• Annual meeting recap

• Egypt corrects halal certification revision

• New product innovation video

• U.S. to host IDF summit

• Market Summary: China’s dairy appetite
• Indo-Pacific Economic Framework

• USDEC calls for consolidated plant list

• Ocean Shipping Reform Act steams ahead

• Dairy prominent in 2022 National Trade Estimate report

• Company news: MENA foodservice, Emmi, Savencia

 

Major opportunities ahead for U.S. dairy exporters, if they can overcome challenges
This week’s USDEC Spring Annual Meeting painted a balanced, realistic picture of export opportunities in the years ahead. The United States will have ample opportunity to increase U.S. dairy export business based on global supply and demand expectations over the next decade. At the same time, we will need to overcome ongoing supply chain challenges, withstand geopolitical unrest that threatens economic growth, navigate evolving sustainability demands, and continue to work toward a level global trade playing field without trade barriers or protectionist, non-science-based regulations that hinder our efforts.

Sessions at the meeting addressed both the opportunities and the challenges. Here are a couple of highlights.

Demand and supply favor U.S.
On the opportunity side, dairy demand worldwide will continue to grow faster than local dairy producers can match, noted Ben Laine, vice president, Rabosearch Dairy, Rabobank. From 2020-2030, U.S. dairy exports will grow by about 7.5 million MT milk equivalent, according to Rabobank estimates.

Even after factoring in export gains from the EU, Oceania, South America and elsewhere, global demand will outstrip production by more than 20 million MT milk equivalent. That’s a 20-million-MT opportunity for the dairy sector that can expand production and gear up to service export market needs.

The two largest global dairy suppliers are coping with milk production pressures that will limit their ability to grow with global demand. Analysts forecast New Zealand’s milk output will shrink through 2030. France and Germany (the EU’s two biggest milk producers) are losing farms daily because they can’t make the economics work, said Christophe Lafougere, associate, Girafood. At least one EU cheese plant has had to shut down, while another major facility making 250,000 MT per year plans to reduce output 25,000-50,000 MT because it cannot get enough milk.

Dairy companies are starting to ask themselves if they will have enough milk to operate in the future, and some are making alternative plans to utilize existing infrastructure, such as moving into dairy alternatives, said Lafougere.

It spells opportunity for the United States, as long as U.S. companies can respond to the significant challenges facing U.S. dairy export growth.

Challenges plentiful
USDEC President and CEO Krysta Harden discussed some of those challenges in a keynote “fireside chat” with Anja Manuel, founding partner and principal, Rice, Hadley, Gates & Manuel LLC.

The topics ranged from Russia’s invasion of Ukraine to U.S.-China relations to burgeoning Latin American protectionism to the supply chain crisis.

Manuel likened the pre-pandemic supply chain to “a beautifully fine-tuned ballet,” with equipment, workers, trucks, rail, ports and ships all choreographed to interact exactly where and when needed to smoothly and efficiently import and export goods.

“If you break any part of that chain, you mess with everything,” she said, noting that in the post-pandemic supply-chain ballet, it’s like “the three principal dancers broke their legs.”

Supply chain deeper dive
Panelists at the subsequent session, “A Look at the Supply Chain: Transportation Issues and the Dairy Industry,” delved more deeply into the supply chain crisis. Speakers offered a to-do list of actions that would help resolve bottlenecks, some more likely than others: passage of the Ocean Shipping Reform Act (OSRA), programs to train younger trucks drivers to resolve labor shortages, regulatory changes that would allow those younger drivers to cross state lines, significantly improved data sharing among all facets of the supply chain, infrastructure investment, further movement toward 24/7 port operations, and a U.S.-owned ocean carrier or two.

Some, like the OSRA, are remedies USDEC has been working toward for months and are continuing to progress (see story below, “Ocean Shipping Reform Act steams ahead”).

There are no easy answers to the supply chain situation, Harden said. “I don’t have the answers. I don’t think anyone in the room has the answers, but collectively, we’ve got to keep working on this.

“There has got to be investment, there’s got to be creativity. There’s got to be change. We’ve got to be part of that,” Harden said. “We have to explain what we need and make sure we are getting those specific problems and suggested solutions to decision-makers and that we are willing as an industry to come together to help create some of those answers.”

For more on the meeting …
This is just a summary of some of the key themes from the meeting. The speakers at these and other sessions provided a slew of insights on global markets, USDEC programs and future prospects. For example, Daniel Whitley, administrator, USDA Foreign Agricultural Service, spoke on a panel with USDEC staff that looked at the relationship between USDEC and USDA and opportunities to strengthen the partnership between the two.

Members can view the PowerPoint slides (of presenters who had slides) in the Meetings & Webinars section of usdec.org under the Spring 2022 meeting link. In addition, USDEC will post the full video versions of presentations next week after they are processed.

Egypt alters its halal certification update
In a follow-up to its letter postponing Egypt’s halal certification requirement, the Egyptian Ministry of Agriculture and Land Reclamation notified industry that the officially postponed halal certification requirement for milk and dairy products was altered to only be a postponement of the payment requirements. As such, while exporters and importers will not need to pay any fees associated with ISEG Halal’s halal certificates until Oct. 1, 2022, Egypt will require all imports of milk and dairy products to be certified as halal by ISEG Halal.

USDEC continues to work closely with FAS and USTR to resolve the issues, and we will provide further information and updates once they are obtained. In the meantime, if you have any questions, please contact Bryan Jacoby at bjacoby@usdec.org or Shawna Morris at smorris@usdec.org.

New video highlights how USDEC’s local-friendly product innovation activities help build demand
Vikki Nicholson-West, USDEC senior vice president, Global Ingredients Marketing, took meeting attendees on a trip around the world at this week’s USDEC Spring Annual Meeting. Nicholson-West highlighted how USDEC partnerships help drive local-friendly product innovation using U.S. dairy ingredients—increasing awareness and desire to use U.S. dairy ingredients and ultimately driving demand.

From Jiangnan University in China to the Food Innovation and Resource Centre in Singapore to Kiyota Sangyo in Japan (see Global Dairy eBrief, 3/25/22) to Tec de Monterrey in Mexico, these partnerships “help open local doors and create new pathways to success with U.S. dairy ingredients,” she said.

Nicholson-West unveiled a new “Passport to Innovation” video that offers an around-the-world snapshot of these activities in less than two minutes. She encouraged members to not only view and share the video, but to explore the resources, product prototypes and technical materials online. Go to the product innovation section of the U.S. Center for Dairy Excellence website to see products created for Southeast Asian tastes. Also look under the “Using Dairy” tab at ThinkUSAdairy.org, participate in USDEC Ingredients Team activities and stay connected by joining the Ingredients Advisory Group.

U.S. to host 2023 World Dairy Summit to showcase global dairy leadership
The International Dairy Federation (IDF) board of directors voted to accept the US-IDF proposal for the United States to host the 2023 World Dairy Summit. The decision is a boon to U.S. dairy, providing a valuable opportunity to showcase and highlight the United States’ global dairy leadership and the U.S. commitment to global market development, sustainability and product innovation—areas that are also major focus areas for IDF.

The 2023 summit had been slated for China, but it dropped out late last year due to ongoing COVID challenges.

Benefits as host
The host country chooses the theme of the summit and leads the process for developing sessions, selecting speakers, and conducting industry tours of farms and facilities to showcase its industry. That organizing role creates numerous opportunities for Dairy Management Inc. (DMI), USDEC staff and all of U.S. dairy to promote their priorities, global leadership and unique expertise to a broad global audience. (Dairy industry representatives from 40+ countries typically attend the summit, and USDEC hopes to drive increased participation from additional key export markets as well next year.)

“This represents a major investment in U.S. dairy’s global leadership and a very clear sign that U.S. dairy, led by DMI, has stepped up its game,” said Nick Gardner, Senior Vice President, Sustainability and Multilateral Affairs. “This is also a unique moment to showcase the benefits and promise of U.S. dairy’s sustainability efforts at a time when many of our global competitors are trying to paint us in a negative light.”

Background and next step
USDEC plays a leadership role in US-IDF and worked with DMI and others on making the bid. This will be the first time in decades that the summit is held in the United States. The U.S. joined with Canada to co-host the meeting in 2005 in Vancouver, British Columbia .

Formal approval by the IDF General Assembly is required to ratify the IDF board’s decision and provide the legal certainty to begin contracting venues and developing programming. That approval is expected as early as next week.

 

Market outlook: Tight milk supply and China’s appetite
“Globally, we are going to be talking about tight supply for milk production for much of the year,” said USDEC Economic Analyst Stephen Cain at the start of the USDEC Spring Annual Meeting Market Outlook Update session.

In addition to rising structural limitations to dairy herd growth in the EU and New Zealand (a topic explored earlier in the day at the session, “More with Less: How Competition for Milk Will Impact EU and NZ Dairies”), elevated input costs (heightened by Russia’s invasion of Ukraine) and labor shortages will also hinder efforts to boost production to meet growing demand.

While the U.S. is best positioned from a global perspective to increase production and meet rising long-term demand, those rising input costs and labor issues will challenge the U.S. ability to do so in the short run.

Questions about China in 2022
Booming Chinese demand was a huge factor in driving global dairy trade in 2021 as well as in fueling international dairy commodity prices. In the first half of 2021, “China purchased everything. They sucked all the oxygen out of the room and drove up those prices,” Cain said.

Global dairy trade remained on a strong upward trajectory in 2021 …

… but that growth curve would not have looked quite so strong without record purchasing from China.

That demand appetite might not show the same type of growth in 2022. We are starting to see some pullback in demand in China, and whether it will grow or even maintain 2021 buying levels remains to be seen.

Regardless of China, “we are going to need to see some other partners start to step up,” Cain said.

And there are reasons to be optimistic that we may see some accelerated buying apart from China. Many countries worked down inventories last year to avoid paying higher dairy commodity prices. The Middle East/North Africa (MENA) is a prime example.

Overall MENA dairy imports lagged in 2021 as the region drove down stocks. With inventories low and few signs that prices will ease anytime soon, they could be more motivated to refill pipelines in 2022. A sustained hike in oil prices could buoy the region’s economy and help mitigate elevated dairy commodity prices.

As noted throughout much of this week’s meeting, significant uncertainties remain in play that could affect demand, including the impact of Russia’s war on Ukraine on GDP growth in dairy export markets.

 

Letters urge Biden Administration to make agriculture major focus of Indo-Pacific Economic Framework
Two letters—one from the House of Representatives and a second from the U.S. Food and Agricultural Dialogue for Trade (USFADT)—urged the Biden Administration to prioritize U.S. food and agricultural exports as part of the nascent Indo-Pacific Economic Framework (IPEF).

The president announced plans for a U.S.-led IPEF last October. It would not be a traditional free trade agreement (FTA), but rather an effort “to deepen economic relations in the Indo-Pacific region and coordinate approaches to addressing global economic challenges,” the administration said.

USDEC is working to ensure that any potential deal includes provisions that would facilitate U.S. dairy trade with the Asia-Pacific region. The IPEF is one of many routes USDEC is seeking to help level the trade playing field with competitors like New Zealand and the EU while progress U.S. FTA talks remain stalled.

The Biden Administration has yet to report on the framework’s participants, but it did hold exploratory talks with Japan, Malaysia, Singapore and South Korea in February and has also discussed the undertaking with Australia and New Zealand.

From the House
The first letter, signed by a bipartisan group of 87 U.S. House members, called on USTR Ambassador Katherine Tai and USDA Secretary Tom Vilsack to use the IPEF to address barriers to U.S. agricultural exports, create mutually agreed-upon regulatory reforms that would benefit U.S. dairy and others in American agriculture, to “include efforts to reduce tariffs on U.S. agricultural exports,” and more.

“Dairy farmers and manufacturers need a framework that lives up to the recommendations laid out in this letter, ensuring America’s dairy industry—from farmers to workers to manufacturers—are able to compete fairly and efficiently in fast-growing markets across Asia and the Pacific,” USDEC President and CEO Krysta Harden said in a joint USDEC/NMPF press release on the letter.

USDEC and NMPF worked with the lead congressional offices to craft the letter’s message, develop a broad coalition of U.S. ag groups to support the letter and secure congressional signers. Representatives Jimmy Panetta (D-CA) and Jodey Arrington (R-TX) led the letter, together with Jim Costa (D-CA), Dusty Johnson (R-SD), Ron Kind (D-WI) and Randy Feenstra (R-IA). Several of the actions urged are those USDEC has worked to tout as important IPEF goals.

From the USFADT
The second letter from USFADT to Ambassador Tai, Secretary Vilsack and Commerce Secretary Gina Raimondo echoes many of the themes from the House communique, noting that the Indo-Pacific is “a critically important region for American farmers, ranchers, agribusinesses and workers.” USFADT is made up of more than 200 U.S. food and ag groups and companies, including USDEC and NMPF.

The letter notes: “Improving U.S. farmers, ranchers, food and agribusiness competitiveness in the region is dependent on having a level playing field with regard to tariffs, sanitary and phytosanitary (SPS) measures, technical barriers to trade and other essential provisions, but also ensuring countries adhere to a science- and evidence-based approach to regulatory matters, operate functioning import licensing and programs to facilitate trade, and remove unwarranted restrictions.”

USDEC supports creation of consolidated U.S. dairy plant list to facilitate exports
USDEC and NMPF submitted joint comments to FDA’s Center for Food Safety and Applied Nutrition-Regulated Products supporting the agency’s effort to create a new, consolidated list of plants and products certified for export that would be offered to importing countries in lieu of country-specific lists.

The comments provide input on key factors to consider as the agency moves forward in developing a consolidated dairy exporter list, including disclosure requirements that would ensure the proprietary nature of commercially sensitive business information, functionality that would allow facilities to select interest in particular markets, and close coordination with USDA during the list development process.

USDEC and NMPF emphasized that they are eager to work with FDA and relevant interagency partners like USDA’s Agricultural Marketing Service and Foreign Ag Service on how to craft such a list. USDEC’s MARA and Trade Policy teams will be pursuing further work with both agencies to advance work on this area.

Ocean Shipping Reform Act steams ahead
Key legislation to address the supply chain challenges facing U.S. dairy exporters moved forward this week in Congress. On Thursday, the Senate passed the Ocean Shipping Reform Act of 2022 (S. 3580) by voice vote, a week after the Commerce, Science, and Transportation Committee unanimously approved the bill.

On Wednesday, the House passed its own version of the legislation a third time as part of the Coast Guard reauthorization package.

The bill now has several avenues to move toward conference to reconcile the differences between the two chambers—either as a standalone bill or as part of the negotiations on the U.S.-China competition legislation. The Senate also has the option to pass the measure in its own Coast Guard reauthorization.

USDEC working with NMPF played a key role in shaping the language in both the House and Senate bills, worked to garner critical support for the measure and fought to keep out harmful amendments in the Senate text that would threaten the strong bipartisan support for the legislation. The Trade Policy team will continue to work with congressional conferees to ensure strong prescriptive provisions to alleviate the crisis are retained as the bill makes its way to the president’s desk for signature.

USTR report highlights barriers to U.S. dairy trade
The 2022 National Trade Estimate Report on Foreign Trade Barriers highlights numerous impediments to dairy trade drawn from joint comments submitted last October by USDEC and NMPF. Notably, the USTR press release on the annual report cites two dairy-specific issues as examples of significant obstacles:

• Indonesia’s “opaque and burdensome facility registration requirements” for dairy.
• Mexico’s draft conformity assessment procedures for cheese.

The 517-page document covers 64 key U.S. export markets and regions and includes many more references to dairy trade issues. Milk and dairy products are cited more than 100 times in the report, which highlights unscientific import requirements, tariffs, country-of-origin labeling and many other issues hampering U.S. dairy trade.

Middle East foodservice operations expand
The Middle East remains a thriving region for foodservice expansion. A few recent developments:

• AG Café, the master franchisee for the Tim Hortons brand in the Middle East, plans to open 110 more Tim Hortons locations in Saudi Arabia by 2024, giving the company more than 300 across the GCC.
• PJP Investment Group, the master franchisee for Papa John’s International, signed an agreement with UAE-based energy and retail company ENOC Group. By year-end, PJP plans to open seven Papa John’s outlets at ENOC food courts across the UAE. The new units will give PJP more than 70 Papa John’s stores in the nation.
• “Ghost” or “cloud” kitchens are a growing foodservice trend worldwide, including the Middle East. Kitopi Bahrain, which cooperates with many local, regional and international foodservice brands, including Urban Slice pizza, opened three cloud kitchens and a central production facility in Bahrain. With the expansion, the company will begin offering additional products, including OG Sliders burgers. Kitopi earlier announced plans to expand to Singapore and Malaysia in the second half of 2022. (USDEC Middle East/North Africa office)

Lactalis buys German dairy brands, plant
Lactalis is reportedly buying the fresh product operations of German dairy co-op Bayerische Milchindustrie (BMI) including the brands Frankenland, Thüringer Land and Haydi and a manufacturing plant in Würzburg, Germany. BMI said it would focus its business on cheese and ingredients moving forward. (just-food.com, 3/29/22)

Company news briefs
Olivier Delamea will succeed Jean-Paul Torris as CEO of Savencia Fromage & Dairy. Torris is stepping down after 30 years with Savencia, including the last six as CEO. Delamea is joining Savencia on April 4, 2022, after heading the vegetable division of the Avril Group and an earlier run as general manager of Danone France. … Swiss cheese and dairy processor Emmi named Ricarda Demarmels as the company’s next CEO. Demarmels, who currently serves as Emmi CFO, will replace Urs Riedener when he steps down on Jan. 1, 2023, after leading the company for 14 years. (Company reports)

• FAS Administrator Daniel Whitley thanks USDEC for being a strong, proactive partner
• Harden points out future trends at USDEC membership meeting
• Dairy leader calls on U.S. government to pursue new trade deals
• U.S. sustainability initiatives praised
• Explore how market-tailored solutions are spurring growth with U.S. dairy ingredients around the world (retweet)