HIGHLIGHTS: April 8, 2022
• Harden testifies before House subcommittee
• USDEC renews, expands LatAm partnership
• February U.S. dairy export results
• Market Summary: China steps back from GDT
• USDEC Data Hub: U.S. butter exports
• Congress rejects Canada TRQ proposals
• USDEC offers supply chain fixes
• Dairy absent in Australia-India FTA
• USDEC Export Guide March updates
• China extends massive COVID lockdown
• Singapore loosens business, travel restrictions
• Company news: Kerry
Featured
Harden lays out dairy export roadmap for House subcommittee
On April 6, USDEC President and CEO Krysta Harden outlined a roadmap to dairy export growth to the House Agriculture Subcommittee on Livestock and Foreign Agriculture. Harden was invited to testify at the subcommittee hearing, “A 2022 Review of the Farm Bill: International Trade and Food Assistance Programs.”
Harden’s comments covered farm bill provisions as well as U.S. trade policies that would complement the farm bill. Within the context of the farm bill, she:
- Called on Congress to double funding for the Market Access Program (MAP) and the Foreign Market Development (FMD) programs.
- Recommended that Congress seek opportunities to increase the use of U.S. dairy ingredients across U.S. food aid programs.
- Suggested adding two new provisions to next year’s farm bill—one to combat more effectively the EU’s abuse of geographical indications; a second to provide specific timeframes for the administration to put forward crucial nominees overseeing agricultural trade.
Outside the scope of the farm bill, Harden asked Congress and the administration to actively pursue comprehensive trade agreements that benefit agriculture, maximize use of other trade tools (like Trade and Investments Framework Agreements) and strongly enforce existing trade agreements.
For more information on the testimony, see this USDEC press release. For an excerpt from her written testimony, see the U.S. Dairy Exporter Blog post, “How exports underpin U.S. dairy’s success.” You can also watch an archived version of the hearing on YouTube. Harden’s presentation begins at the 1:56:39 mark. She also answers panel questions starting around the 2:17:55 mark.
LatAm partnership extended to build united voice on international issues affecting dairy regulations and trade
On April 5, USDEC and the Inter-American Institute for Cooperation on Agriculture (IICA) extended and expanded their successful, three-year-old partnership agreement. In renewing the Memorandum of Understanding, which will continue strengthening cooperation to promote and harmonize science-based regulations across food and ag trade policies, USDEC and IICA also updated the language to include a greater focus on collaboration on sustainability and food systems issues.
The expanded MOU extends the USDEC-IICA relationship for three years and complements an agreement USDEC previously signed with the Pan American Dairy Federation (FEPALE).
“It is successful partnerships like these that help deliver science-based regulations, while reducing unnecessary trade barriers,” said USDEC President and CEO Krysta Harden in a USDEC news release on the relationship.
Left to right: Nick Gardner, USDEC senior vice president, Sustainability and Multilateral Affairs; Manuel Otero, director general of IICA; Jaime Castaneda, USDEC executive vice president for Policy Development and Strategy; and Lloyd Day, deputy director general of IICA, at the signing ceremony for the expanded MOU.
While the expanded MOU with IICA formalizes the focus on sustainability and food systems, that sustainability engagement and cooperation had to some extent already been taking place.
“IICA has been an important collaborator on the UN Food Systems Summit and a strong proponent of the critical role livestock and dairy can play in the future of a sustainable food system,” said Nick Gardner, USDEC senior vice president, Sustainability and Multilateral Affairs. “As the U.S. dairy industry continues to prioritize sustainable productivity growth and reducing its environmental impact, our relationship with IICA is evolving to include supporting science-based sustainability policies that reflect the values shared across the Americas.”
Manuel Otero, director general of IICA, summed it up: “We grow stronger when our region is able to speak with one voice. That is why it is essential we work together to harmonize science-based health, safety, sustainability and quality standards.”
Egypt notifies WTO that it is delaying halal certification requirement
In the interest of transparency, Egypt, via the Egyptian Organization for Standardization and Quality, notified the WTO of an amendment to its original WTO notification regarding its new halal requirement. This amendment states that the country will accept imports of milk and dairy products not accompanied by a halal certificate through Sept. 30, 2022 (date of arrival at Egyptian ports). As such, product not accompanied by an ISEG Halal certificate should be able to enter the Egyptian market until Oct. 1, 2022.
This notification comes after the Egyptian Ministry of Agriculture and Land Reclamation issued two letters to Egyptian industry last month, first notifying that the certification requirement was postponed and then, several days later, that only the need to pay for the certificates was delayed.
USDEC continues to work closely with FAS and USTR, to gather information and resolve the problematic issues associated with Egypt’s new halal requirements, and will continue to provide further information and updates as we obtain them. In the meantime, if you have any questions, please contact Bryan Jacoby at bjacoby@usdec.org or Shawna Morris at smorris@usdec.org.
February U.S. dairy export volume dips, value soars
U.S. dairy export volume and value diverged again in February, the third straight month in which year-over-year volume slipped while value rose. U.S. milk solids equivalent exports fell 1%—the value of those exports jumped 23%.
The volume decline was the smallest of the past three months. Strong sales for U.S. cheese, butter and lactose nearly put U.S. dairy suppliers back in the black on the volume side.
U.S. shipments of butterfat jumped 75% to 6,755 MT. That was the biggest month for U.S. butterfat exports in nearly eight years, since April 2014. U.S. lactose exports grew 15% to 28,776 MT.
Cheese gained 9% to 32,953 MT, a February record, with double-digit gains in many key markets: Japan (+59%, +1,401 MT); Southeast Asia +39% (+661 MT); South America +32% (+422 MT, rebounding from a lackluster January); the Caribbean +30% (+369 MT); and Central America +26% (+527 MT). Sales to the No. 1 U.S. cheese market, Mexico, increased 5% (+394 MT).
Milk powder and whey
Year-over-year U.S. NFDM/SMP exports fell 11% (-8,200 MT) in February, with declines to most key markets, including Mexico (-5%) and Southeast Asia (-12%).
Reduced Chinese demand continues to dampen U.S. whey exports, but overall volume in February finished better than expected, slipping only 4.5% (-2,308 MT). There were some encouraging signs in whey in February, including a 14% increase in modified whey shipments and a much stronger buying presence by Japan in the WPI sector. In February, U.S. WPI exports declined 5%, primarily due to a 67% drop in WPI shipments to China (-1,498 MT). Japan, however, increased WPI purchases from the U.S. by 164% (+1,010 MT).
For a deeper look into February results, go to the USDEC Data Hub and experiment with the interactive charts under the “U.S. Exports” tab. Also, read the U.S. Dairy Exporter Blog piece, “February butter, cheese exports help mitigate declines in milk powder, whey,” which includes insights on Mexico’s dairy appetite in 2022.
Market Summary
GDT Price Index deja vu
The Global Dairy Trade (GDT) Price Index fell 1% at the April 5 auction, mirroring the 0.9% decline at the previous auction on March 15. WMP (-1.5% to US$4,532/MT) and butter (-0.6% to US$6,891/MT) declined for the second straight event. SMP ran its string of gains to 17 consecutive auctions (+1.0% to US$4,599/MT) while cheddar extended its win streak to 12 straight auctions (+2.7% to US$6,472/MT).
AMF broke its run of price gains by falling 2.5% to US$6,908/MT, but that softness was due in part to Fonterra Co-operative Group increasing AMF offer volumes by 3,000 MT from April through June.
The biggest difference at this auction vs. the last was who was buying. Southeast Asia unseated North Asia (China) as the primary buyer as Chinese purchasers stepped back due to uncertainty caused by massive lockdowns across the nation and their impact on food production and consumption. (See China lockdown item below.)
But Southeast Asia didn’t take over by default. Rather, bidders from the region took advantage of China’s lower profile, buying more WMP, SMP, butter, AMF and cheddar than any other region. Southeast Asia bought more product in each of those five product categories than it did at the same auction the previous year—and more WMP, butter and AMF than it did at the March 15 auction.
The Middle East and Africa similarly increased their purchasing of WMP, SMP and AMF compared to the previous year, and the Middle East was also a factor in cheddar.
Fundamentals unchanged
Demand remains strong globally and despite the back-to-back drops in the GDT Price Index, today’s elevated prices look unlikely to significantly ease anytime soon.
Dismal milk production growth forecasts have not improved, with sustained high input costs set to stick around.
New Zealand last week classified drought in Southland and part of the North Island as a “medium-scale adverse event,” unlocking a first phase of support funding for farmers in those regions. At the same time, recent rains are bringing relief to most of the country.
USDEC Data Hub: butterfat exports
The USDEC Data Hub collects dairy production, pricing, export and import numbers and organizes them into a series of meaningful, interactive tables and graphs for members to investigate trends, plan export strategy, and seize global opportunities.
Each week, Global Dairy eBrief will feature a Data Hub chart. This week’s issue highlights U.S. butterfat exports. You can find the graph at the Data Hub under the U.S. Exports tab.
We encourage you to visit the Data Hub and experiment with an interactive version of this and other charts, graphs and tables. If you have any questions regarding the information, please contact William Loux at wloux@usdec.org.
U.S. butterfat exports are on a long-term growth streak. Monthly year-over-year volumes have increased every month since December 2020.
Trade Policy
Congress rejects Canada’s TRQ proposals, demands it meet its USMCA commitments
Congressional pushback against Canada’s tariff rate quota (TRQ) proposal has been strong. This week, several leading members of the U.S. House of Representatives sent a bipartisan letter to USTR Ambassador Katherine Tai and USDA Secretary Tom Vilsack calling on the Biden Administration to reject Canada’s proposition and insist on real reform.
USDEC, which worked on the letter with the congressional offices, commended the Representatives for their support in a joint press release.
The letter was led by Reps. Ron Kind (D-WI), Tom Reed (R-NY), Antonio Delgado (D-NY), Glenn Thompson (R-PA), Suzan DelBene (D-WA), Dusty Johnson (R-SD), Jim Costa (D-CA), and David Valadao (R-CA).
“A deal’s a deal; it’s not too much to ask that our trading partners live up to their end of the bargain,” the letter stated. “That is why it is critical that this compliance stage of the USMCA dairy case demonstrate that the USMCA enforcement process works—not just to deliver the right finding, as it did in January, but to ensure faithful implementation of the overall agreement and drive real, tangible reforms that are seen on store shelves, to the benefit of American dairy producers and manufacturers, as intended.”
The bipartisan House letter follows a March 4 letter from Rep. Elise Stefanik (R-NY) to Ambassador Tai sharply criticizing the Canadian proposal. A similar bipartisan, bicameral letter was sent on April 6 from members of the Minnesota Congressional delegation, led by Rep. Michelle Fischbach (R-MN) and Sen. Amy Klobuchar (D-MN). Sen. Tina Smith (D-MN) and Reps. Tom Emmer (R-MN), Angie Craig (D-MN) and Pete Stauber (R-MN) also joined the letter.
Export Supply Chain Working Group submits recommendations to USDA, port envoy
USDEC and NMPF’s Export Supply Chain Working Group sent a list of recommendations to Mike Schmidt, USDA senior advisor in the Office of the Under Secretary for Farm Production and Conservation, and John Porcari, White House Ports Envoy, outlining a series of measures USDA could take to alleviate ongoing export logistics issues.
The letter builds on meetings between USDA and the working group earlier in March, expanding on supply chain congestion and export facilitation issues that were discussed. Those recommendations include:
- Pop-up container facilities at ports as well as at non-port locations closer to inland food production centers, like Minneapolis, Chicago, Detroit, Kansas City and Salt Lake City.
- Fast lanes that would allow a carrier preferred berthing access in exchange for agreeing to maximize export carriage.
- Container dual-turn facilitation that would improve exporter access to empty containers.
- Container availability and export-port flow reports that would improve data transfer and facilitate planning.
- Container tracking that would provide real-time data on container locations to increase efficiencies and support container dual-turns.
The working group letter is part of USDEC’s ongoing efforts to find immediate and long-term solutions to the supply chain challenges hampering U.S. dairy export growth for the last 18 months.
Dairy left out of Australia-India FTA
Australia and India signed an Economic Cooperation and Trade Agreement last weekend that cuts tariffs on more than 85% of goods Australia ships to India, rising to 91% over 10 years. While the deal includes certain food and ag products, dairy and other sectors deemed “sensitive” were completely excluded.
Australia is hoping the pact, which took nearly a decade of negotiations, will help the nation reduce its dependence on trade with China. The government is calling it an “interim” agreement and said it would continue to work toward a full trade deal with India. (ABC Rural, 4/4/22; Economic Times, 4/2/22; ABC News, 4/2/22)
Market Access and Regulatory Affairs
March updates for USDEC Export Guide
The Market Access and Regulatory Affairs team updated 108 documents from 17 countries in the USDEC Export Guide in March. Some of the changes include:
Volume 1: Tariffs and Classification
- Regional Comprehensive Economic Partnership (RCEP): Listed tariff concessions for several RCEP countries, including China, Korea, Malaysia and Thailand. The RCEP entered into force for most countries on Jan. 1, 2022. For Korea, it was Feb. 1; for Malaysia it was March 18. Some countries are still pending.
Volume 2: Import Requirements
- Egypt: Included the extension to the Halal certificate requirement, as well as new payment restrictions.
- Vietnam: Updated Mandatory Testing/Inspection Upon Entry to reflect changes to products subject to quarantine inspection.
Volume 3: Labeling and Product Standards
- Dominican Republic: Updated Powdered Milk, Butter, Processed Cheese, Ricotta Cheese, Whey Cheese, Picantino Cheese, Danbo Cheese, and Labeling documents.
- Japan: Updated labeling and food additives regulations.
- Malaysia: Updated food additives.
- Thailand: Updated all product standards (contaminants regulation revisions posted). Added a list of approved enzymes to the food additives document and revised general labeling.
- United Kingdom (England, Wales and Scotland): Posted new Volume 3 documents. Posted all requirements for the UK with amendments since EU exit.
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.
COVID Update
China extends massive lockdown
China is struggling to maintain its zero-tolerance COVID policy in what has turned into its worst virus wave to date. A temporary two-stage lockdown in Shanghai evolved into a full, city-wide, indefinite lockdown this week as the country posted record single-day new case totals in excess of 20,000.
Zero-tolerance means most residents are forbidden from leaving their homes even for food. Some businesses are able to operate, but all employees must remain on premises full time.
The lockdowns have limited truck movement and slowed port operations in Shanghai triggering a domino effect at other Chinese ports as ocean carriers look to reroute their ships. Logistics managers have warned that further ripple effects are on the horizon, including potentially heightened container shortages.
China’s dairy sector and dairy consumption may not be immune to the problems. It is too soon to tell, but market watchers speculate that the lockdown—no travel, limited shopping opportunities, no dining out—will take a bite out of Chinese fluid milk consumption, causing more domestically produced raw milk to be redirected to dryers. That, in turn, could potentially limit import demand. (Wall Street Journal, 4/7/22, 4/6/22; CNN, 4/6/22; The Loadstar, 4/4/22; South China Morning Post, 3/28/22)
Singapore loosens COVID restrictions
Over the past two weeks, Singapore significantly eased what had been some of the world’s strictest and longest-running COVID business, life and travel rules. The nation said it wants to move toward a “living with COVID” model.
- On March 29, the government eliminated mandatory mask-wearing outdoors (although masks are still required indoors at all times, and mask-less outdoor individuals must remain 1m away from others). Authorities also increased workplace capacity to 75% (up from 50%), doubled the maximum size of group gatherings from five people to 10 people (including for dine-in restaurants), removed the need for restaurants to screen for proof of vaccination before seating (although the government will conduct random COVID proof-of-vaccination checks at restaurants), and increased capacity for large events (greater than 1,000 people) to 75% (up from 50%).
- On April 1, it began accepting all fully vaccinated adult travelers (and non-vaccinated children under 12) without quarantine-upon-arrival, and it halted on-arrival testing. Pre-departure tests for air and sea arrivals are still required. For more information on traveling to Singapore, visit the Singapore government’s Safe Travel website.
- Effective April 19, the country will allow all bars, pubs and other nighttime entertainment operations to fully resume, although patrons will need a COVID-19 rapid antigen test within 24 hours before entering.
The government has yet to provide details on rule changes for the industry sector under which the U.S. Center for Dairy Excellence operates, so activities at the U.S. CDE are being planned with smaller, local-only attendee numbers for the time being.
In addition, USDEC’s Southeast Asia office notes that the government has shown a tendency over the course of the pandemic to make quick decisions on COVID restrictions depending on infection levels. So the latest moves to reduce travel and business restrictions could change at any time. Members planning to visit Singapore are advised to confirm requirements prior to travel. (USDEC Southeast Asia office; Singapore Ministry of Health; Bloomberg, 4/4/22; CNN, 3/31/22; CNBC, 3/23/22)
Company News
Company news briefs
Ireland’s Kerry Group joined the list of companies altering their Russian business plans (see Global Dairy eBrief, 3/25/22, 3/11/22 and 3/4/22). After scaling back its Russian and Belarusian activities over the past few weeks, the company announced it was suspending all operations in both countries. (Agriland, 4/4/22)
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