HIGHLIGHTS: November 10, 2023
• USDA allocates over $110 million to U.S. dairy sustainability projects
• U.S. dairy ingredients in the spotlight in the Middle East
• Letter outlines U.S. ag trade priorities in advance of MC13
• U.S. dairy export performance mixed in September
• Market Summary: GDT declines for first time since September
• Panama Canal update
• Change of leadership at Leprino
• Company news: Lala, Olam, Starbucks
Featured
USDA funding highlights U.S. dairy’s sustainability leadership, ambition
Several
U.S. dairy companies received USDA funding this week to advance
ambitious industry commitments to reduce greenhouse gas emissions,
optimize water usage and improve water quality. The 2023 Regional
Conservation Partnership Program (RCPP), which supports projects that
promote conservation and reducing greenhouse gas (GHG) emissions,
awarded more than $1 billion through 81 projects designed to advance
partner-driven solutions to conservation on agricultural land.
Dairy-related companies received more than $110 million from the overall
budget.
USDA,
which administers the program, also announced several improvements to
this year’s RCPP, including streamlining RCPP agreements for the
public-private partnerships, entrusting program management and
negotiation to the State Conservationists for a more locally-led
process, and improving RCPP guidance and training. Funding for the
project was provided by the Inflation Reduction Act and the Farm Bill.
The dairy organizations receiving funding and their project goals include:
Agropur
The
“Agropur Dairy Producers Best Management Practices Project” ($9.8
million) will incentivize the implementation of best management
practices at farms across the central U.S. to achieve environmental
benefits including delivering GHG reductions, air quality improvements,
soil protection, water protection and resource conservation. In addition
to RCPP funds, Agropur and Nestlé will provide financial incentives and
technical assistance to farmers.
Agspire
The
“Absolute Enteric Methane Reductions in Washington State Dairies: A New
Frontier on the Journey to Net Zero” project ($16.5 million) will help
producers reduce and avoid GHG emissions by generating a reduction of
approximately 225,000 metric tons of CO2 equivalent from enteric methane
production in the Northwest Dairy Association milkshed.
California Dairies Inc.
The
“Absolute Enteric Methane Reductions in California Dairies; a New
Frontier in the Journey to Net Zero” project ($21.4 million) seeks to
implement feed-based interventions, including using feed additives, to
help producers reduce and avoid GHG. This approach aims to reduce the
GHG footprint of the dairy industry by 35%, a step toward achieving the
industry’s goal of GHG neutrality by 2050.
Dairy Farmers of America
The
“Climate-Smart Dairies: A Partnership for Enteric Methane Reduction
using Novel Feed Additives” project ($22.9 million) aims to support
dairy farmers as they seek to reduce GHG emissions while also improving
recordkeeping and expanding the dairy profit chain by implementing an
integrated system that includes advanced methane avoidance technology,
emission-reduction tracking and a customer-focused carbon marketplace.
Newtrient LLC
Newtrient
was awarded three projects totaling $18.3 million designed to improve
feed and manure management systems in three regions to further reduce
GHG emissions. The projects are:
- The
“Methane Avoidance on Dairy Farms in Michigan Milk Producers
Association Region” project ($6.2 million), in partnership with Michigan Milk Producers Association.
- The
“Accelerating Methane Emissions Reductions in Wisconsin, Michigan and
Indiana Dairy Producers” project ($9 million), involving members of Foremost Farms USA.
- The
“Reducing Greenhouse Gas Emissions on Idaho Dairy Farms” project ($3.1
million), which partners with Idaho dairy producers and seeks to enroll
10 producers and 12,000 cows.
Maryland & Virginia Milk Producers Cooperative Association (MDVA)
The
“Mid-Atlantic Dairy Farmers Producing Tangible Results Through Climate
Smart Solutions” project ($10 million) will work to enhance outreach and
education about conservation practices—including improving water
quality, reducing GHG emissions, improving soil health and increasing
farm efficiency—to dairy farmers in Maryland, North Carolina,
Pennsylvania and Virginia.
Stonyfield Organic/Lactalis U.S.
Stonyfield
is partnering with the National Fish and Wildlife Foundation for the
“Vermont Dairy Farms Working for Water, Wildlife, Climate, Food and
Farmers” project ($10 million), which will help organic and
pasture-based dairy farms throughout Vermont accelerate adoption of
conservation practices that reduce their water quality and climate
footprints, while also bolstering their economic sustainability. The
project aims to leverage Stonyfield’s dairy supply chain to facilitate
shared learning among farmers through events on demonstration farms, and
build a network of trained technical assistance providers who can
advise dairy farmers on whole-farm conservation planning
Tillamook County Creamery Association
The
“Oregon Dairy Climate and Water Quality Partnership” project ($4
million) seeks to enroll more than 22 producers representing a target of
10,000 cows in Clatsop and Tillamook counties and help them adopt NRCS
conservation practices focused on manure management for lasting
improvements to water quality of impaired watersheds. (USDA; Natural Resources Conservation Service; Dairy Processing, 11/2/23; AgProud, 11/3/23)
USDEC Seminar, Gulfood Manufacturing put U.S. dairy ingredients in the spotlight
On
Nov. 6, USDEC welcomed 54 key food and beverage processors from across
the Gulf Cooperation Council (GCC), Egypt and several other MENA region
countries to the exclusive conference, “USDEC Dairy Ingredients
Seminar—2023 Update.” At the event, which took place in Dubai prior to
the Gulfood Manufacturing expo, an expert lineup of speakers offered
their takes on the global dairy market outlook, risk management tools
and consumer trends, especially for dairy proteins.
Many
of the attendees had previously joined USDEC for a November 2022
Ingredient Buyer’s Conference. This year’s program aimed to provide a
valuable update to returning participants while giving the newcomers a
thorough summary of how to best capitalize on U.S. dairy ingredient
opportunities.
Eight
USDEC members also joined the event to network with the participants.
Members held more than 35 one-on-one meetings, discussing opportunities
for formulating with U.S. dairy Ingredients.
After
the seminar, USDEC exhibited at Gulfood Manufacturing at the Dubai
World Trade Center on Nov. 7-9. This ingredient-focused expo welcomed
over 3,000 exhibitors from 80 countries and 25,000 visitors from food
and beverage manufacturers from throughout the region. USDEC members who
took part in the U.S. dairy ingredient seminar held several meetings at
the booth.
Nina
Halal, director of USDEC’s MENA office, moderates a panel discussion at
this week’s ingredients seminar in Dubai. Seated left to right are
Terri Rexroat, USDEC vice president, Global Ingredients Marketing;
Nicole Jansen, customer success team leader, Innova Market Insights;
Stephen Cain, USDEC director, Economic Research and Analysis; and
Charlie Hyland, head of EMEA Dairy and Food Group, StoneX Financial.
Several USDEC members held meetings this week at the USDEC booth at Gulfood Manufacturing in Dubai.
Letter seeks renewed agricultural trade progress at upcoming WTO ministerial conference
A coalition of 30 ag associations, including USDEC and NMPF, sent a joint letter
to USTR Katherine Tai and USDA Secretary Tom Vilsack urging the
Biden-Harris Administration to take a proactive role in modernizing
global agricultural trade policies at the WTO’s upcoming 13th
Ministerial Conference (MC13). The letter, which USDEC and NMPF helped
shape, asks the U.S. government to pursue achievable, short-term WTO
goals while laying the groundwork for a more ambitious, long-term effort
to reform agricultural trading systems.
The letter urged the U.S. to:
- Restore binding dispute settlement that enables trade enforcement.
- Advance
a meaningful proposal on market access. “While future WTO reform may
not lock in market access gains equivalent to a free trade agreement
with a specific country, the benefits of reducing agricultural trade
barriers globally could be significant,” the letter states.
- Begin
talks with a subset of WTO members in areas where consensus outcomes
are momentarily impossible. Work in a plurilateral forum could lead to
concrete, binding commitments (including in areas that go beyond the
scope of the current WTO Agreement on Agriculture) and lay the
groundwork for eventual multilateral outcomes.
“The
WTO is too valuable to U.S. agriculture and global food security to
allow its negotiating function to collapse entirely,” the letter
concludes. “A reset in the negotiations is badly needed, and MC13
provides a critical opportunity to determine whether multilateral reset
is possible or if those supportive of continuing the reform process
should concentrate their energy on a separate approach.”
MC13 takes place Feb. 26-29, 2024, in Abu Dhabi.
U.S. export performance mixed in September
Despite
record shipments of WPC80+ and a rebound in U.S. cheese exports,
year-over-year U.S. dairy exports (milk solids equivalent or MSE) fell
12% in September. It was the eighth consecutive decline, dating back to
February 2023.
September export value fell 25% to $603 million, the lowest monthly total since January 2022.
Trends
that have been keeping overall U.S. exports in check for most of the
year remain largely unchanged. U.S. suppliers continue to face strong
demand headwinds from tepid global economic growth, elevated inflation
and, in the case of low-protein whey, China’s struggling pork sector.
While global milk supply growth has slowed, competition from New Zealand
and the EU remains tougher than it has been in recent years. At the
same time, we are seeing the emergence of some positive storylines in
recent months and into September, particularly on the higher-value
products.
On the upside …
The
biggest positive came in cheese and WPC80+. Global cheese demand has
proven surprisingly resilient internationally, buoyed by the ongoing
post-pandemic recovery in the foodservice sector and Mexico’s robust
consumption.
Year-over-year
U.S. cheese exports rose 4% (+1,531 MT) in September. Shipments to
Mexico remained on record pace, jumping 26% (+2,524 MT) and U.S. cheese
sales to China more than quadrupled (+1,502 MT). U.S. suppliers also
posted strong gains to Southeast Asia (+54%, +543 MT), Central America
(+10%, +310 MT) and the Caribbean (+9%, +154 MT).
The
increasingly global nutritional appeal of high-protein foods and
beverages, coupled with favorable pricing of high-protein whey, drove
WPC80+ demand to an all-time high in September. The U.S. shipped 7,356
MT of WPC80+ in September, a 40% increase (+2,118 MT) over the previous
year. It was the first time U.S. shipments cleared the 7,000-MT mark—and
in a 30-day month no less. U.S. WPC80+ exports to Japan—our top
market—more than doubled (+1,078 MT) while volume to China more than
tripled (+1,070 MT).
While
U.S. cheese export volume remains down 5% year to date through
September, U.S. WPC80+ shipments were up 18% in the first three
quarters. Lactose, which also rebounded in September (+4%, +1,583 MT)
after a streak of negative monthly results, remains 5% up for the year.
On the downside …
U.S.
nonfat dry milk/skim milk powder (NFDM/SMP) exports had their worst
month of 2023, falling 20% to 53,256 MT (-13,411 MT). Year-over-year
U.S. shipments to Mexico declined for the first time in more than a year
(-16%, -5,273 MT). And the nascent recovery in U.S. NFDM/SMP exports to
Southeast Asia (+3% for the three-months of June-August) ended abruptly
in September, with year-over-year volume falling 38% (-7,314 MT).
China
continued to drag down U.S. low-protein whey sales. U.S. whey shipments
to China (0404.10) fell 39% (-11,427 MT), with across-the-board
double-digit declines in dry, whey protein concentrate (less than 80%)
and modified whey and permeate. U.S. suppliers also saw smaller declines
to Mexico (-24%, -928 MT) and Canada (-28%, -1,172 MT).
For a deeper dive into the cheese and NFDM/SMP performance, read “U.S. export performance mixed in September,” on the U.S. Dairy Exporter Blog. In addition, check out the interactive charts at the U.S. Exports tab in the USDEC Data Hub section at www.usdec.org.
Market Summary
GDT: WMP’s hot streak comes to an end
After
posting four straight healthy gains beginning with the Sept. 3 auction,
the Global Dairy Trade (GDT) Price Index fell 0.7% at the Nov. 8 event.
Despite the decline, the overall results actually were fairly positive,
and demand was good.
SMP,
cheddar and AMF posted solid gains. The average winning SMP price rose
2.3% to US$2,724/MT—its fourth straight increase. AMF gained 3.1% to
US$5,489—its fifth straight increase. Cheddar came off the floor
established at the previous two auctions, jumping 4.5% to US$4,042/MT.
(Prior to the auction, Fonterra Co-operative Group reduced its 12-month
cheddar offer quantity for cheddar by 420 MT, lending some support to
the category.) SMP and AMF prices rose for all contract periods
reported; cheddar rose in all contract periods except Contract 6.
Buying
overall was steady but without any one region aggressively bidding up
prices. North Asia (China) purchased the largest overall volume and
Southeast Asia was second, but neither bought more than the previous
auction. The Middle East helped lift SMP prices, purchasing more than
both the previous auction and the same event in 2022, and the region was
also the top buyer of cheddar.
The
GDT Price Index decline was primarily due to WMP, with the average
winning price falling 2.7% to US$2,972/MT. Butter prices fell 1.6% to
US$4,890/MT. Both declines came after rising for four straight auction
gains.
GDT
Pulse events and NZX futures markets heading into the auction were
predicting a decline for WMP, so the change in course was unsurprising.
However, those same indicators were projecting a decline in SMP as well,
and in that case, the indicators were well off. The auction raises a
caution flag to New Zealand to hold off on channeling more milk to WMP,
reinforcing an emphasis on SMP/butter in the product mix.
Supply Chain
Panama Canal reducing ship transits by half for the winter months
As
severe drought conditions continue to slow the ability of vessels to
move through the Panama Canal, officials announced they will decrease
the number of available slots for ship transits by one-half this winter.
In contrast to the average 40 transits per day that the canal typically
accommodates, the canal administration is cutting daily reservation
slots in November to 25, in December to 22, in January to 20 and in
February to 18.
While
not likely to affect containerships with fixed schedules that have
already booked slots, the reduction in slots means non-booked vessels
may face weeks-long delays. To overcome those delays, ships pressured to
deliver cargo within certain time parameters may turn to bidding up
toll payments to amounts several times higher than normal.
Rainfall
levels in the area are down by one-third for the year. Last month the
canal, which accommodates nearly 10% of global seaborne trade, saw its
driest October on record. These low rainfall levels created record-low
water levels in Gatun Lake, which feeds the reservoir’s locks. (Wall Street Journal, 11/1/23)
Company News
Durkin announces retirement; Leprino names new chief
Leprino
Foods President and CEO Mike Durkin announced that he would retire
effective November 2024. Durkin joined Leprino as senior vice president
and CFO in 2011, before taking over as president and CEO three years
later. In addition to heading up Leprino, he has held various leadership
positions in the U.S. dairy and world dairy industries, including chair
of the Innovation Center for U.S. Dairy and as a member of Global Dairy
Platform’s Global Dairy Board.
Leprino
announced that Lance FitzSimmons, executive vice president and chief
supply chain officer, with succeed Durkin effective Nov. 1, 2024.
FitzSimmons has been with Leprino since 2009, managing nearly every
division of the company over the years. (Company reports)
Lala exits Nicaragua
Mexico’s
Grupo Lala exited the Nicaraguan market, reportedly selling its
operations to a group called Nicaragua Dairy Ventures. Lala entered the
Nicaraguan market in 2014, acquiring well-established local processor
Eskimo SA and, two years later, La Perfecta, promising to expand milk
collection, transfer technology to its milk suppliers, increase storage
facilities, and create new jobs. After the sale announcement, media
reports were critical of the company, saying the promises were
unfulfilled. (Breaking Latest News, 11/3/23; La Prensa, 10/27/23)
Company news briefs
New Zealand’s Olam Food Ingredients
(OFI) new Tokoroa, North Island, processing plant is nearly finished
with its commissioning stage. The NZ$100-million facility (about US$59
million) produced its first bags of WMP at the end of August and staff
has been fine-tuning the process since. Phase 2 of construction will add
specialist powder capacity, although completion is at least two years
away. … Starbucks said it expects to add nearly 15,000
locations outside of North America by 2030. It currently operates around
20,000 international cafes. (Farmers Weekly, 11/2/23; CNBC, 11/2/23)
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