HIGHLIGHTS: APRIL 26, 2024
• March Chinese dairy imports
• HPAI update
• USDEC takes part in USDA trade mission to India
• New USDEC research examines dairy vs. plant-based sustainability messaging
• Supply chain resilience linked to improved market access
• Feedback wanted on USDEC membership meeting
• Member opportunity! USDA accepting applications for Colombia mission
• Member opportunity! Three China ingredient events on deck
• Telling the U.S. dairy sustainability story on Earth Day
• Market Summary: NZ, EU27+UK milk output fall
• Ireland and Denmark make GHG regulatory decisions
• Arla buys Volac whey business
• General Mills to slash dairy emissions
• Company briefs: Lactalis, Camelicious, Chipotle
Featured
Chinese exports continue to struggle
Chinese dairy imports posted their worst year-over-year (YOY) decline in more than a year in March. The volume of major products fell 17% (-29,387 MT), and that does not include a 12% decline in fluid milk and cream and a 62% plunge (-21,087 MT) in infant formula. Demand fell for every significant dairy product category (except for AMF and WPC80+), as uncertain Chinese economic growth and steady domestic dairy production gains continue to limit imports.
At 147,810 MT, it was the smallest March import volume since 2019. The biggest YOY decreases came in NFDM/SMP (-32%, -12,063 MT), low-protein whey (-14%, -7,781 MT) and WMP (-15%, -5,687 MT).
In NFDM/SMP, the EU, Australia and the U.S. all faced double-digit declines for the month, with the EU suffering the largest volume loss. Purchases from the EU plummeted 74% (-7,165 MT). Imports from Australia fell 56% (-3,626 MT). While the U.S. YOY decline was larger in percentage (86%), it came off a smaller base and volume fell 2,619 MT.
In WMP, China’s top supplier, New Zealand, felt the brunt of the decline, with YOY imports down 19% (-6,693). In low-protein whey, the EU took the biggest hit, as volume fell 22% (-4,364 MT). Purchases from the U.S. dropped 5% (-1,150 MT) in March, but U.S. market share of Chinese low-protein whey imports rose to more than 50%.
Cheese, one of the few categories where Chinese imports grew in 2023, has now recorded back-to-back months of YOY declines. March cheese imports fell 7% (-1,107 MT), after a 17% drop (-2,146 MT) in YOY volume in February. The United States was one of only a handful of suppliers that saw Chinese cheese import growth in March. China purchases from the U.S. rose 44% (+364 MT). That being said, the total U.S. volume was only 1,183 MT, and we remain a distant No. 4 in cheese import market share behind New Zealand, the EU and Australia.
Through the first quarter, China’s total dairy imports were down nearly 60,000 MT compared to January-March of 2023. That does not include fluid milk and cream and infant formula, and it has not been adjusted for Leap Year.
Better-than-expected economic performance in the first quarter provides some optimism that the Chinese government’s moves to boost the economy might be starting to pay some dividends. But the economic rebound has yet to show up in consumer dairy purchasing, and many questions remain as to whether the economy can continue its recovery momentum given ongoing challenges in the Chinese real estate sector and signals of potential faltering already showing in the economic production numbers for the month of March itself.
HPAI update
Highly Pathogenic Avian Influenza (HPAI) continues to make news headlines. The latest official messaging from the U.S. government reaffirms the safety of the U.S. dairy supply.
On Tuesday, FDA issued a 4-page statement regarding HPAI and the collective activities being undertaken to ensure the continued effectiveness of the federal-state milk safety system. Key highlights from the statement are as follows:
- FDA confirmed that some samples of pasteurized milk at retail tested positive for inactive viral particles. Based on available information, pasteurization inactivates the virus, however, the process is not expected to remove the presence of viral particles.
- The viral particles do not pose a threat to human health. “To date, we have seen nothing that would change our assessment that the commercial milk supply is safe.”
- FDA has been evaluating milk from affected animals, in the processing system, and on store shelves. They are completing a large representative national sample to better understand the extent of these findings. Because the findings do not represent actual virus that may be a risk to consumers, the FDA is further assessing any positive findings through egg inoculation tests, a gold-standard for determining viable virus.
On Wednesday, USDA’s Animal and Plant Health Inspection Service (APHIS) announced mandatory testing for HPAI for interstate movement of cattle and mandatory reporting.
We will remain on alert as we anticipate there will be further developments in the coming days and weeks.
Castaneda in India on USDA ag mission
USDEC Executive Vice President, Policy Development and Strategy, Jaime Castaneda represented U.S. dairy on the USDA agricultural trade mission to India this week. USDA Under Secretary for Trade and Foreign Agricultural Affairs Alexis Taylor led the mission, which included USTR Chief Agriculture Negotiator Doug McKalip and a delegation of officials from 47 U.S. agribusinesses and 11 state departments of agriculture.
Castaneda continues to pursue USDEC’s long-running goal of restoring U.S. dairy market access to India and to cultivate relationships with allied groups to collaborate on issues that impact global dairy consumption and trade. He took part in a series of meetings with Indian officials, including the leaders of the Indian Dairy Association, the secretaries of India’s Ministry of Fisheries, Animal Husbandry and Dairying and Ministry of Health Food Safety and Standards, as well as several importers of dairy products to discuss how to advance dairy trade with the U.S.
Alexis Taylor and Jaime Castaneda on the USDA agricultural trade mission to India this week.
USDEC’s Castaneda met with leaders from the Indian Dairy Association to explore areas where the U.S. and India could work together on issues affecting global dairy consumption and trade.
USDEC research report explores differences in dairy vs. plant sustainability messaging
USDEC’s Strategic Insights team released a new report exploring the differences in sustainability messaging between dairy and plant-based dairy alternatives in global markets. The project had several objectives, including understanding the extent to which sustainability marketing motivates consumer purchasing and discerning which sustainability claims are most impactful.
The report offers insights on:
- How brands position themselves.
- Consumer perceptions of dairy versus plant sustainability.
- Market-specific summaries for 13 countries with recommendations on how U.S. suppliers can tailor their messaging to maximize impact.
The report is available free to USDEC members. Please click here to download a copy.
Comments highlight important role of comprehensive trade agreements in supply chain resilience
On April 19, USDEC and NMPF submitted joint comments in response to a March request from USTR for input on promoting supply chain resilience. Supply chain resilience is paramount for the U.S. dairy industry, which is why USDEC has worked extensively with Congress, the Department of Transportation, Department of Agriculture and Federal Maritime Commission on improving U.S. laws and regulations related to the flow of dairy products along the export supply chain. (USDEC Director, Trade Policy Tony Rice also has been invited to testify at a USTR public hearing on supply chain resilience on May 3.)
Within USTR’s remit, USDEC’s comments stressed that the emphasis on resilient supply chains is not just about maintaining operational continuity. It’s also about securing and expanding American dairy exporters’ global footprint in a sustainable and profitable manner—to the benefit of American farmers and workers throughout the industry.
Comprehensive trade agreements play a crucial role in promoting resilience by securing and expanding the U.S. dairy industry’s global footprint, thereby cementing U.S. dairy’s role as a vital supplier source in international dairy supply chains.
USTR asks several questions in its request for comments. The USDEC/NMPF response outlines how comprehensive trade agreements contribute to the answers to many of those questions, including the following:
- Comprehensive trade agreements coupled with robust WTO disciplines have proven to offer the best opportunity to open foreign markets to U.S. dairy products.
- Ensuring the U.S. remains an attractive global location for producing and exporting goods is the best way to ensure growth in dairy production and manufacturing remain in the United States. Comprehensive trade agreements contribute to that outcome.
- By reducing foreign tariffs and other trade restrictions, comprehensive free trade agreements play an essential role in ensuring that U.S. exporters can compete on a level playing field with their foreign competitors when their customers are making sourcing decisions.
Events
Feedback wanted on Annual Membership Meeting
USDEC aims to make the Annual Membership Meetings an event members value and look forward to every year. To help us deliver on that goal, we ask everyone who hasn’t yet completed the post-Annual Membership Meeting survey to please do so today. The survey only takes a few minutes to complete and includes questions on the meeting’s location, facilities, agenda, speaker quality and future get-togethers. Please click here to take the survey. Thank you!
USDA accepting applications for Colombia ag trade mission
USDA’s Foreign Agricultural Service (FAS) is inviting U.S. ag exporters to participate in the agency’s upcoming trade mission to Bogota, Colombia, the largest U.S. dairy customer in South America. USDA Under Secretary for Trade and Foreign Agricultural Affairs Alexis Taylor will lead the mission from Aug. 13-15.
Calling Colombia “a top-tier food and agricultural export destination for American farmers, ranchers and processors,” Taylor pointed to the country’s favorable demographics, economic expansion and increasingly modern food retail system as factors that create a fertile environment for U.S. dairy agricultural exports.
FAS-sponsored international trade missions aim to connect U.S. agricultural suppliers with prospective customers, giving U.S. companies the opportunity to forge relationships, gather market intelligence and generate sales. Attendees will meet with potential importers from across Colombia and have opportunities to engage with USDA leadership. FAS and trade experts will provide market briefings and organize site visits and other networking opportunities. For more information on the trip, click here. The online application form is available here. The application deadline is next Friday, May 3.
Members, local reps invited to participate in two China dairy ingredient events
USDEC is participating in two events organized by the U.S. Agricultural Trade Offices (ATO) in Guangzhou and Beijing, targeting the bakery sector. The goal is to share the multifaceted benefits of using U.S. dairy permeate in bakery applications.
Members and local representatives, as well as current and future U.S. dairy ingredient customers, are invited to meet with USDEC staff and sample permeate-containing bakery creations made during chef-led demos. For more information on either event, please contact Suzanna Stohr at sstohr@usdec.org.
- The 27th China Bakery Exhibition (CBE), May 10-12, Guangzhou
USDEC has been working closely with ATO Guangzhou staff and Chef Heinz Fischer on a bakery demo and instruction that will be held at the USA Pavilion during the show. Chef Heinz will lead the presentation, explain how he incorporates U.S. dairy permeate into baked goods tailored to regional tastes. The CBE has become the biggest and the most popular bakery exhibition in China, attracting visitors and exhibitors from around the world, especially south China and Southeast Asia.
- Discover U.S. Baking – Ingredients and Trends, June 6-7, Changsha
Organized by ATO Beijing in cooperation with the China Association of Bakery and Confectionery Industry, the event will highlight U.S. ingredients for the bakery sector. USDEC will present on dairy ingredients during the seminar and plans to use chef-led demonstrations to show U.S. dairy permeate’s functionalities in delicious recipes. Several other U.S. cooperators will also be present promoting their bakery ingredients.
CDIA conference and dairy technology expo set for May 27-29 in Changsha
USDEC will take part again this year in the largest dairy gathering in China: the 30th Annual Conference of the China Dairy Industry Association (CDIA) and the 2024 China (International) Dairy Technology Expo. The events will take place jointly at the Changsha International Convention and Exhibition Center in Changsha, Hunan Province from May 27-29. The theme of this year’s conference is “Green Development, Technology Innovation, International Cooperation, Nutrition and Health.”
Over the years, USDEC’s collaboration with CDIA and presentation at the annual meeting has offered a great platform to share the latest information about the U.S. dairy industry with a broad Chinese audience. The event is an opportunity for USDEC to highlight the U.S. dairy commitment to the market, raise the profile of U.S. dairy and strengthen relationships with the Chinese food and beverage industries.
This year, Vikki Nicholson-West, senior vice president, Global Ingredients Marketing, will deliver a speech in-person during the opening ceremony and will host a half-day symposium in the afternoon on May 28 to strengthen China-U.S. dairy trade relations. USDEC staff, consultants and our partners from Jiangnan University will assist in presenting the U.S. supply and innovation opportunities for U.S. dairy proteins, permeate and milk powder ingredients. USDEC members are invited to deliver a short presentation during the symposium.
For more information and to let us know you’re interested in participating in the event, please contact Annie Bienvenue at abienvenue@usdec.org.
Earth Day Outreach
Telling the dairy sustainability story on Earth Day—and afterwards
Earth Day and the weeks following are a perfect time to communicate the U.S. dairy substantiality story. USDEC highlighted the Dairy West/World Farmers’ Organisation (WFO) video “The Future of Food” in this X post, highlighting the strides the United States is making in sustainable dairy production, including reduced water use and greenhouse gas emissions.
U.S. dairy farmer videos
In the weeks leading up to Earth Day, USDEC released a five-part series of short videos sharing U.S. dairy farmers’ perspectives on their efforts to sustainably produce milk for products and ingredients that help feed a growing global population. The videos aimed to introduce overseas food and beverage manufacturers to key factors that help set U.S. dairy apart from other origins as a sustainable supply.
The short, compelling method to deliver U.S. dairy sustainability highlights helps drive home advantages by tying farmers’ own insights into their production practices, commitments and specific projects they have undertaken with relevant proof points. The series was initially released through USDEC’s customer-facing Think USA Dairy LinkedIn page and was also adapted for language to be delivered through eblast to customers across several markets. The introduction was specifically organized to align with the Earth Day timing, but the videos will continue to be leveraged in upcoming activities.
DMI, Innovation center campaigns
DMI and the Innovation Center for U.S. Dairy highlighted two new communications efforts showcasing real examples of progress being made today on farms and throughout the dairy value chain. “See Dairy Differently” is a one-page ad produced in partnership with the Florida Dairy Farmers and dairy farmer Sutton Ricks. The ad, which ran in The Economist, highlights Ruck’s farm, Milking R Dairy, and its efforts around water conservation and wetland preservation. It is being complemented with digital versions on Economist.com and the Economist app.
“Dairy Diaries,” produced in partnership with MilkPEP, DMI, American Dairy Association North East, and Beck Farms in New York, are video shorts featuring SNL comedian Vanessa Bayer and her experiences learning about dairy farming, animal care, milk processing and sustainability. The episodes can be viewed on Roku for free and via their online platform here.
Market Summary
NZ, EU27+UK milk production fall
YOY milk production numbers in New Zealand and Europe showed no sign of an early supply rebound this year, according to latest-month data from Dairy Companies of New Zealand and Eurostat. After a rebound in February (YOY production up 1.9% after accounting for Leap Day), increasingly dry weather in New Zealand took hold in March, significantly undercutting hopes for a strong finish to the 2023/24 season.
YOY New Zealand milk output fell 3.4%; milk solids production dropped 1.2%. Some farmer have reportedly been dipping into supplemental feed stocks put aside for winter and/or are drying off cows early. Water restrictions have been implemented in certain areas. Three times in March, the government declared a “medium-scale adverse event” in regions across the country, loosening some monetary restrictions for farms affected by drought in those areas. The situation suggests a weak finish ahead for the final two months of the season.
EU down too
The EU27+UK saw YOY milk deliveries drop for the sixth straight month in February (after adjusting for Leap Day) albeit with the smallest decline in the streak. With all but one country reporting, EU27+UK milk deliveries were down 0.2%.
Farmers are facing challenging conditions. EU farmgate milk prices declined in each of the first three months of the year, and the first quarter brought wetter than normal conditions across most of Europe, particularly in the west. Irish milk production (Leap-Year adjusted) fell 16.3%, the Netherlands dropped 2.3%, the UK fell 0.7% and Germany dipped 0.3%.
Poland recorded the biggest gain, with deliveries up 3.7%, and France and Italy managed to eke out 0.5% and 0.6% increases, respectively.
Market dynamics and January-February results provide little cause at this point to expect a big European spring flush.
Ireland backtracks, Denmark moves ahead on ag policy changes that would deter milk production
Ireland was the latest EU country to backtrack on proposed measures aimed at creating a sustainable food system in line with the bloc’s Farm-to-Fork Strategy. Irish Minister for Agriculture, Food and the Marine Charlie McConalogue said the country has scrapped its voluntary dairy farmer exit scheme, which would have culled up to 200,000 dairy cows. The plan was proposed by Ireland’s Food Vision Dairy Group, which was formed in 2022 to find ways for the dairy sector to reduce greenhouse gas (GHG) emissions in line with broader Irish commitments to cut agricultural GHG contributions by 25% by 2030.
McConalogue’s pronouncement came after a formal consultation with stakeholders in which the majority came out against the proposal. He went on to say that Ireland would seek to maintain its nitrates derogation, allowing to country to exceed EU limits on applying livestock manure per hectare. (The EU’s nitrogen limits aim to ensure safe water.) The Irish derogation was reduced in 2023 to the dismay of the dairy sector and will be reviewed again in 2025. To continue taking advantage of it, Ireland would need to present proof to the European Commission that water quality is improving in areas of concern.
Without a cow cull scheme, and assuming Ireland can successfully renew its nitrogen derogation, McConalogue said he is confident that the growth in productivity and exports achieved buy our dairy sector over the last decade can be maintained.”
Denmark forges ahead with environmental plan
Only four EU regions still benefit from a nitrates derogation: Ireland, Denmark, the Netherlands and the Flanders area in Belgium. But that number is dropping. The Netherlands’ derogation is being phased out by the end of 2025.
And bucking the recent trend of EU countries back-peddling on environmental commitments, Denmark announced it would no longer seek a nitrogen derogation after July 31, 2024. The Danish Ministry of the Environment said the country has failed to reduce nitrogen discharge to coastal waters for the last 10-15 years. The ministry admitted the change will lead to increased costs for some livestock operations but plans to forge ahead anyway to reduce national nitrate emissions and align with climate action goals. (Agriland, 4/18/24)
Company News
Arla Foods Ingredients to acquire Volac’s whey nutrition business
Denmark-based Arla Foods Ingredients reached an agreement to acquire the whey nutrition business of UK-based dairy company Volac, which specializes in whey ingredients for sports nutrition. The acquisition includes Volac’s whey processing facility in Felinfach, Wales, which Arla says will become a “global production hub and a cornerstone of an enhanced product offering in the performance, health and food sectors.” The acquisition is expected to be completed later this year and is subject to regulatory approval. (Company reports)
General Mills plans to cut dairy emissions 40% by 2030
In its Climate Transition Action Plan released last week, Minnesota-based General Mills said, “accelerated action to reduce methane is essential to avoiding the worst impacts of climate change.” As a result, the company said it is working to reduce methane emissions on dairy farms by 40% by 2030 through manure management, rotational grazing, feed optimization, and cow health and longevity. Other planned actions include advancing and scaling whole-farm dairy principles across supply sheds and advancing adoption of regenerative agriculture.
In December of 2023, General Mills joined the newly formed Dairy Methane Action Alliance, which is led by the Environmental Defense Fund and also includes Danone, Kraft Heinz, Nestlé, Group Bel and Lactalis USA. The company said through the alliance, it commits to “transparent accounting and public disclosure of methane emissions within our dairy supply chain and to creating a comprehensive methane reduction action plan in 2024.” (Company reports; Food Dive, 4/18/24)
Lactalis posts “weak” profit performance
In its FY 2023 annual results, French dairy giant Lactalis reported revenue grew 4.3% from the previous year to €29.5 billion (about US$31.5 billion), and consolidated net profit grew a “weak” 11% to €428 million (about US$457 million). A company statement cited inflation-driven changes in consumer purchasing behaviors—including higher demand for private label brands—for the performance. Lactalis also noted a slight increase in profit margin, an uptick credited to “organic growth and the continued strengthening of Lactalis in North America.”
The group invested more than €920 million (about US$982.3 million) in 2023 to “develop new products, modernize its dairies and cheese factories in France and North America and reduce its environmental impact.” (Company reports, Just Food, 4/19/24)
Camelicious to focus on China as primary market in Asia expansion
Emirates Industry for Camel Milk and Products, which is based in Dubai and operates as ‘Camelicious,’ is investing in Asian expansion, with a focus on China. The company claims demand for its camel milk in China has surpassed domestic demand in the UAE.
Currently, two-thirds of Camelicious’ production of milk powder is exported to China. “We have also grown our exports to Singapore and Malaysia in recent years and are now looking to expand our footprint in markets such as Japan and South Korea,” said CEO Mutasher A. Latef Albadry. Camelicious is optimistic of 15-20% organic growth annually and is looking at franchise partners to sell its brand in the target markets. (USDEC Middle East and North Africa offices)
Company briefs
Dallas-based Daisy Brand plans to build a new sour cream and cottage cheese dairy processing facility in Boone, Iowa. The $708 million investment will bring 255 jobs to the community. … California-based Chipotle Mexican Grill opened its first outlet in the Middle East this week in the largest shopping mall in Kuwait City. The location is run by Kuwait-based franchise operator Alshaya Group, which says it plans to open a restaurant in Dubai later this year and has four new locations planned for the region in 2024. … Weeks after filing for Chapter 11 bankruptcy protection in Chicago, Illinois-based Oberweis Dairy disclosed plans to close its North Aurora, Illinois, plant. Oberweis also said it received a bid to purchase its operating assets from the founder of Chicago-based dairy company Dutch Farms. (Dairy Herd Management, 4/18/24; Bloomberg, 4/22/24; FoodBev Media, 4/24/24)
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