HIGHLIGHTS: september 23, 2022
• NOURISH conference
• China imports continue to lag in August
• IWC outlines whey’s bright future
• Chinese bakery webinar focuses on permeate
• Register now! Supply chain session at fall membership meeting
• Market Summary: GDT rises; SMP lags
• USDEC calls for full Senate vote on McKalip
• Letter asks USTR to prioritize WTO dispute settlement reform
• West Coast labor talks slow; railroad contract awaits vote
• Company news: Fonterra, Norco
Featured
Harden touts U.S. dairy sustainability leadership at NOURISH
A consistent element of USDEC messaging is the U. S. sustainability story. All activities, all contact with end-users, includes information not only on U.S. dairy’s long history of environmental stewardship and accomplishments, but also U.S. dairy’s commitment to making further sustainability progress and USDEC’s growing role as a global leader in promoting U.S. dairy as an environmental solution.
This week, USDEC President and CEO Krysta Harden was in Amsterdam telling those stories to an international audience at Global Dairy Platform’s annual NOURISH Conference. This year’s focus for the conference was the health of the planet and how the global dairy sector is raising its climate ambition while continuing to provide nutritious foods for 6 billion people and livelihoods for 1 billion.
The conference featured high-level executives from dairy companies and organizations around the world. Experts, business leaders and government officials rounded out the programming, with an introductory address from John Kerry, U.S. special envoy for climate.
Harden spoke in a panel session titled, “Progress Underway in Developed Markets.” She highlighted the U.S. Dairy Stewardship Commitment, the Innovation Center for U.S. Dairy’s Dairy Sustainability Alliance, the FARM Program and other aspects of the industry’s collective plan to advance well-being, regenerate the environment and care for animals and communities.
She also outlined U.S. environmental goals: By 2050, the U.S. dairy industry collectively commits to achieving greenhouse gas neutrality, optimize water use and improve water quality.
“We have made great progress but recognize that there is much more to be done if we can truly seize the opportunity of being the global source of choice for rising dairy demand as production in the EU and New Zealand remains static or declines,” Harden said after the presentation. “The U.S. dairy industry is the only country poised to grow, building on a strong foundation of responsible stewardship while committing to being a crucial environmental solution to sustainably feed and nourish the world’s growing population.”
USDEC President and CEO Krysta Harden outlines how U.S. dairy aims to be part of the environmental solution to an audience of international dairy company CEOs, senior executives and opinion leaders attending the NOURISH conference this week in Amsterdam.
Chinese dairy imports fall again in August
Year-over-year Chinese dairy import volume (major products, not including fluid) declined 20% in August. Even at -20%, it was the best year-over-year monthly performance since Chinese dairy imports rose 4% in February.
Whey had its biggest month of the year, fueled by rising Chinese pork prices. While still down from record highs of 2020, Chinese pig prices climbed sharply in June/July and began moving upward again in late August/early September.
Driven by feed use, Chinese whey imports (not including WPC80+) rose 1% to 62,819 MT. It was the first year-over-year gain in 2022 and easily the highest volume of any month so far this year.
Lactose imports increased 27% (+2,292 MT) compared to August 2021, and at 12,710 MT constituted the second highest month of the year after July’s 15,015 MT.
The United States has been the biggest beneficiary of China’s growing whey and lactose appetite. Chinese imports of U.S. whey and lactose from the U.S. rose by a combined 11,540 MT in August.
Chinese butterfat demand has also taken off the past two months. August’s 22% jump (+2,106 MT) follows a 13% increase (+1,723 MT) in July.
Powder, cheese fall
The glaring shortfall in August came in WMP. Year-over-year Chinese WMP imports plunged 59% (-44,161 MT) for the month.
The past three months show China’s 2021 WMP buying bubble has clearly popped. Chinese WMP imports for the June-August period in 2021 were 216,583 MT. For the same period this year, they were 102,603 MT—much more aligned with 2020’s 106,003 MT.
Year-over-year Chinese SMP imports fell for the sixth time in seven months, but offered some hopeful signs of a potential turnaround. The 2% drop (-835 MT) in August was the smallest decline posted this year. In addition, August’s SMP import total of 32,962 MT was up 20% from July and was the second highest of the year after January’s 47,986 MT.
New Zealand’s August exports (a forerunner of subsequent-month import volume for China) offer a hopeful sign for a return to growth for WMP. Kiwi WMP exports to China jumped 38% to 22,303 MT in August. It was the first year-over-year increase in New Zealand WMP exports to China since November 2021. It was also a New Zealand record for the month.
August Chinese cheese imports fell 5% (-750 MT) compared to the previous year. It was the third straight month of year-over-year cheese declines, likely tied to the nation’s zero-COVID policy and subsequent movement and business restrictions undercutting foodservice sales.
Events
IWC outlines whey’s bright global future
Last week’s International Whey Conference (IWC) in Chicago, co-organized by the American Dairy Products Institute and European Whey Processors Association, attracted more than 360 attendees from 23 countries eager to hear the latest developments in whey research and market opportunities.
Conference speakers reiterated the key messages that have helped grow whey demand to where it is today and will continue to drive sales globally moving into the future. Those messages included:
- Whey is the original “upcycled ingredient,” aligning perfectly with global sustainability concerns and dairy sector environmental stewardship efforts.
- Research continues to broaden and deepen understanding of the nutritional benefits of whey, often beyond protein and muscle health and into bioactive ingredients, peptides and lactoferrin.
- Scientific advances and additional research continue to advance knowledge of whey processing techniques, functionality and innovation.
“Communicating these positive developments as an industry is critical to the ongoing growth of whey ingredients,” said Vikki Nicholson-West, USDEC senior vice president, Global Ingredients Marketing. “We need to amplify the story of whey as much as possible.”
USDEC’s presence
Three USDEC speakers sought to amplify whey’s potential in global markets at the IWC with a focus on reaching customers in Asia.
- Nicholson-West summarized the global whey ingredient landscape and market trends. She outlined population dynamics in developed and emerging markets, the impact of the pandemic on birthrates, rapidly aging societies, the rising importance of food and how it relates to health and wellness—and the implications of all those trends for whey ingredient growth opportunities internationally.
- Kristi Saitama, vice president, Global Ingredients Marketing, highlighted the untapped potential for Asian food and beverage formulators to create distinctively Asia-friendly products featuring whey ingredients that meet the nutrition and taste needs of the market. The presentation featured collaborative USDEC protein ideation work with partners in China, Japan, Korea and Southeast Asia as well as consumer feedback and insights from product concept testing in Japan and Southeast Asia. (For more on Japanese new product development and testing, see “USDEC holds first in-person ingredients workshop in Japan since pandemic” in last week’s edition of Global Dairy eBrief.)
- Virginia Chan, Market Access and Regulatory Affairs (MARA) lead for USDEC’s China office, discussed USDEC’s mission and the process involved in shipping U.S. dairy products to China. Chan outlined regulatory issues in China, including new procedures for registering plants for export and USDEC successes in resolving regulatory challenges.
Virginia Chan, Market Access and Regulatory Affairs (MARA) lead for USDEC’s China office, explains to IWC attendees the regulatory process for shipping U.S. whey and dairy products to China.
New product innovation leads to growth
Additional speakers, including Dr. Atsushi Kanda, associate scientist, food development laboratories, Meiji Group, highlighted whey’s growing global appeal. Meiji is the market leader for whey protein use in sports nutrition in Japan and has been at the forefront of launching mainstream health and wellness products featuring whey.
Dr. Kanda, who participated in USDEC’s 2015 technical training mission to the U.S. and is a frequent participant in USDEC Japan events, noted how the Japanese whey protein market has grown four-fold in value terms over the last decade.
As noted in last week’s Global Dairy eBrief story on Kiyota Sangyo and USDEC’s collaborative new product development efforts, the United States has been a major beneficiary of that growth. U.S. WPC80+ sales to Japan grew more than eight-fold from 2011-2021 and were up another 56% through the first seven months of 2022.
Meiji forecasts considerable growth for overall Japanese whey protein demand over the next five years.
USDEC bakery webinar touts permeate use in China
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. The webinar, USDEC’s first in partnership with the All China Bakery Association, explored trends and dairy ingredient use in bakery applications. The event was the latest in a line of USDEC activities aimed at driving U.S. permeate demand in China, and it also touched on dairy protein applications in baked goods.
USDEC’s 2021 new product launch survey (analyzed by Innova Market Insights) shows the continued growth and record use of permeate in global new product introductions across all-tracked categories. Permeate applications in bakery have been steadily rising around the world, posting average annual growth of 15.9% from 2016-2021. Bakery is a top category for the use of “dairy permeate powder,” as it is referred to in China. (An infographic showing this impressive permeate growth story is available in Chinese and other languages on USDEC’s customer facing website.)
In addition to the 139 people who viewed the webinar live, another 40 registered and can watch the archived version of the event. Members and customers interested in watching the webinar can also register to view it. Register and watch the English version here. Register and watch the Chinese version here. We encourage members to pass along the links and the infographic to bakery customers in China.
Experts to address supply chain challenges at fall membership meeting
USDEC is assembling a panel of experts to discuss supply chain challenges at the upcoming Fall Membership Meeting Oct. 10-11 at Chicago’s Swissôtel. The session, “Navigating Solutions to Supply Chain Challenges,” features speakers from industry and government offering their takes on port and rail congestion, labor, U.S. supply chain infrastructure and other factors affecting U.S. dairy suppliers.
Confirmed speakers include Michael Di Caprio, senior vice president for specialized sales for ocean carrier CMA CGM. Di Caprio will offer supply chain insights gleaned from more than 16 years at the company and answer member questions on ocean freight challenges. USDEC Executive Vice President Policy Development and Strategy Jaime Castaneda will moderate the session, which takes place on Oct. 11 from 3:00-3:45 p.m. We encourage members to come prepared with questions for Di Caprio and others during the Q&A portion.
Register now
To register for the Fall Membership Meeting, click here. To download the preliminary agenda, click here.
As was the case for recent membership meetings, the Oct. 11 general session will offer the option to attend in-person or participate virtually. However, activities taking place Oct. 10—including the Trade Policy Committee Meeting and the special session on Southeast Asia (“Southeast Asia Trends Briefing: Consumer Attitudes and Perceptions on Sustainability”)—are in-person only. If you have any questions about registration, please contact Weston Abels at wabels@usdec.org.
Market Summary
GDT rises but SMP disappoints
Broad-based demand across buying regions helped lift the Global Dairy Trade (GDT) Price Index 2% at the Sept. 20 auction. It was the second gain in a row after a streak of declines in 10 of 11 auctions dating back to the beginning of March.
Southeast Asia maintained its strong auction presence, leading WMP and cheddar buying and taking high volumes of SMP and butter. The Middle East increased cheddar purchasing, Africa increased WMP and AMF purchases and European buyers continue to use the GDT to supplement tight domestic SMP and WMP supplies.
Significantly, North Asia (China) returned to the top buying spot, dominating butter and taking big chunks of offered WMP, SMP and AMF volumes. But even with a stronger GDT presence, this wasn’t the buy-at-all-costs China of recent years.
Price changes
AMF led pricing gains, rising 4% to US$5,901/MT, but WMP was close behind with a 3.7% increase to US$3,733/MT. Fonterra Co-operative Group reduced volumes on offer for both products prior to the auction, providing support for the gains.
SMP disappointed, with a 0.7% decline to US$3,547/MT. The drop-off was minor, but futures markets were expecting a 4% increase. Part of the reason for the underperformance was the pre-auction addition of 10,000 MT of SMP by Fonterra. Fonterra added 9,650 MT of SMP to auctions taking place between October 2022 and June 2023, with an additional 350 MT to the Sept. 20 event.
Butter fell 0.2% to US$5,356/MT, despite strong demand from Asia.
Market direction remains a puzzle, with conflicting pricing signals. Global inflation, the strong U.S. dollar, uncertain GDP growth and China’s zero-COVID policy pose significant demand questions. Poor weather and pasture conditions in New Zealand and energy cost and availability issues in the EU (and their impact on dairy manufacturing operations) raise compelling supply reservations.
Trade Policy
USDEC calls on Senate for swift floor vote of McKalip
A coalition of 105 U.S. food and agricultural organizations and companies, including USDEC and NMPF, co-signed a letter to Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell urging them to work with colleagues to “expeditiously confirm” Doug McKalip as Chief Agricultural Negotiator at the Office of the U.S. Trade Representative. USDEC and NMPF drafted the letter and worked with the Corn Refiners Association to circulate it for signatures.
The letter warns that the competitive landscape “is moving quickly, and away from the United States,” as other dairy and ag export nations negotiate new long-term deals. While the United States is engaged in limited trade discussions like the Indo Pacific Economic Framework, “bilateral opportunities for U.S. agricultural trade await in places like the United Kingdom … and Taiwan, but their potential can only be realized with the meaningful contribution of the Chief Agricultural Negotiator,” the letter states.
Letter seeks WTO dispute settlement reform
Twelve U.S. ag associations, including USDEC and NMPF, sent a joint letter to USTR Katherine Tai voicing strong support for the U.S. government to engage with other World Trade Organization (WTO) members to establish and operate a functioning dispute settlement system (including a reformed appeals system) and make improvements to the Dispute Settlement Understanding (DSU) system that would help support a rules-based agricultural trading system.
U.S. ag exports face unwarranted trade barriers in many export markets, the letter notes. “Having a fair and functioning dispute settlement system, including the threat of formal dispute settlement, are fundamentally important for the future of the WTO,” it goes on to say.
Appellate Body breakdown
The WTO has an Appellate Body. That body has been non-functional since 2019 when the Trump Administration blocked all new appointments to the seven-member panel after years of U.S. complaints that the body overstepped its mandate. The U.S. has not brought a dispute related to agriculture since 2016.
“We acknowledge the importance of addressing Appellate Body overreach to the extent that it occurs, but it is equally important to ensure that the enforcement mechanism is robust and effective,” the letter states. “Indefinitely extending the block on Appellate Body appointments or agreeing to reforms that weaken the enforcement mechanism will have the opposite effect to the detriment of U.S. agriculture producers, the broader agriculture sector, and global food security.”
Ambassador Tai has expressed a desire to revise and restart the WTO dispute settlement system, including the Appellate Body, and this week convened a meeting on the sidelines of the G20 Ministerial in Bali, Indonesia, specifically to discuss dispute settlement reform. During that meeting, Ambassador Tai invited participants to offer views on possible improvements to the system, including how reforms can better help members resolve a dispute in an efficient and cost-effective manner. She also stated her interest in convening future meetings with ministers in different configurations to continue the dialogue.
Supply Chain
West Coast labor talks slow; railroad deal awaits vote
West Coast labor talks are reportedly months away from a resolution. The Wall Street Journal cites maritime executives saying they now expect negotiations to continue through the end of the year or into 2023.
The Pacific Maritime Association and International Longshore and Warehouse Union have agreed not to discuss ongoing negotiations, but contentious issues like automation and jurisdiction have reportedly slowed progress.
Biden Administration officials are monitoring the talks closely to ensure that they proceed at a good pace, and the president could step in should discussions break down as he did last week with the railroad workers contract.
Railroad deal pending
President Biden is coming off a victory in the form of last week’s new railroad deal. While the president earned praise from union leaders for the administration’s help, rank-and-file union members say they are withholding judgment until they see the text of the deal. It remains unclear if union locals will support the agreement or when locals will vote.
Seth Harris, President Biden’s former top labor advisor, said union ratification of the deal is not certain. “[Union] leadership has some work to do,” he added. (Wall Street Journal, 9/19/22; Bloomberg, 9/19/22, 9/17/22)
Company News
Company news briefs
About 200 members of the Chilterra farmers’ union and the Mapuche indigenous community temporarily took over Fonterra’s Prolesur milk processing plant in Los Lagos, Chile, late last week. The group accused Prolesur and Fonterra of exploitation for what they considered unfair milk prices. Chilterra farms are a key Prolesur supplier. … Separately, Fonterra said efforts to sell its Chilean business were progressing, but it had decided to maintain full ownership of its Australian operations. ... Australian dairy processor Norco said it might be forced to permanently close its ice cream plant in Lismore, New South Wales. Heavy rains flooded the plant in March, causing A$142 million (about US$95 million) in damage, according to Norco estimates. The company has plans to rebuild, and the Australian government pledged $35 million toward the project, but Norco says it needs additional government funding. (Company reports; BusinessDesk, 9/16/22; ABC News, 9/14/22)
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