HIGHLIGHTS: JANUARY 12, 2024
• U.S. cheese export grows in November but overall volume declines
• FAS announces MAP, FMD allocations
• Dairy carbon inset marketplace kicks off
• Morris featured in Cheese Market News
• Save the date! USDEC Annual Meeting set for April
• Register for February’s USDA Ag Outlook Forum
• Market Summary: New Year marks removal of all Chinese duties on NZ milk powder
• Red Sea shipping crisis continues
• U.S.-Mexico rail crossings reopened
• Ongoing issues Red Sea/Suez Canal shipping
• Ornua sells UK powder manufacturing, blending business
• China’s Pinlive starts making its own cheese
• Company news: Pizza Inn, Nutura, Volac, Lactalis
Featured
Cheese rebound and strong WPC80+ sales unable to erase declines in other product categories
U.S.
cheese suppliers had their best November ever, shipping 38,610 MT—a 4%
increase over the previous year. But the cheese category’s
improvement—plus ongoing growth in high-protein whey exports
(WPC80+)—were insufficient to offset declines in almost all other
product categories.
Year-over-year
(YOY) U.S. dairy exports fell 8.1% in milk solids equivalent (MSE)
terms in November. With only one month of data to go, they are down 7.4%
for the year.
In
value terms, even as U.S. exports of high-value products like cheese
and whey proteins grew, lower commodity prices pushed U.S. dairy export
value down 21% to $631 million in November, putting overall value down
16% year to date (to $7.481 billion). Effectively, even as the declines
are moderating and performance is improving, U.S. dairy exports are
still trailing the highs of 2022 both on a volume and value basis.
With
tepid global economic growth and inflationary forces still holding sway
in key markets, a broad and sustained demand rebound remains elusive.
Global cheese demand, however, is showing some green shoots. As we wrote in our International Demand Analysis,
global cheese trade (all suppliers) appeared to turn a corner in
October, jumping 12% vs. the previous year. That modest improvement in
demand combined with competitive prices boosted U.S. cheese exporters in
November. U.S. shipments to Mexico soared 42% (+4,370 MT) for the month
and have already exceeded the annual record with a full month of data
to go. U.S. exports to Central America grew 16% (+565 MT) while volume
to the Caribbean rose 14% (+276 MT). Shipments to China grew nearly
five-fold (+1,290 MT). (For more details on cheese, see below.)
Similarly,
WPC80+ exports jumped 37% (+1,960 MT) as global demand there too seems
to be improving. It was a down month for Japan, the No. 1 U.S. market,
but shipments to China more than doubled (+920 MT), volume to Brazil
nearly tripled (+756 MT) and India came out of nowhere, buying 761 MT
(up from only 47 MT in November 2022). YTD U.S. WPC80+ exports grew 18%
(+10,805 MT) and, once December numbers come out, will most certainly
top 70,000 MT in a year for the first time.
For
more on November data—including recaps of NFDM/SMP, low-protein whey,
lactose and fluid milk and cream and a deeper dive into cheese—read the
U.S. Dairy Exporter Blog post, “Cheese rebounds in November, but overall U.S. dairy export volume declines.” In addition, check out the interactive charts at the USDEC Data Hub under the U.S. Exports tab.
FAS announces new 2024 MAP and FMD allocations, including funding for USDEC
USDA’s
Foreign Agricultural Service (FAS) announced new funding for fiscal
2024 for the Market Access Program (MAP) and the Foreign Market
Development (FMD) Program. FAS allocated the $203-million budget to
nearly 70 agricultural cooperator organizations. USDEC was awarded about
$5.2 million in new funding, although with the carryover from fiscal
2023, the full funding is about $6.4 million for this year. That total
is down by about $100,000 from USDEC estimates due to a lower level of
program carryover funding that affected almost every cooperator.
USDEC
uses MAP funds for several investments, ranging from international
office network to research, engagement with foreign industries,
partnerships and U.S. dairy promotion efforts. FMD funds are used
largely for investments in strategic research, communications, seminars,
shows and workshops.
USDEC
continues to engage with Congress and the administration to urge them
to double funding for the MAP and FMD programs. MAP and FMD have not
seen a budget increase in 16 years, despite offering consistent returns
on investment.
Dairy carbon insetting marketplace kicks off with sale of verified carbon credits to DFA
The
U.S. dairy sector passed a sustainability milestone recently with the
first sale of verified carbon credits in the livestock carbon insetting
marketplace to Dairy Farmers of America (DFA). Both carbon insets and
carbon offsets are strategies to reduce a company’s overall climate
impact. While there are many differences between the two concepts, the
major divergence is this: insetting is when companies invest in carbon
reduction projects within their own supply chain, while offsetting is
essentially paying a company that invests in carbon reduction projects
in any business sector to offset your own carbon footprint.
Here’s
an example of how insetting works. This first carbon credit sale was a
collaboration between Texas dairy farmer Jasper DeVos, Elanco Animal
Health, technology provider and carbon insetting marketplace developer
Athian, and DFA.
DeVos
utilized a feed management product and quantification tool from Elanco
to reduce and measure methane emissions. A third-party verification
process through Athian certified the farm’s avoided greenhouse gas
emissions and created a carbon credit. The resulting carbon credit was
then offered for sale in Athian’s livestock carbon insetting marketplace
to companies in the dairy value chain and was purchased by DFA.
As noted in the announcement,
the purchase of such credits returns economic value to the farmer via
the sale. Purchasing companies can count the reductions as progress
toward their environmental and sustainability commitments instead of
other industries using them as an offset.
Morris featured in Cheese Market News’ “Women in Leadership” column
Cheese Market News profiled USDEC Executive Vice President, Trade Policy and Global Affairs Shawna Morris in its latest “Women in Leadership” column.
In the Q&A-style feature, Morris outlines insights gathered from
her career in the dairy sector, including women representation in the
industry and how to improve it, opportunities for women and how
diversity, equity and inclusion have changed over the last 20 years. To
download the Women in Leadership column featuring Morris, click here.
Events
Save the date! USDEC Annual Membership Meeting
Mark
your calendars for USDEC’s 2024 Annual Meeting in Houston, Texas, on
April 15-16, with committee meetings following on April 17. The location
is ideal for discussions about many of today’s high-priority dairy
export topics, including shipping, port access, supply chain, Mexico and
Central and South America. USDEC is working on the speaker lineup and
agenda, but has already secured two high-profile guests to address the
meeting: former White House advisor, bestselling author and
international global business consultant Todd Buchholz
and member of the Port of Houston Commercial Divisions, Latin America
business development expert and supply chain authority Ricardo Arias.
Registration
for the meeting will open next month (keep your eyes on your inbox for a
direct email with the registration link or watch the pages of Global Dairy eBrief), but you can book a room at the Omni Houston hotel now. Follow this link to reserve a room or call the front desk at 713-871-8181 and mention USDEC when you book.
USDA Ag Outlook Forum coming up in February
USDA will hold its 100th
Agricultural Outlook Forum on Feb. 15-16 at the Crystal City Gateway
Marriott in Arlington, Virginia. Themed “Cultivate the Future,” the
conference will feature a keynote address from USDA Secretary Tom
Vilsack, 30 breakout sessions featuring 120 ag experts covering
everything from trade and markets to climate change and innovation, and a
discussion with state agricultural commissioners about their
on-the-ground efforts to address the challenges producers face and more.
For more information and to register, click here.
Market Summary
New Year marks elimination of last Chinese tariffs on NZ dairy products
Effective
Jan. 1, 2024, the final safeguard tariffs on New Zealand milk powder
shipments to China fell to zero in line with the 2008 free trade deal
between the two countries. The question is how—or whether—that change
might reinvigorate demand for Kiwi WMP, particularly when several
additional dynamics are factored in.
Chinese
WMP imports through the first 11 months of 2023 plunged 38% to 410,857
MT, the lowest since 2016. Chinese imports of WMP from New Zealand fell
by more than 220,000 MT in the first 11 months. But 2023 was an unusual
year. For years under the China-New Zealand free trade deal, Chinese WMP
purchasing from New Zealand was front-loaded, with a spike in volume
early to take advantage of zero tariffs before the safeguards kicked in.
In 2023, the safeguard tariffs began immediately because China allowed
additional volume under zero tariff in 2022.
China
has transitioned from years of limited zero-tariff WMP and front-loaded
buying to no zero-tariff WMP in 2023 to unlimited zero-tariff WMP going
forward.
Trends
in Chinese farmgate pricing are another potential bullish factor in
Chinese WMP demand. Elevated Chinese farmgate milk prices had driven
milk production gains and domestic WMP manufacturing into 2023,
dampening import demand. But farmgate prices have been eroding for
months now, reportedly dropping to their lowest level in six years—a
development that could lower milk output growth in 2024.
But
many question marks remain, including significant bearish factors like
elevated domestic WMP production and inventories, evolving Chinese
demand, disappointing economic growth and shifting demographics.
Supply Chain
Shippers, carriers seek solutions as Red Sea crisis continues
Disruptions
and uncertainty continue to plague shipping operations in the Southern
Red Sea as Houthi attacks continued against vessels seeking passage
through the Suez Canal. Yemen’s Iran-backed Houthi militants have
targeted more than 25 ships in the last two months with drones,
missiles, helicopters and boats, causing many operators to continue to
reroute vessels around Africa’s Cape of Good Hope.
A
U.S.-led initiative to protect commercial shippers known as Operation
Prosperity Guardian has struggled for international support, as other
nations have declined to join due to the potential for perceived
political affiliations associated with the effort. While several nations
have called for the United Nations to intervene and address the
attacks, reports have surfaced that some shipping companies are taking
their own action to navigate the situation.
Chinese
carrier Cosco has reportedly temporarily suspended ocean shipments to
Israel. Other unconfirmed reports have suggested that some smaller
carriers were entering agreements with the Houthis to let their ships
pass through the area without incident. At press time, U.S. and UK
forces launched air strikes targeting the Houthi's ability to attack.
The
markets are watching the situation closely among concerns that the
longer routes and higher shipping rates (in addition to raising costs
and creating scheduling challenges for exporters) may trigger a new
round of inflation caused by supply disruption. (Dow Jones, 1/8/24; The Loadstar, 1/8/24; Splash 247, 1/8/24)
Company News
Ornua selling UK powder business
Ornua
Nutrition Ingredients, which is part of Ornua Ingredients Europe, is
selling its powder blending and manufacturing business in the UK to
Roger Wertheim-Aymes, founder of the medical supplement operation Aymes.
(Ornua and Aymes had previously signed a long-term supply agreement
for sachets of milk powder under the Aymes Shake label.) The deal
includes a facility in Leek, UK, which produces dairy ingredients,
bakery products, breakfast cereal, sports nutrition products and health
and well-being products. Once the deal is finalized, the facility will
manufacture products under the trading name Allicio. (Just Food, 1/10/24; Agriland, 1/6/24)
China’s Pinlive Foods opens its own cheese factory
Pinlive
Foods, the Chinese owner of the imported dairy brand Weidendorf,
started producing its own cheese in December. The company’s first
factory is located in Shanghai and includes two cheese production
lines—one for small round-shaped cheddar cheese with a production
capacity of 600 kg per hour, the other for string cheese with a
production capacity of 500 kg per hour. (USDEC China office)
Nutura makes moves into Vietnam and Thailand
Australia-based
milk powder company Nutura Organic is expanding its presence into
Vietnam and Thailand as the company looks for growth in emerging markets
while China becomes more challenging.
In
Vietnam, Nutura is partnering with Natural Foods Group to launch
products ranging from its pregnancy and conventional infant milk
formulas to its organic infant milk formula. In Thailand, the company
announced a distribution deal with Thai food producer CP Foods to
introduce Nutura products into the country. That launch, which is
expected to begin in hypermarkets and supermarkets in the first quarter
of this year, features products designed for consumers at different life
stages, including both infant and adult milk formulas from Nutura
Organic. (NutraIngredients-Asia.com, 1/3/24)
Mergers, acquisitions and joint ventures
French dairy company Danone signed an agreement to sell its Horizon Organic and Wallaby premium organic dairy businesses in the U.S. to Platinum Equity,
a U.S.-based investment firm. Horizon Organic and Wallaby represented
approximately 3% of Danone’s global revenues in 2022. Danone will retain
a non-consolidated minority stake in the business. … UK-based Volac International
has agreed to sell its milk replacer business to The Netherlands’
Denkavit Group, a move that will make Denkavit the sole owner of the
Volac milk replacer sales organization and the Volac Socoor business in
Italy. Company officials said the buy-out was a strategic decision that
will allow Denkavit to strengthen the milk replacer business while
enabling Volac to put more focus on growing its new feed additives
division. … Chicago-based Archer-Daniels-Midland
announced a deal to acquire Revela Foods, a Wisconsin-based dairy flavor
ingredients developer and manufacturer. The deal, which ADM says will
enhance its growing portfolio of flavor ingredients and solutions, is
expected to close early this year. (Company reports)
Company news briefs
Dallas-based pizza buffet chain Pizza Inn signed a franchise agreement with Blessings Basket Company for Serving Food
to develop 50 locations in the Kingdom of Saudi Arabia. The deal, which
kicks off with two new locations in the Middle Eastern kingdom this
month, will more than triple the number of outlets Pizza Inn operates
internationally. … China’s National Dairy Innovation Center
officially started operation in December. Approved by the Ministry of
Science and Technology and located in Inner Mongolia, the Center brings
together more than 100 member companies and more than 1,000 research
experts from China and abroad to focus on China’s national dairy demand
and industry development. … Ireland’s Lakeland Dairies
plans to expand its Killeshandra, Co. Cavan, fluid milk facility,
increasing milk intake by nearly 20% and expanding storage, packaging
and loading dock. (Late last year, Lakeland announced the closure of three of its processing sites.) … French global dairy giant Lactalis
inaugurated a new solar plant that’s expected to reduce carbon dioxide
emissions by 7% or about 2,000 MT per year. The solar thermal plant will
supply heat to the company’s adjacent Verdun dairy factory, which
converts liquid whey into whey powder, for the next 25 years. (Company reports; USDEC China office; Agriland, 1/8/24; Restaurant Business, 1/4/24)
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