HIGHLIGHTS: DECEMBER 13, 2024
• USDEC committee meeting recap
• USDEC leads sustainability mission to Europe
• Market Summary: EU, NZ milk prices support output
• Scotland sets sights on supplying fresh milk to Morocco
• Letter urges ILA, USMX back to negotiating table
• EU-Mercosur finalize trade deal; ratification uncertain
• Merger creates new European cheese manufacturer
• Yakult reorganizes China operations
• Company news: a2MC, Nestlé, SADAFCO, Weigang Dairy
Featured
USDEC committee meetings lay out expectations for upcoming year
On Dec. 10-11, the USDEC Trade Policy Committee, Cheese & Consumer Products (CCP) Advisory Group and Market Access and Regulatory Affairs (MARA) Advisory Group met in Washington, D.C., to review current work and plans for 2025. (The Ingredients Advisory Group meeting took place separately in November (see Global Dairy eBrief, 11/22/24))
The Trade Policy Committee led off the trio of conferences the morning of Dec. 10 and featured a series of guest speakers. Ted McKinney, CEO of the National Association of State Departments of Agriculture, shared his thoughts on the agricultural trade outlook under the incoming administration. Alexa Fox, senior legislative assistant for Rep. Jim Costa (D-CA), and Josh Snead, chief trade counsel from the House Ways and Means Committee, provided farm bill and congressional trade policy updates as well as expectations for the coming year’s priorities. In addition, lunch speaker Mark Slupak, deputy administrator, global programs, USDA Foreign Agricultural Service (FAS), reviewed USDEC funding under the Market Access Program (MAP), Foreign Market Development (FMD) Program and Regional Agricultural Promotion Program (RAPP), before providing an overview of U.S. ag and dairy trade and expectations for 2025.
USDEC’s Trade Policy team—Jaime Castaneda, Shawna Morris and Tony Rice—walked the committee through some key recent achievements, including securing new language in the House Generalized System of Preferences (GSP) bill that ensures GSP beneficiaries protect common names like “parmesan.” That bill passed committee and is likely to be reintroduced in the new Congress.
They also provided updates on ongoing work set to continue into the New Year:
- USDEC’s Most Favored Nation (MFN) tariff projects, which are advancing in the UK, China and Taiwan. Members were surveyed on priority markets for additional projects.
- Supply chain issues, including the East and Gulf Coast dockworkers’ contract, the Federal Maritime Commission’s new billing rules, and supply chain security legislation.
- Colombia’s milk powder investigation (see Global Dairy eBrief, 10/4/24).
- The Indonesian school milk project (see Global Dairy eBrief, 11/22/24).
- Strengthening dairy’s role in international food aid products and programs.
- Geographical indications and common names, including significant victories this year in Chile and Singapore (see Global Dairy eBrief, 7/12/24 and 12/6/24, respectively) upholding U.S. rights to use certain generic names.
- Politically-driven nontariff barriers in the EU (antimicrobial regulations), UK (import certification), India (dairy certification and tariffs) and Egypt (halal certification).
- Ongoing trade issues in Latin America, including Brazil (attempts to limit dairy imports), Costa Rica (import questionnaire) and Ecuador (legislation to ban imports).
The CCP and MARA meetings met concurrently after the Trade Policy Committee on the afternoon of Dec. 10, with the CCP meeting picking up again on Dec. 11. The CCP Advisory Group reviewed the 2025 USDEC marketing plan for cheese and other consumer dairy products, with presentations from the USDEC Economics, MARA and the Strategy and Insights departments. Meeting notes will be made available in the coming weeks.
The MARA Advisory Group meeting provided updates on issues the MARA team is currently working on, including country requirements, plant registration and product labeling.
USDEC leads sustainability mission to Europe
This week, USDEC was in Europe with the U.S. Sustainability Alliance (USSA) for a series of meetings with government officials and industry representatives from the UK, the EU and the Netherlands. Nick Gardner, USDEC senior vice president, Sustainability and Multilateral Affairs, led the mission, which sought to enhance collaboration between the U.S. and EU ag sectors in the area of sustainability.
The USSA delegation—which was joined by Jason Hafemeister, USDA acting under secretary, for a portion of the mission—engaged with authorities from the EU and the two countries to exchange sustainability best practices and look for ways to collaborate or achieve mutual recognition.
Left to right: Eric Coronel, director of science and research, Field to Market; Jason Hafemeister, USDA acting under secretary; Theresa Miller, management council, USSA, and chief programs and partnership officer, Food Export Association of the Midwest USA and Food Export USA–Northeast; Rose O'Donovan, editor, Agra Facts; Luc Vernet, secretary general, Farm Europe; Jean Baptiste Dollé, director of Climate, Environment and Resources, IDELE (French Livestock Institute); and Nick Gardner.
What is USSA?
Funded by USDA, USSA is comprised of 28 trade associations and supply chain partners, including USDEC. The group’s purpose is to share insights into U.S. production methods and provide supply chain perspectives and information on members’ sustainability programs. The aim is to showcase continual U.S. efforts to perpetuate the social, environmental and economic sustainability of U.S. land and waterways.
While the EU and U.S. already collaborate on sustainable food production in several forums, USSA is seeking even closer cooperation that enables mutual understanding, facilitates trade flows, and ensures flexibility in approaches based on sound science and best practices.
Areas of improvement
“There is an opportunity for the EU and U.S. to align policies better in ways that increase trade flows and allow us to achieve our shared objective of financially viable, sustainable dairy production,” said Gardner
EU and U.S. agricultural producers share the same drive to increase sustainable food production, but mandating a Green-Deal-like, one-size-fits-all approach that forces countries to comply with strict sustainability requirements as understood in the EU context will not deliver on those goals, the USSA delegation said.
“Appropriate solutions need to be found at the local level,” said Gardner. “Context is everything.”
To that end, the USSA mission engaged with EU stakeholders to share the U.S. commitment to sustainability and how the U.S. food and ag industries, including dairy, are investing in technology and innovation to pursue safe, secure, resilient and practical solutions to climate change.
“U.S. dairy and livestock producers have already made great strides to reduce greenhouse gases and are continuing to strive to find climate-smart solutions to maintain access to all types of nutritious foods for all consumers,” Gardner said.
USSA believes that greater sharing of U.S. achievements and plans—combined with learning EU perspectives—will expand market access, increase collaboration and reduce misconceptions about U.S. ag.
During the UK leg of the mission, the delegation met with members of the House of Lords and House of Commons who serve on the All-Party Parliamentary Group on Science & Technology in Agriculture.
Market Summary
EU, NZ farmgate milk prices continue to climb
Milk production prospects are starting to look up in the EU and remain solid in New Zealand as farmgate milk prices continue to climb, weather moderates and input costs hold relatively steady. The average EU27 raw milk price rose for the fifth straight month in October, increasing 4.2% and crossing €50/100kg for the first time since March 2023. From June-October, prices gained more than 12% and estimates for November point to a further 1.6% increase.
In New Zealand, major dairy processors and analysts lifted forecast 2024/25 farmgate payouts in response to ongoing price strength in Global Dairy Trade auctions. Fonterra, Synlait, Westpac, ANZ and others increased estimates anywhere from NZ$0.50-$1.00/kgMS. Fonterra cited recovering demand in China, ongoing strong purchasing from Southeast Asia and favorable exchange rates as the reasons for the move. If the season ended today, the payout would be a record.
Milk prices in the EU are expected to remain elevated for at least the short term and with the majority of 2024/25 New Zealand milk having been allocated, major moves in the New Zealand farmgate price forecast are likely to be modest.
Conditions suggest ongoing milk production gains in New Zealand (potentially tempered by deteriorating weather) and a rebound in EU27 deliveries in the first half of 2025. The situation in the UK is similar to the EU27, with improving production and rising prices.
Scotland moves to supply fluid milk to Morocco
The Scottish Dairy Growth Board is in talks to begin shipping pasteurized fresh milk to Morocco. Moroccan officials visited Scotland in July to explore potential partnerships. Negotiations are reportedly progressing, with Morocco’s largest agricultural and agri-food company. The potential deal could position Scotland to enter the North African market by mid-2025, and ship more than £150 million (about US$190 million) worth of pasteurized milk annually by 2030. (USDEC Middle East/North Africa Office; Dairy Business Africa, 11/23/24)
Supply Chain
Letter calls for ILA, USMX to go back to negotiating table
A broad coalition of U.S. agricultural groups, including USDEC and NMPF, as well as manufacturers, retailers, restaurants, distributors and other supply chain stakeholders sent a joint letter to the leaders of the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) urging both parties to resume negotiations and remain at the bargaining table until a new dockworkers’ contract is reached. Last month, the ILA and USMX restarted—and quickly broke off—talks to establish a new labor contract covering East and Gulf Coast ports (see Global Dairy eBrief, 11/15/24).
A three-day strike roiled U.S. East and Gulf Coast ports and U.S. trade in October, but a tentative salary agreement sent dockworkers back to their jobs while the ILA and USMX planned to complete the deal. The new deadline for a contract is Jan. 15, 2025. With that deadline quickly approaching and the two sides refusing to re-engage, concerns are rising that another strike may be around the corner.
By all accounts, automation and technology remain the most significant sticking points. The coalition letter says the negotiating table is the only place to resolve the impasse and calls for the two parties to find a compromise.
“It is critical that our ports and terminals have the ability to modernize their systems and processes in order to remain globally competitive and be able to handle the continuing rise of trade volumes, both imports and exports,” the letter states. “Modernization efforts will benefit all parties and are essential to address current and future throughput issues.”
Trade Policy
EU, Mercosur conclude trade deal; ratification faces hurdles
After more than two decades of negotiations, the EU and South America’s Mercosur economic bloc (Argentina, Brazil, Paraguay and Uruguay) finalized a free trade agreement. The EU-Mercosur Partnership Agreement includes several provisions that will facilitate dairy exports from the EU27 to Mercosur, including reduced or eliminated tariffs on cheese, milk powder and other dairy categories, reduced nontariff barriers, and geographical indication protections for more than 350 products, including common name cheeses such as asiago, feta, fontina, gorgonzola and gruyere.
The European Dairy Association commended the deal, saying it would enhance market access, help diversify supply chains and foster investment.
However, while the deal was finalized, it must clear several legislative hurdles on both sides before it enters into force. In addition, France and Poland announced staunch opposition to the pact and Italy is leaning the same way. Together, the three European nations would potentially be large enough to block the deal. All three countries cite concerns over how the agricultural provisions will impact their farmers as the reason behind their disapproval.
Germany and Spain lead the countries backing the agreement.
Apart from EU approvals, Uruguay said Mercosur ratification could take as long as 18 months. (European Commission; European Dairy Association; Bloomberg, 12/6/24; Reuters, 12/6/24)
Company News
Vache Bleue, FFP merger creates new European cheese giant
Belgian dairy businesses Vache Bleue Group and Flanders Food Production (FFP) have merged into a new entity known as European Dairy Co. The new company will have a combined annual turnover of around €500 million (about US$526 million).
Vache Bleue’s distributes its Vache Bleue, Dilea Zero Lactose and Valmartin brands in its home market and France while also producing cheese in Germany and supplying products on a private-label basis. FFP cuts, grates and portions cheese and has “extensive expertise” in private-label products.
Company officials expect the deal will allow the companies to strengthen their market positions and said that further expansion plans are “on the agenda” to increase production capacity of the various sites. European Dairy Co. will operate from the parties’ existing sites in Belgium, France and Germany and retain its current employees. (Just Food, 12/10/24)
Yakult reorganizes China business
Japanese probiotic beverage giant Yakult Honsha is closing its Shanghai manufacturing plant and dissolving its Shanghai Yakult division, a wholly owned subsidiary of Yakult China. Sales operations in the region will transfer to a new Shanghai branch of Yakult China, while production will shift to plants in Wuxi and Tianjin. Yakult Honsha cited the need to improve competitiveness and increase management efficiency as the reasons for the move. (Company reports)
a2 Milk to bolster senior nutrition business in China
In a move to maximize market potential in China, New Zealand-based a2 Milk Co. (a2MC) revealed plans to launch China-label versions of its existing fortified adult milk powder products designed to support the immune system and joint, bone and muscle health. At the company’s annual meeting last month, CEO David Bortolussi said a2MC’s English-label fortified milk powder products were performing well in China and that the company hopes to achieve further growth by introducing Chinese labels of those products into the country’s “thriving but highly competitive” senior nutrition market. He said a2MC is planning to launch new products targeting the seniors market next year. (Food Navigator Aisa, 12/3/24)
Nestlé and Swiss Confederation program helps Nigerian youth develop skills
One way Nestle raises its profile with consumers and authorities in developing markets around the world is through involvement in social programs. As part of its global Nestlé Needs YOUth program, the Swiss food giant recently awarded 20 young Nigerians who completed their Technical Training program in Agbara with highly recognized City & Guilds certifications.
The Nestlé Technical Training Program in Nigeria is a collaboration with the Swiss State Secretariat of Migration (SEM) designed to help younger generations reach their potential and support economic growth by offering opportunities for skill development and employment. It aims to enhance the employability of young Nigerians by providing them essential skills in mechanical, electrical and automation engineering. The program, which was launched in 2013, includes 18 months of intensive theoretical and practical training at a dedicated learning center in Nestlé’s Agbara factory. To date, it has graduated close to 230 trainees, with 98% securing employment at Nestlé Nigeria. (Company reports)
Company briefs
Saudia Dairy & Foodstuff Co. (SADAFCO) is reviving its expansion plans in Egypt following the resolution of the country's currency crisis and the reopening of letters of credit, according to its general manager of exports. He said SADAFCO is in the process of selecting an accredited distributor to begin exporting its products to Egypt in 2025. … China’s Weigang Dairy opened its new $78-million manufacturing plant in Nanjing, Jiangsu Province. The facility operates 12 production lines, producing a variety of fluid products, including pasteurized milk, fermented milk, mild-based beverages and ESL milk. Weigang also operates two large dairy farms (holding 15,000 cows) within 10km of the facility. … In the face of national efforts to increase food self-reliance in Saudi Arabia, Almarai Co., the country’s largest dairy company, announced expansion plans worth 18 billion riyals (about US$5 billion) to grow the seafood, poultry and red meat categories in the country. The company said it is building new domestic seafood and beef/lamb production facilities that could be up and running in two years and will also increase poultry production by up to 70% by 2026. (USDEC Middle East/North Africa Office; USDEC China office; Zawya, 12/4/24; Bloomberg, 12/3/24)
In Case You Missed It...
U.S. Dairy Exporter Blog
Market analysis, research and news subscribe hereUSDEC Twitter feed
Follow us here.
