• Economic news for China

• India delays health certificate implementation

• Link to All-Member Webinar recording

• Membership renewal notice

• Market Summary: GDT starts new year on positive note

• USDEC releases International Demand Analysis with October data

• EU milk output drops 2% in October

• Japan butter tender set for Jan. 11

• U.S.-Mexico rail crossings reopened 

• Ongoing issues Red Sea/Suez Canal shipping

• USDEC’s December Export Guide updates

• Pelzer announces retirement

• Company news: Saputo, Domino’s, Synlait, A2 

 

China looking to boost economy as growth expected to slow in 2024
China continues to make moves to jolt its economy as forecasters suggest GDP growth will slow in 2024. In a televised speech on New Year’s Eve, President Xi Jinping said China would deepen reforms to shore up confidence in the economy and “achieve stable and long-term economic development.”

While the final numbers are not in yet, China’s economy grew about 5.2% in 2023. That could drop to about 4.6% this year, according to a Nikkei Asia survey of 25 China specialists. One of those experts, S&P Global Ratings, also offered a potential downside scenario that would see growth as low as 2.9%.

China says it is taking measures to address the issues, including accelerating actions to spur consumption growth and speed demand. The country’s interim report on its 14^th Five-Year Plan said the government plans to “prioritize the restoration and expansion of consumption, stabilize bulk consumption and promote consumption of services.” The report did not provide specifics. The head of the state economic planning body also said that the country planned to accelerate reforms aimed at expanding the country’s middle-income bracket.

To tackle a multi-year property slump that is contributing to the economic underperformance, China recently injected $50 billion into its banking system, leading to speculation that the central bank might be ramping up financing for housing and infrastructure.

But economists are quick to point out that even if these and other measures provide some economic support to China, they may be insufficient to tackle the range of challenges facing the Chinese economy. Citing additional challenges like geopolitical risk and unfavorable demographics, Goldman Sachs said it expects Chinese economic growth to slow to about 3% over the next decade. As the world’s largest dairy importer, China’s economic outlook will impact global dairy demand and all suppliers. (Bloomberg, 1/2/24; Reuters, 12/31/23, 12/27/23; Business Insider, 12/28/23; Nikkei Asia, 12/26/23)

India delays certificate implementation for six months
India's Department of Animal Husbandry and Dairying (DAHD) issued an Office Memorandum on Jan. 3 delaying the implementation of its new integrated dairy health certificate through June 30, 2024. This integrated dairy health certificate contains attestations from both the current DAHD certificate and proposed and withdrawn Food Safety and Standards Authority of India (FSSAI) model certificate.

The announcement should mean that the status quo holds for now and that the 2019 DAHD dairy certificate will be required until such time as the new integrated certificate is enforced.

The U.S. government (USG) cannot endorse the DAHD model certificate or the new integrated health certificate given the problematic nature of various attestations on them. USDEC continues to work with the USG to explore paths forward on the longstanding certificate impasse.

The situation related to certification in India remains fluid and may change at any time. Any shipments to India continue to be at the exporter's own risk. Please contact Sandra Benson at sbenson@usdec.org with questions.

USDEC All-Member Webinar recording now available
On Dec. 13, USDEC held a one-hour-and-15-minute webinar to review (and vote on) the 2024 Operating Plan and hold new leadership elections. A recording of that event is now available online for members who missed the live version or those who might want to watch it again. To access the recording, click here. If you have any problems accessing the video, please contact Weston Abels at wabels@usdec.org.

Did you receive your USDEC membership renewal notice?
USDEC emailed annual membership renewal notifications in December. If you haven’t received your invoice or if you have any questions about dues, please contact Weston Abels at wabels@usdec.org. The membership renewal fee deadline is the end of March.

GDT rises for third straight auction
The Global Dairy Trade (GDT) Price Index rose 1.2% at the Jan. 2 auction, marking the third increase in a row and extending a positive price trend that began in September 2023. But the gains significantly undershot rosier futures market activity heading into the event (raising questions about continued growth in upcoming auctions), and in the case of SMP, the result contradicted expectations.

The average winning SMP price fell nearly 1% to US$2,613/MT, defying pre-auction futures market activity suggesting a 3.1% increase. SMP has been up and down in the US$2,600-$2,700/MT range now since mid-October.

In contrast, WMP rose for the eighth time in the last nine auctions, increasing 2.5% to US$3,290/MT. While it fell short of futures market expectations of a nearly 5% increase, WMP is now at its highest price on the GDT since February 2023.

Butter rose 2.1% to US$5,514/MT, its highest price since July 2022. AMF posted its ninth straight gain, inching up 0.2% to US$5,595/MT.

Cheddar, arguably the most inconsistent product from auction to auction, dropped 2.4% to US$4,165/MT. Mozzarella held steady at US$3,960/MT.

Demand varied by product, with North Asia (China) leading WMP, butter and cheddar purchasing, Southeast Asia topping all SMP buyers (and increasing volume from both the previous auction and same auction last year); and the Middle East taking the most AMF.

Overall, the results inject a note of caution into the current market dynamic.

USDEC International Demand Analysis with October data ready for download
Year-over-year (YOY) global dairy trade rose 1.1% in milk solids equivalent (MSE) terms in October, according to the latest USDEC International Demand Analysis. While only a small gain, it marked the first YOY increase since June and cut the year-to-date (YTD) deficit to only 0.3%.

Notably, trade increased without the aid of China. Chinese dairy import demand continued to lag in October, down 16%. But big gains in other key markets, including Southeast Asia (+6%), the Middle East/North Africa (+10%) and South Asia (+24%), helped erase the Chinese decline.

Heading into 2024, China’s ongoing economic challenges, inflation in emerging markets and slow economic growth in many developing markets may continue to dampen dairy trade growth prospects in the first half. For the complete analysis, download the report here.

The International Demand Analysis 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).

YOY EU milk production falls nearly 2% in October
The impact of nine months (January through September) of falling farmgate milk prices is really starting to show in Europe. After slipping nearly 1% in September, (YOY) EU27+UK milk deliveries dropped 1.9% in October, the largest decline in more than two years. While year-to-date (YTD) deliveries were still up 0.2% through October, that gain has slipped significantly in just two months.

October declines were widespread and, in some cases, substantial. YOY Irish milk deliveries plunged nearly 13% compared to the previous year, while French output dropped 4.5%. The UK (-3.1%), the Netherlands (-2.4%) and Italy (-2.0%) recorded significant declines as well. No. 1 producer Germany held steady. Poland was the sole major supplier to post a solid gain: +1.5%.

Softening EU27+UK milk production in the second half of the year was anticipated but has taken longer than expected to materialize. Average farmgate prices began to rebound in October and November but remained more than 20% down on the elevated pricing of 2022. Moderating input costs should help EU27+UK farmer pocketbooks, but a quick return to growth would be surprising.

ALIC slates January butter tender for next week
Japan’s Agriculture and Livestock Industries Corp. (ALIC) announced an SBS tender for 364 MT of SMP on Jan. 11, 2024. The tender is for fiscal 2023. Tender plans after January will be announced by MAFF after reviewing the market demands and supply situation. For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410.

U.S. authorities reopen railway bridges at U.S.-Mexico border
U.S. Customs and Border Protection (CBP) reopened rail bridges at El Paso and Eagle Pass, Texas, on Dec. 22. CBP had closed the bridges for five days, citing a surge in migrants crossing the U.S.-Mexico border. The closures stalled delivery of more than half-a-billion-dollars in freight, including agricultural exports.

U.S. ag suppliers, Union Pacific, BNSF Railway and the Association of American Railways strongly criticized the closures and their negative effects on the supply chain, including the threat to Mexico’s food security. (In late December, nearly 50 U.S. agricultural associations, including USDEC and NMPF, cosigned a letter from the Ag Transportation Working Group to Department of Homeland Security Secretary Alejandro Mayorkas asking for an immediate reopening of the border crossings.)

Union Pacific said it was working as quickly as possible to restore normal operations but that it would take some time to work through the five days of backlogged shipments. BNSF issued a temporary permit embargo for southbound trains moving through the crossings to limit congestion as it cleared the backups. But USDEC has heard that border crossings are gradually returning to normal and major delays have eased. (USDEC Mexico office; Railway Age, 12/22/23; CNBC, 12/20/23)

Global shipping disruptions continue in Red Sea
Shipping and container companies from around the globe are continuing to halt or reroute vessels away from the Suez Canal after Yemen’s Houthi militant group began targeting vessels in the Red Sea area in November. The disruption is adding significant time and cost to efforts to transport goods from Asia to Europe and North America’s east coast, as vessels avoid attacks by using alternative routes like the much-longer trip around the southern tip of Africa.

In addition to transit times up to 25% longer than using the Suez Canal, these diversions are causing shippers to charge additional shipping fees, higher insurance rates and, in some cases, war risk surcharges. Redirecting ships around Africa’s Cape of Good Hope is also expected to add up to $1 million in extra fuel costs for every round trip between Asia and northern Europe. Vessels rerouting around Africa are also finding it increasingly difficult to refuel and restock as they overwhelm the continent’s ports.

Shippers say they are monitoring the constantly evolving situation. Some companies, including Denmark’s Maersk and France’s CMA CGM, had planned to resume trips in the area with the support of a U.S.-led military task force organized to provide security. But those plans were cancelled after one of Maersk’s ships was attacked last weekend. Industry experts estimate roughly 300 ships, or nearly 20% of global capacity, have changed course or intend to.

At press time, a group of more than a dozen countries, including the United States, issued what officials described as a final warning to the Houthi Yemeni rebel group to cease it attacks on shipping or “bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region’s critical waterways.” (Wall Street Journal, 1/3/24; Reuters, 1/2/24; Bloomberg, 12/28/23)

 

USDEC closes out 2023 with 140 Export Guide document updates in December
USDEC’s Market Access and Regulatory Affairs (MARA) team updated or revised 140 documents in the USDEC Export Guide last month. Changes include:

Volume 1: Tariffs and Classification

• China: The Tariff Committee published an extension on the MFN tariff exemption for permeate for feed through July 31, 2024.

Volume 2: Import Requirements

• Colombia:S. Dairy Plant Registration updated to reflect ICA’s publication extending plant registration datelines.
  
  
• Egypt: Halal Certificate section updated to reflect the delay in the halal requirement through the end of 2024.
  
  
• India: Updated to reflect the Indian government’s delayed implementation of its new model health certificate until June 30, 2024.
  
  
• Malaysia: Transportation Requirements section reflects the Malaysian government ban of Israeli-affiliated vessels.

Volume 3: Labeling and Product Standards 

• Dominican Republic: Added new standards for cheese in brine, cream and prepared cream, and milkfat products; revised labeling, cheddar cheese, raw milk, and milk and dairy product terms documents.
  
  
• Korea: Updated food additives.
  
  
• Thailand: Added new standards for filled milk, pesticide and veterinary drug residues in foods, and use of probiotic microorganisms in foods; updated food additives 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.

 

Midwest Dairy’s Pelzer announces retirement
Molly Pelzer, CEO of Midwest Dairy, officially announced her retirement, which will be effective in March 2024. Pelzer joined Midwest Dairy in 1984 as a program director working with schools and dairy nutrition programs and served in a variety of leadership roles ever since. She has also served on USDEC’s Operating Committee. “Over my time at Midwest Dairy, I have seen checkoff strategies evolve and foster new ideas that make a difference for dairy farm families,” said Pelzer. “It has been a privilege to work for dairy farmers in each of my roles in dairy checkoff, and I will continue to be a dairy advocate in my retirement.”

Midwest Dairy’s board has engaged a search firm to guide the selection of the next CEO for the organization.

Company news briefs
Lino A. Saputo, president and CEO of Saputo Inc., was appointed to the Order of Canada, an honor created by the Canadian government in 1967 to recognize “people who make extraordinary contributions to the nation.” Saputo founder Emanuele (Lino) Saputo was previously appointed a Member of the Order of Canada in 2012. … Michigan-based pizza chain Domino’s plans to add more than 1,100 new stores per year under its recently announced five-year growth plan called “Hungry for More.” Over the long term, Domino's believes the international business could grow to 40K locations, outnumbering U.S. stores 4-to-1. … Two of Africa’s most prominent e-commerce companies—Wasoko and MaxAB—plan to merge. Together, the groups have an estimated customer base of 65 million people across eight countries: Egypt, Morocco, Kenya, Tanzania, Rwanda, Uganda, Zambia and DR Congo. … An arbitrator was appointed to help New Zealand’s A2 Milk and Synlait Milk come to an agreement over A2’s termination of an exclusive supply deal with Synlait (see Global Dairy eBrief, 9/22/23). (USDEC Middle East/North Africa office; Company reports; Reuters, 12/21/23; Seeking Alpha, 12/7/23)

 

• Check out USDEC's 2023 Global Dairy Business Year-in-Review
• Meet Alex Peterson and Becky Nyman, recently elected as USDEC chair and vice chair  
• In radio interview, USDEC chair Alex Peterson talks about sustainability  
• USDEC honors NMPF President and CEO Jim Mulhern
• Video shows how Idaho dairy farm is working to reduce methane emissions