HIGHLIGHTS: DECEMBER 2, 2022
• Rail strike averted for second time
• U.S. seeks nominations for supply chain committee
• Chinese imports fall; COVID heightens uncertainty
• China extends permeate exemption
• Dairy Nutrition Webinar attracts a crowd in China
• USDEC talks innovation in the Philippines
• Market Summary: Oceania milk output declines
• Download USDEC’s International Demand Analysis for September
• ALIC butter tender in December
• Letter calls for McKalip, Taylor approval
• November updates to the USDEC Export Guide
• Fonterra targets lactose production
• New Dutch-Philippine dairy center
• Company news: Vinamilk, Nestlé, Dutch Lady, Reckitt
Featured
Congress passes legislation to head off rail strike
On Thursday, the U.S. Congress cleared legislation that averts a potential railroad workers strike. The measure forces the railroads and employees to accept a tentative agreement that the Biden Administration helped negotiate in September (see Global Dairy eBrief, 9/16/22).
Eight of the 12 railroad unions had subsequently approved that agreement, but four rejected it, opening the door to a possible work stoppage as soon as Dec. 9.
Acknowledging that further contract talks had reached an impasse, President Biden called for legislation to impose the agreement early this week. The president noted that a rail strike would “devastate our economy.” Estimates suggested economic damages of up to $2 billion a day.
Problem and resolution
The central sticking point in the new contract was paid sick leave. While railroad workers currently have coverage for long-term illnesses, they have zero paid sick days, requiring them to use vacation time for medical appointments and short-term illnesses. The tentative agreement would provide one sick day; the unions sought 15.
The Senate voted down a second measure that would have provided railroad workers seven paid sick days. The body also voted down a resolution that would have extended the current negotiating period for another 60 days, giving the railroads and the unions more time to resolve the issue themselves.
President Biden signed the legislation today.
USDEC’s role
USDEC and NMPF have repeatedly shared concerns over any stoppage of rail service in conversations with Congress, the White House and relevant agencies. U.S. dairy exporters cannot afford to take on additional supply chain congestion, a message that USDEC continues to drive home to the administration as the organization works to pursue solutions to the degradation in rail service.
U.S. seeking nominations for supply chain competitiveness advisory committee
The U.S. Department of Commerce, International Trade Administration (ITA), is soliciting nominations for immediate consideration to fill positions on the Advisory Committee on Supply Chain Competitiveness. The Committee advises the Secretary of Commerce on the necessary elements of a comprehensive policy approach to supply chain competitiveness.
The Committee plays a key role in formulating recommendations to address global supply chain challenges, including identifying key bottlenecks and actionable solutions to address them, advising on the latest advances in supply chain management technology and how to apply them to the current challenges in the economy, and developing long-term recommendations to make supply chains more resilient. Membership would offer a valuable opportunity to complement the work of USDEC’s staff on these issues by allowing companies to feed into the administration’s deliberations on these topics directly.
ITA will accept nominations until 5:00 p.m. ET on Dec. 8, 2022. Selected committee members will serve until Nov. 9, 2023. Nominees should bring a track record of effective senior executive leadership on issues impacting the U.S. and global supply chains.
Details on how to apply can be found here. For questions, please contact trice@usdec.org.
Chinese imports fall again; response to latest COVID-19 spike clouds future
Chinese dairy imports (major products, not including fluid) fell 2% in October compared to the previous year. On the one hand, in a year of mostly double-digit declines, it was one of the better year-over-year performances of 2022 for China. In addition, most products posted healthy gains.
Year-over-year Chinese cheese imports jumped 23% to 9,785 MT. Butterfat soared 59% to 10,156 MT, with growth in both butter and AMF. It was easily a record for October, continuing a streak of double-digit gains that began in July. And Chinese whey imports rose 12% to 58,480 MT, with a big bump in volume from the U.S. (+25%, +5,919 MT).
On the other hand, October historically is a low-buying month for China, and October 2022 not only fell 2% from the previous year, but it was also 4% less than October 2020.
Chinese milk powder demand remains muted. Year-over-year WMP imports fell 17% (-5,608 MT) to 27,124 MT in October. It was the lowest monthly volume since September 2020. It was also right in line with year-to-date performance: Chinese WMP imports were off by 17% over the first 10 months of the year.
Year-over-year SMP volume declined 32% (-10,361 MT) to 22,295 MT. The EU27+UK felt the brunt of the decline, with shipments from the bloc down 49% (-7,379 MT).
The declines have multiple causes, including inflationary pressures. In addition, Chinese milk powder inventories are down seasonally, but SMP stocks remain elevated by historical standards. In the case of WMP, domestic production has increased significantly over previous years, bolstering domestic supply.
Furthermore, moving forward, China’s COVID situation is throwing up additional red flags.
Protests, lockdowns
In what some are calling “the biggest act of defiance since Tiananmen Square,” Chinese citizens took to the streets to protest China’s zero-tolerance COVID policy. An expected loosening of restrictions in November has turned into a new wave of lockdowns across the country, as daily new case totals reached record highs this week (although still moderate by the standards of most other countries).
So far, the media is reporting that most of the lockdowns are targeted and temporary—lasting days rather than weeks or months. But they are widespread and far-flung, covering areas responsible for more than one-fifth of China’s GDP, according to one estimate. They have also been popping up quickly and without warning in many cases, taxing already pandemic-weary citizens who are pointing to other countries and calling for a broader reopening.
The surge in demonstrations has put the Chinese government in a difficult position. Experts say they are left with two choices: strengthen the crackdown and risk further deterioration of the economy or loosen the restrictions and risk a major virus outbreak that taxes the healthcare system and the economy. The situation is complicated by China’s early success in stemming infections, which has led to little natural immunity to the virus, and its exclusive use of homegrown vaccines that the Wall Street Journal called, “less than effective.”
A possible hint on the direction the government is moving came on Wednesday when authorities in Guangzhou and Chongqing announced they were easing COVID curbs. But no matter the actions the government pursues, China’s COVID situation leaves major unanswered questions about dairy demand in the months ahead and broader unknowns on global economic impact. (Reuters, 11/30/22, 11/24/22; Wall Street Journal, 11/28/22; The Loadstar, 11/28/22)
China extends tariff exemption for U.S. permeate for feed
China has extended its tariff exemption for U.S. permeate for feed (protein content by weight 2%-7%, lactose content 76%-88%) under HS Code 0404.10.00. The exemption, which was originally scheduled to expire on Nov. 30, 2022, will now expire on May 31, 2023.
USDEC has worked to ensure permeate for feed was included in the extension announcement, just as it worked to help secure the exemption in 2019 in the first place. In addition, USDEC’s Trade Policy team continues to urge China to extend these tariff-code level tariff exemptions to additional dairy products.
The extension means that qualifying U.S. permeate for feed will continue to be exempt from China’s additional tariffs for U.S. products until May 31, 2023. For questions, please contact Bryan Jacoby at bjacoby@usdec.org.
USDEC highlights milk powder benefits, desire for partnerships in Peru
USDEC Executive Vice President Jaime Castaneda traveled to Peru last week with National Dairy Council Vice President for Nutrition Research Moises Torres, Ph.D., to educate government officials on the nutritional benefits of dairy products.
A small but vocal group of dairy producers in Peru have engaged in a misinformation campaign regarding the quality of imported dairy products, particularly reconstituted milk products. Canned evaporated milk represents the vast majority of the milk consumed in Peru due to its long shelf-life without refrigeration and ease of transport.
Torres presented to members of Peru’s Congress, the vice minister of agriculture and a team of senior advisors to the minister of commerce, where he emphasized the nutritional benefits of dairy compared to other beverages and the critical role that milk powder can play in fortifying a milk-deficit country like Peru.
USDEC Executive Vice President Jaime Castaneda (left) and National Dairy Council Vice President for Nutrition Research Moises Torres (right) stand in front of the Legislative Palace of Peru where they spoke at length with government officials on the nutritional benefits of milk powder.
Additionally, Castaneda and Torres met with several key industry players industry including Nestlé, Gloria and Laive. Throughout the trip, Castaneda encouraged government officials, industry representatives and producers to partner to protect dairy’s image and increase demand for dairy products in Peru. USDEC has built relationships with some of these companies, creating an opportunity to work jointly moving forward.
As the wave of protectionism continues to increase in Latin America, it’s more important now than ever that USDEC collaborate with its counterparts in the region to advocate for common sense policies and ensure a positive trading environment.
Events
China Dairy Nutrition Webinar attracts 187 viewers
Nearly 190 representatives from Chinese food and beverage manufacturers tuned in to hear a distinguished lineup of speakers delve into the nutritional benefits of dairy ingredients at USDEC’s Nov. 17 Dairy Nutrition Webinar in China.
The deputy executive secretary of the Chinese Nutrition Society; the director of research at the Rural Development Institute of the Chinese Academy of Social Science; professors from USDEC partner Jiangnan University, Peking Union Medical College Hospital and the Institute of Food and Nutrition Development; and frequent USDEC collaborator Matthew Pikosky, vice president-nutrition research, National Dairy Council, outlined how milk and dairy ingredients can provide exceptional nutrition.
Key messages included the beneficial role of dairy and whey proteins on muscle health, body composition, weight management and metabolic function, and their ability to help mitigate sarcopenia and improve recovery after illnesses (such as COVID-19). Speakers also highlighted permeate as a means to reduce salt content, improve flavor, lower costs and support nutrition claims or clean labels.
The nutrition message is an especially powerful one in China, where COVID has fueled an ongoing surge in people seeking out foods and beverages to maximize health. The nutrition delivered by dairy products perfectly aligns with consumer dietary needs and preferences, speakers noted.
Watch the webinar
An additional 25-plus people registered for the webinar but did not attend live but can access the archived video. Indeed it is available for all. The video is a resource for USDEC members to view as well as share with customers to make sure they are up-to-date on the latest information. The replay of the event is available in English using this link or in Chinese using this link. To access the video, viewers will be required to register if they have not done so already.
The Dairy Nutrition Webinar is the second U.S. dairy ingredients webinar in China in the past few months. Nearly 140 Chinese bakers and technical personnel from bakery manufacturers tuned in live to USDEC’s “U.S. Dairy Permeate in Bakery Applications” webinar earlier this month. For more on that event, see Global Dairy eBrief, 9/23/22.
Teo talks innovation in the Philippines
Last week, USDEC’s Martin Teo, technical director–food applications, Southeast Asia, gave a 30-minute presentation to 220 food manufacturing professionals at the Philippines Association of Food Technologists (PAFT) 61st Annual Convention in Mandaluyong City. Teo’s appearance was part of USDEC’s ongoing efforts to spark local-friendly ideation and innovation with U.S. dairy ingredients. He focused on developing new products with U.S. dairy ingredients for health and nutrition applications that span across age groups.
The convention’s two-day scientific program, “Food for All: Responding to the Needs of the Global Market,” was designed to inspire creativity. It focused on local farming, innovative technologies and the latest consumer trends to advance food safety, nutrition and regulations in the Philippines and around the world.
Market Summary
NZ posts lowest peak milk output since 2016
Year-over-year New Zealand milk production fell 3.3% to 3.025 million MT in October. It was the lowest peak-production month in a decade.
Since posting flat output in June (the first month of the 2022/23 season), New Zealand dairy farmers have recorded four straight year-over-year declines. Season to date, New Zealand milk production was down 3.6%.
In Australia, the trend is worse. Australian milk production fell 6.6% in October and for the first four months of the 2022/23 season (July-June), it was off 6.5%.
Improved rainfall in New Zealand has reportedly improved pasture conditions, and farmers are hoping for a strong back shoulder to the season.
September International Demand Analysis ready for download
Year-over-year global dairy trade rose 3.6% in September on a milk solids equivalent basis (MSE), the second straight increase in a row. U.S. and New Zealand suppliers drove the gain, up 7% and 29%, respectively, while the EU27+UK continued to lag. EU27+UK dairy exports fell 7%, the 10th consecutive month of declines.
Looking ahead, China’s zero-tolerance COVID policy is causing civil unrest and continues to undercut economic growth. While USDEC expects international trade will improve in 2023, significant Chinese import gains remain in question.
For more details on September performance, download USDEC’s latest International Demand Analysis. The 69-page document is packed with charts, graphs and commentary, providing a forward-looking glimpse at global markets from a U.S. exporter’s point of view. It analyzes demand in 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, please contact William Loux at wloux@usdec.org or Stephen Cain at scain@nmpf.org.
ALIC slates December butter tender
Japan’s Agriculture and Livestock Industries Corp. (ALIC) announced plans for a new SBS butter tender for 1,000 MT for Dec. 15. Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) will announce tender plans for the remainder of the fiscal year (through March 31, 2023) after it reviews the supply situation. For more information, contact USDEC’s Japan office at usdecjapan@marketmakers.co.jp or (011) 81-3-3221-6410.
Trade Policy
Letter calls for Senate approval of McKalip, Taylor
A broad and diverse group of leading U.S. food and agricultural organizations, including USDEC and NMPF, sent a letter to Senate Majority and Minority Leaders Chuck Schumer and Mitch McConnell asking for their help in securing Senate confirmation of Doug McKalip and Alexis Taylor before the end of the year.
Taylor was nominated in May as Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs at USDA, while McKalip was nominated for chief agricultural negotiator for the Office of the U.S. Trade Representative in June. Each was unanimously approved by their respective Senate committees in September.
“Trade is vital to the health of the U.S. agricultural economy and, in today’s global market, standing still is falling behind,” the letter states. “Our food and agriculture sectors need Mr. McKalip and Ms. Taylor confirmed so that the U.S. can continue to grow overseas markets for our food and agriculture products.”
The letter cites the “unprecedented challenges” U.S. agriculture has faced over the past several years, as well as the progress made by U.S. competitors in signing new trade deals while the United States has dragged its feet on such agreements.
“If we are not aggressively pursuing new market opportunities, we will also face long-term weakness in this sector with devastating impacts for rural America,” the letter says. “American agriculture needs experienced leaders representing us in international negotiations.”
Market Access & Regulatory Affairs
USDEC updates 104 Export Guide documents in November
USDEC’s Market Access and Regulatory Affairs (MARA) team updated or revised 104 documents in the USDEC Export Guide last month. Changes include:
Volume 1: Tariffs and Classification
- China: Updated expiration date for the tariff exemption for U.S. permeate for feed (within 040410) to May 31, 2023.
Volume 2: Import Requirements
- Hong Kong: Noted that Frozen Confectionaries must be accompanied by a Certificate of Free Sale.
- United Arab Emirates: Added information on Certificate of Free Sale.
Volume 3: Compositional Standards and Labeling Requirements
- Brazil: Updated contaminant and microbiological criteria for many dairy products, including milk, butter and cheese.
- GCC: Updated food additive regulations and several standards, including cream cheese, cheese and evaporated milk.
- Uruguay: Updated General Labeling to include front-of-pack requirements.
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.
Company News
Fonterra converts Tirau site to lactose production
New Zealand’s Fonterra Co-operative Group invested NZ$40 million (about US$25 million) to convert its Tirau, North Island, ethanol plant into a lactose manufacturing site. Fonterra cited a series of reasons for the shift, including safety and storage concerns related to ethanol, as well as high costs. In addition, Lactose production allowed reduced water and energy use and reduced waste to landfill.
The Tirau plant will concentrate the lactose to 45%, after which Fonterra will transfer the product to its Kapuni, North Island, facility. The Kapuni plant will further concentrate and dry it for use in a variety of products, but mainly pharmaceutical-grade lactose. Fonterra is currently running commissioning tests. (Stuff.co.nz, 11/28/22)
Netherlands, Philippines team up on dairy center of excellence
Alaska Milk Corp., the Philippine subsidiary of Dutch dairy powerhouse FrieslandCampina, teamed up with the Philippine Department of Agriculture, the Philippine National Dairy Authority, the University of the Philippines, and Dutch dairy genetics and herd management company CRV to establish the Philippine-Netherlands Dairy Excellence Center. The venture will see FrieslandCampina and CRV sharing Dutch dairy expertise with local dairy farmers, the government, academia and others to improve milk yields, quality, productivity, sustainable production and farm management. (Company reports)
Bel buys stake in Britannia, forms cheese joint venture
French cheesemaker Bel Foods purchased a 49% share of India’s Britannia Dairy as part of a joint venture with Britannia’s parent company Britannia Industries. Under the terms of the deal, Britannia Dairy will be renamed Britannia Bel Foods.
The joint venture plans to produce cheeses co-branded under the names Britannia and Laughing Cow. Bel said it has been “in start-up mode” in India for the last four years and expects the joint venture to accelerate its business in the country. (FoodBev.com, 11/30/22)
Vinamilk to build two new plants
Vietnam’s Vinamilk plans to build major new milk processing facilities in Hung Yen Province and the Moc Chau district in Son La Province. The Hung Yen plant will connect existing Vinamilk dairy farms, warehouses and distribution systems in a single hub with a capacity of over 410,000 MT per year. It will serve domestic and export markets, including China, Japan, South Korea and Southeast Asia.
The US$130-million Moc Chau complex will include dairy farms and a processing facility. The two-phase project will be capable of manufacturing 1,000 MT per day when complete.
Vinamilk plans to complete the projects, which it estimates will increase the company’s production capacity by 20% in the next two-to-three years. It did not specify what types of products the plants would make and did not release a price estimate for Hung Yen. (Company reports; DairyReporter.com, 11/17/22)
Company news briefs
Nestlé plans to invest nearly $1.9 billion in Saudi Arabia in the coming decade, starting with a $100-million plant to make infant products and ready-to-drink coffee. It’s aiming to complete the facility in 2025. … Malaysia’s Dutch Lady Milk Industries plans to discontinue milk powder operations at its Petaling Jaya plant in May 2023 as part of an ongoing manufacturing optimization program. The company will instead source its milk powder through Dutch parent company FrieslandCampina. … British multinational Reckitt Benckiser Group reportedly opened a new milk dryer at its plant in Delicias, Chihuahua, Mexico—a project totaling around $100 million. The facility will manufacture infant formula for domestic and export markets. … Olam Food Ingredients (OFI) opened a new Customer Solutions Centre in Singapore. A team of Olam chefs, food scientists and quality and regulatory experts will work with OFI customers on applications using OFI ingredients, including dairy. (USDEC Mexico office; USDEC Southeast Asia office; El Heraldo de Chihuahua, 10/25/22)
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