HIGHLIGHTS: AUGUST 30, 2024
• USDEC submission refutes Colombia’s CVD claims
• Finding solutions to the container break-in problem
• Sen. Baldwin commends USTR on common names, urges enforcement
• Michigan dairy farmer stands up for exports in USTR meeting
• Canadian rail strike update
• Member opportunity! Espacio Food & Service show in Chile
• Market Summary: USDEC’s latest International Demand Analysis
• Fonterra focuses on proteins with Studholme expansion
• Nestlé questions New Zealand’s emissions claims
• Idaho Milk Products to enter ice cream category with new plant
• Company news: Synlait, Arla, Symrise
Featured
USDEC submits forceful response to Colombian CVD investigation
This week, USDEC submitted its response to Colombia’s countervailing duty (CVD) investigation on alleged U.S. subsidies for U.S. milk powder exports (see Global Dairy eBrief, 7/19/24). The submission strongly refutes Colombia’s assertions that U.S. dairy exports are being unduly subsidized and causing harm to the domestic Colombian dairy industry.
USDEC cited several arguments against Colombia’s claims. They include the following:
- The benefit of the alleged subsidies to U.S. dairy producers identified by the Colombian Investigative Authority is calculated incorrectly. For instance, in its investigation report, Colombia included programs that were no longer in force by 2023 or whose inclusion ran counter to WTO rules.
- The methodologies for 1) the transfer of the alleged subsidies to U.S. milk powder producers and 2) the conversion factors from fluid milk to milk powder as proposed by the investigative authority are incorrect.
- Due to different physical characteristics and end uses, Colombia fails to meet the similarity requirement that milk powder imports originating in the United States are comparable to fluid milk produced in Colombia.
- There is no evidence that the domestic Colombian industry has suffered injury as a result of imports of milk powder originating in the United States.
The submission is USDEC’s latest move in an extensive, cross-organization effort to dispute Colombia’s politically driven investigation. Earlier this month, USDEC and NMPF helped coordinate letters to the U.S. and Colombian governments criticizing the investigation (see Global Dairy eBrief, 8/16/24). As part of that effort, the organizations supported a letter from the bipartisan House Agricultural Trade Caucus to Colombian ambassador to the United States outlining why the investigation is unfounded and encouraging the dairy industries in both countries to work together on mutually beneficial policies. In parallel to that congressional message, USDEC and NMPF sent a joint letter to USDA Secretary Tom Vilsack and USTR Katherine Tai urging them to prepare all available tools to respond forcefully should the investigation rule against the U.S. position.
USDEC continues work to resolve container break-in issue
On Monday, Tony Rice, USDEC director, Trade Policy, spoke with the New Democrat Coalition and Homeland Security Investigations in two separate meetings about the ongoing rash of container break-ins.
First, Rice joined representatives from UPS, Garmin and Amazon to inform the New Dem Coalition of the impact of container break-ins on their businesses. The meeting follows the introduction of the bipartisan Safeguarding Our Supply Chains Act legislation in June (see Global Dairy eBrief, 6/28/24) and is part of ongoing efforts to move that legislation forward.
Rice explained the problems facing dairy as a result of the robberies. Even though the thieves are not seeking dairy (or stealing dairy shipments) when they break into containers, the damage they inflict on the dairy supply chain and exports is significant.
Dairy and other foods are frequently collateral damage. When container seals are broken by thieves looking for products to steal, it compromises food safety. Broken seals are often discovered at ports, forcing the supplier to cover the cost of returning and destroying the product. The situation also risks the reputation of U.S. exporters as reliable suppliers, potentially leading to loss of business.
After the New Dem meeting, Rice participated in a virtual meeting with Homeland Security Investigations’ National Lead Development Center (NLDC). He joined as part of a coalition of supply chain service providers, rail representatives and other trade associations. The meeting discussed how implementation of the Safeguarding Our Supply Chains Act would work in practice in terms of reporting break-ins and coordinating Homeland Security Investigations’ response.
USDEC and NMPF have met with multiple government agencies this year to address the break-in problem and will continue to work to support the legislation and ensure resolving the issue remains a priority.
Baldwin commends USTR for common name agreement, urges enforcement
Sen. Tammy Baldwin (D-WI) sent a letter to USTR Katherine Tai commending the U.S. government on the agreement between the U.S. and Chile to safeguard the use of certain common terms for cheeses and meats (see Global Dairy eBrief, 7/12/24). Calling it “a significant step forward for the agriculture sector,” Sen. Baldwin said it would “help protect market access for U.S. cheese and meat products in this important FTA market.”
The letter, which USDEC helped draft, then goes a step further, asking for two additional actions:
- To ensure the agreement is rigorously enforced once it goes into effect.
- To establish a comprehensive USTR policy dedicated to proactively protect U.S. suppliers’ market access rights to export products using common food and beverage names.
The U.S.-Chile agreement is a positive move in the fight to defend U.S. use of common names. “To build on the momentum of this success, the United States needs to establish a clear and consistent policy of proactively defending the market access of producers of these products,” the letter states.
Dairy farmer affirms importance of exports at panel with McKalip
Michigan Milk Producers Association (MMPA) dairy farmer Corby Werth participated in a roundtable discussion this week at Michigan State University with Doug McKalip, chief agricultural negotiator in the Office of the United States Trade Representative.
USDEC worked with MMPA to draft talking points prior to the meeting to emphasize the important role exports play in the success of U.S. dairy farmers and highlight ways in which USTR and the U.S. government could help advance U.S. dairy export opportunities moving forward. That includes:
- Pursuing new trade agreements that improve U.S. dairy access in key markets such as the UK, Taiwan and in Southeast Asia and help U.S. suppliers keep pace with competitors in the EU and New Zealand.
- Holding Canada accountable to its U.S.-Mexico-Canada Agreement (USMCA) obligations, as the United States gears up for the 2026 USMCA sunset review.
- Proactively defending the right of U.S. suppliers to use common cheese names on the world stage.
- Enforcing existing trade agreements, an issue that is particularly timely given a growing wave of anti-trade protectionism in Latin America typified by Colombia’s CVD investigation.
Canada labor board intervenes in railroad shutdown
After a labor dispute and resulting work stoppage triggered a shutdown of Canada’s rail networks late last week, the Canada Industrial Relations Board imposed a federal government order directing Canadian National Railway (CNR) and Canadian Pacific Kansas City (CPKC) to resume operations effective Monday, Aug. 26. The order also imposes binding arbitration to reach collective agreements and forbids work stoppages during the arbitration process.
Both companies agreed to comply with the order. The Teamsters Canada Rail Conference, the union representing the rail workers, also said it would abide by the decision but plans to appeal the ruling in a federal court. The union said the rail companies are looking for concessions on issues related to crew scheduling, rail safety and fatigue management in the new agreement. (Supply Chain Dive, 8/24/24; Wall Street Journal, 8/24/24)
Events
Member opportunity: exhibit at USDEC booth at Chile’s Espacio trade show
USDEC invites members to participate in the upcoming Espacio Food & Service Trade Show in Santiago, Chile. The event, which runs from Oct. 1-3, is expected to attract more than 30,000 food industry professionals this year from importers/distributors, wholesalers, retailers, foodservice operators, and culinary specialists based in Chile and across the region.
The show represents an opportunity for U.S. cheese suppliers to showcase their product portfolios to thousands of potential customers and partners, network with key industry stakeholders, and gain insights into Latin American markets.
At press time, USDEC had four spaces available in its booth for members. Space will be allocated on a first-come, first-serve basis. Members interested in participating in the USDEC booth should sign up via this form no later than Tuesday, Sept. 3.
Market Summary
USDEC’s latest International Demand Analysis finds global dairy trade down 0.5% halfway through 2024
Year-over-year (YOY) global dairy trade fell 5.5% in June, as Chinese demand continued to lag, and the Middle East/North Africa (MENA) recorded its second straight month of double-digit losses. Year-to-date (YTD) global dairy trade was down 0.5% in the first half, according to USDEC’s latest International Demand Analysis, in what has been an up-and-down year on a month-to-month basis.
June marked the second consecutive month where all three major suppliers—the U.S., the EU and New Zealand—posted YOY declines. The U.S. fared the best, falling only 0.8% versus -10.7% for the EU and -9.5% for New Zealand.
Southeast Asia remains the biggest bright spot in terms of demand. With the region’s economic recovery gaining steam, dairy shipments to Southeast Asia jumped 15% in June—the eighth straight YOY gain dating back to October 2023. Buying trends have put Southeast Asia in position to pass China and MENA as the largest dairy market in the world.
For more on June results, download the International Demand Analysis. The monthly report is packed with charts, graphs and commentary, providing members with a forward-looking glimpse at world markets from a U.S. exporter’s point of view. The report analyzes demand in the key markets for cheese, NFDM/SMP, whey (HS Code 0404.10) and WPC80+, and also includes shorter summaries for lactose, butterfat and WMP. For questions and comments, please reach out to William Loux (wloux@usdec.org) or Stephen Cain (scain@nmpf.org).
Company News
Fonterra expanding Studholme site to increase protein ingredients offerings
Fonterra Co-operative Group announced an investment of about NZ$75 million (about US$47 million) to expand its Studholme, South Island, site to create a hub for high-value proteins. A company official said increasing its manufacturing capacity for functional proteins will “enable us to continue to strengthen our offerings with existing customers as well as attract new business.” The site expansion will begin next month, with the first product due to come off the line in 2026. (Company reports)
Nestlé says New Zealand dairy must reduce emissions to remain attractive
An official from Switzerland-based Nestlé disputed New Zealand’s claim to have the lowest global carbon footprint, Bruno Spire, Nestlé’s chief dairy buyer, said the country’s dairy industry must move faster to reduce its carbon emissions in order to meet the dairy buyer’s needs. While speaking at a New Zealand industry conference about its path to zero emissions, Spire said, “Without achieving the reductions on dairy, Nestlé will not be able to achieve its overall decarbonization objectives.” He cited New Zealand’s pasture-based farming model as a challenge to significantly reducing emissions, noting that North American and European dairy farmers had “more opportunities to significantly reduce their emissions.” But he also identified opportunities for New Zealand, including improving per-cow efficiency and productivity. (Farmers Weekly, 8/20/24)
Synlait announces recapitalization plan
After settling its partnership dispute with The a2 Milk Co. earlier this month (see Global Dairy eBrief, 8/23/24), Synlait Milk has resolved its funding issues. The New Zealand-based dairy company said it will raise nearly NZ$218 million (about US$136 million) from its two main shareholders, a2 Milk and China’s Bright Dairy, to avoid insolvency. Under the proposed deal, the two companies will pay well over Synlait’s recent market price, with Bright Dairy upping its stake in the company to more than 65% and a2 Milk maintaining its roughly 20% stake. The capital raised from the deal will be used primarily for debt reduction. (Radio New Zealand, 8/21/24; Dairy News, 8/20/24)
Idaho Milk to enter ice cream sector; build new facility
Idaho Milk Products is building a new $200-million ice cream and powder blending facility at its Jerome, Idaho, campus. Construction on the 183,000 sq. ft. plant will commence in the next two months, with full commercial production starting by May 2026. The ice cream venture, a new product line for the company, will focus on premium indulgent and functional recipes in both bulk and novelty formats. The blending operation will support the ice cream business and create capabilities to provide custom formulations to both existing and new customers. Idaho milk said the project is a natural extension of its existing model and has the potential to create one of the world’s most sustainable ice cream businesses. (Company reports)
Arla’s half-year report sees continued demand growth amid volatility
In what it called a “robust” first half, Arla Foods revenues declined “slightly” €6.6 billion (about US$7.4 billion), but net profit grew to €167 million (about US$187 million), a big jump compared to the first half of 2023. The Denmark-based dairy co-op said its strategic brands had a volume-driven revenue growth of 4% in the first half of 2024 compared to a decrease of 6% in the first half of 2023, with the growth spearheaded by its Lurpak, Puck and Arla brands.
Looking ahead, Arla said it expects geopolitical tensions and economic uncertainty will lead to continued market volatility. And despite the potential for increased retail dairy prices (due to rising commodity prices), it predicts the positive trend in consumer purchasing from the first half of 2024 will persist, particularly in Europe, where inflationary pressures are easing and wages are rising. Arla said it anticipates conditions will translate into a continued upturn in demand for dairy. (Company reports; Just Food, 8/28/24)
Company briefs
In a move to enhance production capabilities and operational efficiency to strengthen its position in the Chinese market, German chemicals company Symrise expanded its F&B powder blending plant in Jinqiao, a district of Shanghai. The expansion includes the installation of a state-of-the-art blender in the seasoning plant to upgrade existing manufacturing capabilities. (Company reports)
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