week training program to deepen junior bakers’ knowledge of baking with U.S. ingredients. USDEC jumped at the chance to take part in the event along with two cooperators from other U.S. agricultural sectors: U.S. Wheat Associates and American Pistachio Growers.
USDEC believes the bakery sector is among the best to drive dairy permeate use in foods. The USDEC Ingredients team has been working to expand the use of dairy permeate in China, with a strong focus on bakery, since authorities approved it for human food use in 2020.
The weeks-long class and demonstration took place at the Guangdong Teachers College of Foreign Languages and Arts (GTCFLA) from September through mid-December. SABS is part of GTCFLA.
USDEC provided information, instructional materials and videos and application experience to the ATO and the SABS technical team, which developed eight bakery products using U.S. milk permeate and nine using U.S. whey permeate. During the three plus weeks of instruction, 15 instructors outlined U.S. dairy permeate and application knowledge to over 200 students, often referencing materials provided by USDEC and learnings from their own application work. The teaching culminated on Dec. 12 in a skills contest in which students used the insights gained to create products containing the featured ingredients.
Presenters repeatedly praised the functional benefits of permeate in the applications. USDEC thanks Agri-Mark, Agropur and Grassland Dairy Products for supplying the dairy permeate used during the class.
In addition to engaging with students through the class, the college published two articles detailing the event on the GTCFLA website and the College of Catering and Tourism website (also a part of GTCFLA).
An instructor provides insights on U.S. dairy permeate use in bakery products suited to Chinese consumer tastes.
The audience prepares to watch the skills competition. Front row (center, wearing black) is Fiona Chen from the USDEC China office and far right is JonAnn Flemings, director, ATO Guangzhou.
Bakery students take part in the skills competition to demonstrate what they learned about U.S. dairy permeate, wheat and pistachios.
One of the students in the skills competition explains her dish to the audience.
This marked the seventh time USDEC participated in marketing programs organized by the various ATO offices in China. Four of those were bakery-specific while the other three covered a broader spectrum of foods with a focus on local tastes. Here’s a quick look at the other events:
- The 27th China Bakery Exhibition (CBE), May 10-12, 2024, organized by ATO Guangzhou (see Global Dairy eBrief, 7/19/2024).
- Discover U.S. Baking–Ingredients and Trends, June 6-7, 2024, organized by ATO Beijing (see Global Dairy eBrief, 7/19/2024).
- Bake for the Future, Discover U.S. Ingredients, Aug. 23-25, 2024, organized by ATO Shenyang (see Global Dairy eBrief, 9/6/2024).
- U.S. Ingredient Showcase and Tasting for Pre-prepared Food Producers, Sept. 24, 2024, organized by ATO Guangzhou. The event introduced ingredients and recipes to about 40 people from the local catering sector. A buffet tasting allowed participants to sample a pancake made using U.S. milk permeate.
- U.S. Ingredients in Cantonese Delicacies–Chef Seminar, Nov. 18, 2024, organized by ATO Guangzhou. Master Cantonese chefs developed dishes using U.S. food ingredients and shared their insights with 70 leading chefs in the region, including a lobster macaroni dish using U.S. milk permeate. The feedback from the chefs was that U.S. milk permeate can replace full cream evaporated milk to save cost.
- From U.S. Ingredients to Yunnan Cuisine, Dec. 5, 2024, organized by ATO Guangzhou. About 30 decision makers from the local catering sector attended. Chefs demonstrated several dishes featuring U.S. food ingredients in local cuisine, including Sichuan Pepper Flavor Beef Shortbread made with U.S. milk permeate.
USDEC members, staff contribute trade expertise to U.S. government
On Wednesday, USDA and USTR announced appointments and reappointments for seven Agricultural Trade Advisory Committees (ATACs), including representatives from several USDEC member companies. Committee members consult and advise USDA and USTR on U.S. policy that impacts global access to valuable markets.
DairyAmerica’s Patti Smith was reappointed to the ATAC for Trade in Animals and Animal Products, while Hilmar Cheese Co.’s Kyle Jensen was a new appointee to the same committee. Abbott Nutrition’s Jason Grove was reappointed to the ATAC for Processed Foods.
In addition to the new and reappointed members of the committees, three USDEC staff are in the midst of their current terms. USDEC President and CEO Krysta Harden was named to the Agricultural Policy Advisory Committee (APAC) last year; USDEC Executive Vice President, Policy Development, Jaime Castaneda continues to serve as chair of the ATAC for Trade in Animals and Animal Products; and USDEC Executive Vice President, Trade Policy and Global Affairs, Shawna Morris serves on the ATAC for Trade in Processed Foods as well as the Industry Trade Advisory Committee (ITAC) for Intellectual Property.
Events
Sign-up for Expo IAlimentos and Food Tech Summit & Expo trade shows in 2025
Registration opens today to co-exhibit within USDEC’s booth at two key ingredient trade shows in Latin America this year. Member booth space is available at both Expo lAlimentos (six spaces available) in Bogota, Colombia, July 30-31, and the Food Tech Summit & Expo (eight spaces available) in Mexico City, Oct. 8-9.
Both shows provide high-visibility platforms for members to showcase their U.S.-produced dairy ingredient portfolios and engage with customers. Spaces are expected to fill quickly, so please reach out as soon as possible to indicate interest.
There are no fees to participate in these shows, but members are responsible for any travel and shipping costs. Please contact Suzanna Stohr at sstohr@usdec.org to indicate interest in booth space for either or both shows. USDEC will provide interested members with an activity participation agreement form (completion and submission thereof will be required to confirm the space). Space is limited, and USDEC will confirm participation on a first-come, first-served basis.
Market Summary
YOY Chinese dairy imports rise for first time in a year
After 11 straight months of year-over-year (YOY) regression, Chinese dairy imports finally posted a gain. It wasn’t a big increase—and it is premature to say it’s the start of a trend—but November volume of major products (not including fluid) inched up 1.3% over the previous year. On top of that, YOY fluid milk and cream imports rose 5%—a rare increase in a product category that has been in long-term decline since late 2021.
An uptick in Chinese purchasing has been expected, based on domestic market trends (weakening local milk production growth and declining milk powder inventories) and China’s more active position on the Global Dairy Trade platform. It finally came in November, foreshadowed by New Zealand’s October export results that showed strong gains in WMP and butterfat shipments to China.
YOY Chinese WMP import volume jumped 25% (+5,556 MT) in November, the first increase since February. YOY butterfat purchases increased 67% (+4,736 MT). WMP and butterfat purchases from New Zealand rose by 5,357 MT and 4,338 MT, respectively.
Unfortunately, other key categories did not fare as well in November. Despite extremely low domestic inventories, Chinese SMP imports fell 41% (-9,659 MT)—the 13th consecutive YOY decline.
Cheese, which set a volume record in 2023 and is, by all accounts, a category poised for long-term growth, has struggled significantly over the past seven months, falling 10% (-10,277 MT) since April. Only one month posted a gain in that span: September, when volume rose 6% compared to the previous year. China's YOY November cheese import volume fell 17% (-2,810 MT).
New Zealand’s November export numbers suggest China may see modest improvement in SMP and potentially in cheese in December, along with continued strong gains in butterfat. YOY New Zealand cheese exports to China inched up 1% in November, SMP grew 18% and butterfat soared 53%. WMP, however, may revert to the negative growth that characterized most of 2024 (and for that matter 2022 and 2023 as well).
GDT Price Index begins 2025 with a 1.4% decline
The Global Dairy Trade (GDT) Price Index fell 1.4% at the Jan. 7 auction as China stepped back again from its more aggressive stance in the second half of 2024. North Asia (China) purchased only 32% of total product sold, well down on the 38% it purchased at the previous auction, which itself was a significant drop from the 40%+ it had been averaging for the previous several months.
For the second straight auction, China ceded the position of top buyer of WMP to Southeast Asia. And while it remained the lead purchaser of SMP, butter and cheddar, it purchased less of all three products than at the previous auction. Taken together with softer Chinese WMP purchases indicated by New Zealand’s November export results (see above) as well as ongoing concerns about the country’s economy and restocking beginning efforts looking like they are beginning to stem inventory depletion, the question is whether China is returning to the second-tier GDT role it held for much of the first half of 2024 or if this is just a holiday slowdown.
The average winning WMP price fell 2.1% to US$3,804/MT and SMP dipped 2.2% to US$2,682/MT (its third straight decline).
Cheese and butter fared better. Cheddar and mozzarella rebounded after three consecutive auction declines. Cheddar rose 1.0% to US$4,728/MT and mozzarella increased 3.6% to US$4,173/MT. Butter increased 2.6% to US$6,815/MT.
EU farmers look to restart protests
Convoys of farmers headed to Paris last weekend to reignite protests against what they say is unfair competition and over-regulation. Farmers across the continent held similar protests in several European countries earlier this year, successfully getting the bloc to step back (at least temporarily) from some of its environmental regulation plans. The EU-Mercosur trade agreement finalized in December (see Global Dairy eBrief, 12/13/24) rekindled farmer ire. French farm association officials are slated to meet with French Prime Minister Francois Bayrou on Jan. 13 to discuss their complaints. It remains to be seen whether the new protests will spread to other members of the bloc and endure. (Reuters, 1/5/24)
Market Access and Regulatory Affairs
USDEC makes 92 Export Guide document updates in December
The MARA team updated or revised 92 documents in the USDEC Export Guide last month. Here are some highlights:
Volume 1: Tariffs and Classification
- Argentina, Brazil and Uruguay: The EU-Mercosur Association Agreement status indicates that negotiations between the EU and Argentina, Brazil and Uruguay were finalized. The official ratification processes of the involved countries are ongoing.
Volume 2: Import Requirements
- Chile: The Geographical Indications (GIs) section notes the implementation of GIs in the EU-Chile Advanced Framework Agreement.
- EU: The Packaging Requirements section notes that the EU published a BPA ban in December. The implementation date and other impacts are noted.
- Ukraine: The Mandatory Testing/Inspection Upon Entry section includes updated information on testing percentages as well as the minimum and maximum of items in a shipment that can be physically inspected and the most frequent reasons for clearance delays.
Volume 3: Labeling and Product Standards
- Chile: The Cheese compositional standard notes the implementation of GIs in the EU-Chile Advanced Framework Agreement.
- Morocco: Added shelf-life and storage requirements to cheese, fermented milk, ice cream and milk and minor formatting requirements to other compositional standards.
- Singapore: Singapore updated “A Guide to Food Labeling and Advertisements” in November 2024. In the Labeling link, see Section 2 General Requirements for the link to this guidance document.
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
CSX, Union Pacific take the reins in railroad labor deals
After the last round of national bargaining dragged on for three years (and a national strike was narrowly averted) before freight railroads and unions reached a labor deal, CSX and Union Pacific have taken a different approach for the next round of contracts. Rather than following the traditional pattern, in which the major freight railroads are represented by a group called the National Carriers’ Conference Committee (NCCC) that establishes national deals with each of the 12 major rail unions, the companies began to negotiate directly with the various unions that represent their workers early last year. As a result of the early negotiations, which were initiated by CSX CEO Joe Hinrichs, both companies reached some tentative agreements months before the previous contract expires. The NCCC began its national round of collective bargaining in November. The group said it reached three ratified agreements at the end of 2024, and it looks forward to “building on this momentum in the new year.” (Wall Street Journal, 12/27/24; CNBC, 11/1/24)
Insider: Red Sea disruptions likely to continue well into 2025
As shipping disruptions in the Red Sea caused by Houthi maritime attacks continue, industry insiders said this week that the changes about to be phased in by major container lines indicate detours around the Cape of Good Hope will likely continue until after the second half of this year. Vespucci Maritime CEO and partner Lars Jensen told The Loadstar he questions whether carriers will be willing to make additional network changes any time before August “at least” and that even if the Red Sea Crisis were resolved, the diversion of ships around the Cape would likely remain in place for a further six months. He added that the risks and disruptions associated with using the Suez Canal to move goods between Europe and Asia—especially potential general average declarations related to a Houthi attack—will cause shippers to stick to the longer Africa route until it is clear there is no more risk. Meanwhile, Egyptian officials announced last week that the ongoing attacks and disruptions cost Egypt at least $7 billion in Suez Canal revenue in 2024. (The Loadstar, 3/1/25; Bloomberg, 12/26/24)
Company News
Danone accuses Lifeway of violating investor agreement
After France-based dairy giant Danone submitted two unsuccessful offers to acquire Illinois-based kefir and probiotic products manufacturer Lifeway Foods, Danone said it now plans to file a lawsuit accusing Lifeway of breaching its fiduciary duties to shareholders by allowing its CEO to “engage in self-dealing waste and value destruction.” Danone said Lifeway’s decision to award CEO Julie Smolyansky nearly 300,000 shares of Lifeway stock violates an agreement dating back to 1999, when Danone made its first investment in Lifeway, that requires Danone’s consent before making such a move. In a company statement, Lifeway said the company rejected Danone's acquisition offers because they severely undervalue the company, and that the 1999 stockholders’ agreement between the two companies violates Illinois law and should be nullified. Lifeway also said it is not opposed to a sale at a price that more accurately reflects its true value. (Company reports; Food Dive, 1/6/25)
Mergers, acquisitions and joint ventures
New York-based Avance Investment Management and Florida-based AUA Private Equity Partners LLC announced a significant investment in Tropical Cheese Industries LLC, a New Jersey-based producer of Hispanic cheese, meat and other food products. A company statement said the founding Mendez family and the management team of Tropical Cheese will retain a significant minority interest in the company. … Chinese dairy manufacturer Junlebao Group and beverage franchise chain Mixue announced a deal to build a dairy farm in an effort to jointly expand their reach, drive product innovation and improve their supply chains. The farm will reportedly hold 8,000 Holstein dairy cows and is expected to start operations in June. (USDEC China Office; Company reports; Beijing News Media, 12/19/24)
Company Briefs
Canadian dairy company Saputo announced that COO Frank Guido has stepped down from his role for personal reasons. In the interim, President and CEO Carl Colizza will assume the duties of COO in addition to his current responsibilities. … Wisconsin-based dairy co-op Ellsworth Cooperative Creamery announced the appointment of Kevin Pieh to CEO effective Dec. 18, 2024. Pieh was elevated from his role as interim CEO, which he assumed in September 2024 after serving as CFO since 2022. Prior to joining Ellsworth Creamery, he held leadership positions with Land O’Lakes in the Dairy Foods, Corporate Finance, and Truterra divisions. … Domino’s Pizza announced it reached 1,000 operating outlets in China in November and that it plans to open 300 to 350 outlets annually in the coming two years. It currently operates in 33 Chinese cities. … After three consecutive quarters of declining customer traffic, Minneapolis-based ice cream brand Häagen-Dazs said it will accelerate its pace of shutting down poor-performing physical stores in China and shift efforts to retail and catering to boost profits. The company, which owned 402 outlets in 90 cities in China as of mid-December, will reportedly focus more on ice cream cones and seek new online retail channels, such as social media retail via TikTok or Red Note. (USDEC China Office; Company reports)
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