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Innovation, convenience are key to steady dairy demand

July 13, 2018

By Alyssa Mitchell

EGG HARBOR, Wis. — Product innovation and accessibility are key strategies to staying competitive in a fast-moving, increasingly digitized and convenience-focused marketplace, according to panelists during a session at the Wisconsin Dairy Products Association’s annual Dairy Symposium in Egg Harbor, Wisconsin, this week.

During the session, panelists shared policy, consumer and retailer perspectives on dairy demand.

Randy Green, principal at Watson Green LLC, Washington, D.C., outlined some of the direct and indirect impacts policy can have on dairy demand, and vice versa.

For example, while the current Dietary Guidelines for Americans recommend lowfat and fat-free dairy, a resurgence in demand for full-fat dairy — as well as research on its benefits — in recent years may impact the development of the 2020 guidelines, he says.

Upcoming policy development on standards of identity and use of the term “healthy” on product labels also could have implications for the dairy industry, he says.

Meanwhile, Phil Plourd, president of Blimling and Associates, Madison, Wisconsin, notes the marketing landscape has largely shifted.

“We’re in a world where marketing costs very little compared to 20-30 years ago,” he says.

Plourd notes a lot of new players are not putting money into traditional marketing channels, but rather are capitalizing on social media and name recognition to attract consumers whose attention spans are shrinking.

At the same time, today’s consumers are looking for convenience in obtaining products including food. While millennials in particular are making fewer trips to the grocery store, e-commerce and food delivery options are booming.

“The question going forward is, how does dairy fit into that picture?” Plourd says.

Also at the session, Mike Brown, director, dairy supply chain, The Kroger Co., Cincinnati, shared some of the ways Kroger is working to fit into this environment, both in its stores and by offering consumers more options for shopping and delivery.

He notes consumers want “Anything, Anytime, Anywhere.” Using an example of salmon, Brown showed the various ways Kroger can offer the product to meet a variety of consumer demands. The store offers it fresh, uncooked and plain; fresh, but flavored, for easy cooking at home; as part of a larger meal kit to eliminate the guesswork and labor of putting a balanced meal together; and finally, as a fully-cooked meal for grab-and-go, ready-to-eat convenience.

Kroger also embraces a variety of consumers with its own brands, including its traditional Kroger brand as well as its Private Selection and Simple Truth (natural and organic) brands.

Kroger and Nuro — a provider of software and hardware expertise to design and build products that accelerate the benefits of robotics for everyday life — recently announced a new partnership to redefine the grocery customer experience for Americans by piloting an on-road, fully autonomous delivery experience: Restock Kroger.

The plan has four main drivers: redefine the food and grocery customer experience, expand partnerships to create customer value, develop talent, and live Kroger’s purpose.

“Unmanned delivery will be a game-changer for local commerce, and together with Kroger, we’re thrilled to test this new delivery experience to bring grocery customers new levels of convenience and value,” said Dave Ferguson, co-founder, Nuro, in a June 28 press release. “Our safe, reliable, and affordable service, combined with Kroger’s ubiquitous brand, is a powerful first step in our mission to accelerate the benefits of robotics for everyday life.”

As meal kit delivery also has increased in popularity, Kroger has merged with Home Chef, the country’s largest private meal kit company. Home Chef meal kits now are available to Kroger customers, both in stores and online.

Brown notes dairy plays a key role in all of these initiatives. Kroger has 20 dairy plants across the United States.

He adds that manufacturing is a competitive advantage so the company can better control costs, quality and innovation, as well as control raw product sources and better coordinate logistics.

Brown also outlined several dairy growth opportunities he sees, including increasing interest in natural and specialty cheeses, development of specialty dairy beverages and packaging innovation.

He says both long shelf life packaging and right-size dairy packaging have enormous growth potential. Right-size packaging in particular is huge as consumers continue to turn to dairy for snacking needs.

“It’s exciting times for dairy,” he says.

CMN


U.S. Senate pushes back on tariff escalation with China

July 13, 2018

WASHINGTON — As trade tensions heat up between the United States and several key exporting regions, the U.S. Senate this week expressed support for efforts by U.S. Sens. Bob Corker, R-Tenn., Pat Toomey, R-Pa., and Jeff Flake, R-Ariz., to ensure Congress plays an appropriate role in the implementation of national security-designated tariffs.

By a vote of 88-11, the Senate on Wednesday adopted a non-binding motion to instruct conferees considering H.R. 5895 — the Energy and Water Development and Related Agencies Appropriations Act of 2019 — to include language “providing a role for Congress in making a determination under Section 232 of the Trade Expansion Act of 1962” in the final legislation developed by the Senate and House conference committee.

Corker, Toomey and Flake say they will continue to push for a binding vote on legislation they introduced in June to require congressional approval of national security-designated tariffs.

President Trump has been engaged in a trade war with China since the Office of the U.S. Trade Representative (USTR) earlier this year concluded an investigation in which USTR found that China’s acts, policies and practices related to technology transfer, intellectual property and innovation are “unreasonable and discriminatory, and burden U.S. commerce.” (See “Dairy under pressure in U.S., China trade dispute” in the June 22, 2018, issue of Cheese Market News.)

Corker says the Senate this week “spoke loud and clear by overwhelmingly expressing support for our efforts to ensure Congress plays its appropriate role in the implementation of national security-designated tariffs.

“Tariffs are a tax on the American people, and as the U.S. economy and American businesses and consumers begin to feel the damaging effects of incoherent trade policy, I believe support for our legislation will only grow,” he says. “We will continue to push for a binding vote and are hopeful one will be scheduled in the near future.”

Toomey adds the administration is wrong to use “national security” as a pretext to impose taxes on steel and aluminum from the United States’ closest allies.

“It’s time for Congress to reassert its constitutional responsibility on trade, and (this week’s) bipartisan vote shows that there is a way forward to accomplish this,” Toomey says.

Flake says the vote represents the strongest and most straightforward message the chamber has delivered against the administration’s abuse of trade authority.

“Imposing tariffs on products from allies that pose no threat to our national security is just plain wrong,” Flake says. “I will continue to push for binding legislation that requires congressional approval of national security-designated tariffs. We have to rein in abuse of presidential authority and restore Congress’ constitutional authority in this regard.”

The measure’s fate in the House, however, is uncertain. News reports say House Speaker Paul Ryan, R-Wis., this week expressed doubt that legislation to bar Trump from imposing tariffs could carry a veto-proof majority.

Ryan did caution that the United States risks falling behind the rest of the world because other countries are pursuing free trade deals more aggressively, and said he hoped President Trump’s moves to impose tariffs on China and other nations was a negotiating tactic that would only remain in place until trade deals with those countries are worked out, news reports say.

Meanwhile, USTR in Wednesday’s Federal Register made good on its promise to establish a process by which U.S. stakeholders may request that particular products be excluded from new U.S.-imposed tariffs on Chinese goods imported into the United States.

The notice sets out specific procedures and criteria related to requests for product exclusions and opens up a docket for the receipt of exclusion requests.

USTR has set a deadline of Oct. 9, 2018, to receive exclusion requests.

USTR says approved exclusions will be effective for one year upon publication of the exclusion determination in the Federal Register, and will apply retroactively to July 6, 2018. Because exclusions will be made on a product basis, a particular exclusion will apply to all imports of the product, regardless of whether the importer filed a request. U.S. Customs and Border Protection will apply the tariff exclusions based on the product.

CMN


USDA lowers dairy product price forecasts in report

July 13, 2018

WASHINGTON — U.S. milk production forecasts for both 2018 and 2019 are lowered in USDA’s new “World Agricultural Supply and Demand” report released this week due to slower-than-anticipated growth in milk per cow and lower cow numbers.

USDA lowered its 2018 milk production forecast by 100 million pounds from last month’s report to 217.9 billion pounds, and lowered its 2019 projection to 220.6 billion pounds, down by 500 million pounds. Although tempered by lower expected feed costs, lower milk prices likely will weaken producer margins, resulting in lower cow numbers and slower growth in milk per cow, USDA says.

For 2018, the fat-basis import forecast is raised from the previous month on higher imports of butterfat products. Fat-basis imports are unchanged for 2019. The 2018 fat-basis export forecast is unchanged from the previous month but is raised for 2019 as the United States is expected to be price competitive and higher expected exports of butterfat products will more than offset expected declines in cheese exports, USDA says.

Skim-solids basis import forecasts for 2018 and 2019 are unchanged from the previous month. However, skim-solids basis exports for 2018 and 2019 are reduced from the previous month primarily on lower expected exports of skim milk powder and whey products as China’s tariffs on certain U.S. dairy products hampers exports to some extent.

The 2018 cheese, butter, nonfat dry milk (NDM), and whey price forecasts are reduced from the previous month. Cheese is forecast at $1.540-$1.570 per pound, down from $1.605-$1.645 in last month’s report. Butter is forecast at $2.245-$2.305, down from $2.295-$2.365. NDM is lowered to $0.730-$0.760 from $0.775-$0.815, and dry whey is forecast at $0.275-$0.295, down from $0.295-$0.315.

Forecasts also are reduced for cheese, NDM and whey prices for 2019 as cheese stocks will remain large and prices for NDM and whey will have to remain competitive with competing exporters, USDA says.

However, the 2019 butter price forecast is raised to $2.220-$2.350, up a penny from last month’s report, as stocks are expected to be worked down.

The 2018 Class III price forecast is lowered to $14.30-$14.60 per hundredweight, down from $15.05-$15.45 in last month’s report. The 2018 Class IV price forecast is lowered to $13.65-$14.05, down from $14.30-$14.80. The 2018 all-milk price forecast now is $15.95-$16.25, down from $16.60-$17.00

The 2019 Class III price forecast was lowered by 60 cents from a month ago to $14.70-$15.70, and the 2019 Class IV price forecast is lowered by $1.05 to $13.65-$14.75. The 2019 all-milk price forecast is $16.25-$17.25, down from $16.70-$17.70 a month ago.

CMN




NMPF urges focus on food imitation label regulation

July 13, 2018

WASHINGTON — As the use of laboratory-based cell culture technologies to replicate naturally-made foods continues to develop, FDA must first enforce its own existing regulations on the labeling of imitation products, the National Milk Producers Federation (NMPF) said at a hearing Thursday.

The FDA hearing focused on the regulation of cell-cultured products replicating meat. NMPF says these rapidly-evolving technologies impact dairy foods as well. Just as scientists have discovered how to make “meat” imitations look and feel like the real thing, so, too, have they used genetically-modified yeast to produce proteins that share a chemical identity with those found in milk, NMPF says.

FDA has asserted jurisdiction over products manufactured from cell culture technology, but Beth Briczinski, NMPF’s vice president for dairy foods and nutrition, warned that the agency’s failure to enforce existing labeling standards is a major concern.

“For decades, manufacturers have been making fake milk and other imitation dairy beverages and inappropriately using the names of products on their labels that have clear FDA standards of identity,” Briczinski says. “What began as a clever marketing tactic has led to the rampant abuse of legally defined dairy terms, while FDA has looked the other way. Most importantly, it has misled consumers over the nutritional composition of these products in comparison to traditional milk and its contributions to a healthy diet.”

Over the last 20 years, NMPF and its members have made repeated requests for FDA to take enforcement action on misbranded imitation dairy products, with FDA continually claiming the issue is not an agency priority.

“As a result, we now have an ‘anything goes’ attitude in the marketplace,” Briczinski says.

The recent debate over how to regulate and market synthetic meat developed in a lab has brought an added sense of urgency for the dairy industry, NMPF says.

Without a consistent regulatory framework that addresses the marketing of imitation meat and dairy products, in addition to FDA’s selective enforcement, NMPF says it believes labeling abuses by product manufacturers, further consumer confusion and a lack of U.S. compliance with international standards will continue to spread.

Briczinski reiterated the industry’s request that FDA enforce the labeling laws already on the books regarding fake “milks,” stressing that “it’s beyond time to resolve this problem.”

NMPF says it also plans to file written comments with FDA.

In a June 18, 2018, Federal Register notice, FDA requested comments in advance of the meeting on the safety of foods produced using animal cell cultures. FDA specifically requested comments on what considerations should be taken into account when evaluating foods produced by animal cell culture technology, how the technology could have an impact on food safety, how to evaluate the inputs used in this technology and how to assess hazards that may be unique to the production of foods using animal cell culture technology.

Comments are due Sept. 25, 2018.

CMN


Norseland builds market presence with fresh ideas and convenience

By Kate Sander

DARIEN, Conn. — Norseland Inc., best known in the United States for its Jarlsberg cheese, continues to grow its U.S. footprint with snack sizes, menu ideas and prepared foods that cater to all consumers seeking convenience and flavor.

“We’re expanding in the prepared deli and in the grocery grab-and-go cases,” says Valerie Liu, marketing manager, Norseland Inc.
As part of this strategic shift, Norseland —which is owned by Norway-headquartered TINE SA — will debut new ideas and products that cater to these trends at the International Dairy-Deli-Bakery Association (IDDBA) show in New Orleans this month.

At the show, Celebrity Chef George Duran will be on hand to offer new burger ideas and preview the company’s global summer burger promotion, which will hit social media and grocery stores in July.

Duran has made four burger recipes, each with a story: The Marvelous Meltdown (Jarlsberg Fondue Burger), Melted Maui Madness (Pineapple Bun Jarlsberg Burger), The Viva La Quinoa (Quinoa and Red Lentil with Jarlsberg) and The Brooklyn Bacon Bonanza (Bacon Burger Stuffed with Jarlsberg).

As part of the campaign, the four burgers have their own backstory and their own film. The campaign places the burgers in different settings, and the ambience is quintessentially New York: three of the four burger shorts are filmed in a Williamsburg brownstone, and the fourth on a rooftop in Queens with the Manhattan skyline as a backdrop. There also will be print materials for in-store use, including a burger-shaped brochure with the burger recipes.

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U.S. dairy under pressure as additional tariffs imposed

July 6, 2018

WASHINGTON — Tariff threats are becoming reality as the first week in July is underway, with new tariffs from both China and Mexico set to take effect, some of which impact the U.S. dairy and agricultural sectors. The United States also is facing tariff pressure from Canada and the European Union (EU).

Earlier this week, the U.S. Chamber of Commerce released a new analysis outlining the state-by-state impact of retaliatory tariffs from China, the EU, Mexico and Canada, which have been imposed in response to new U.S. tariffs on imported goods. The analysis shows how much of each state’s exports are threatened by retaliatory tariffs, highlights each state’s hardest-hit products and shows the total number of jobs supported by global trade in each state, illustrating what U.S. families and consumers stand to lose in a potential trade war.

“Tariffs are beginning to take a toll on American businesses, workers, farmers and consumers as overseas markets close to American-made products and prices increase here at home,” says Thomas J. Donohue, president and CEO, U.S. Chamber. “Tariffs are simply taxes that raise prices for everyone. Tariffs that beget tariffs that beget more tariffs only lead to a trade war that will cost American jobs and economic growth.”

As of this week, approximately $75 billion worth of U.S. exports will be subject to retaliatory tariffs.
The report highlights a few states that will be particularly harmed by an emerging trade war, including Wisconsin, which is expected to have $1 billion of state exports threatened by retaliatory tariffs, including cheese.

To view the analysis, visit www.uschamber.com/tariffs.

Mexico this week leveled a second round of a two-part process targeting almost $3 billion worth of U.S. goods — $2.5 billion of which are agricultural products including cheese. The first phase of the Mexican duties went into effect June 5 and now is increasing. (Cheese tariffs now will be 20 to 25 percent. For more information, see “Mexico announces codes for cheese tariffs in dispute” in the June 8, 2018, issue of Cheese Market News.)

Stakeholders note the measure impacts most of the cheese shipped from the United States into Mexico.

China also is expected to impose retaliatory tariffs this week on more than 600 products including nearly every dairy product with the exception of lactose, casein and highly concentrated whey proteins.

Meanwhile, Canada is focusing its retaliation mostly on metals but isn’t leaving ag products untouched, notes Dave Salmonsen, trade specialist with the American Farm Bureau Federation (AFBF).

He notes 25 percent retaliatory tariffs on pizza, yogurt, chocolate, orange juice, beer and whiskey are coming from Canada. The EU also is retaliating and, for ag products, they’ve included rice and cranberries, peanut butter, kidney beans and whiskey, subject to 25 percent tariffs, Salmonsen said this week on an AFBF Newsline podcast.

Salmonsen notes that in the near term, for contracts, which potentially have to be executed already, it’s up to the importer to pay the tariff and see how much of it they can pass on in higher prices to consumers.

“In a little longer term, you would think that if we’re not price competitive in those markets, the buyers will try to find product elsewhere, if they can. Those export markets will dry up,” he adds.

Uncertainty also persists on talks on the North American Free Trade Agreement (NAFTA) being renegotiated between the United States, Canada and Mexico. News reports say Chrystia Freeland, Canadian foreign affairs minister, wants NAFTA talks to kick into higher gear this summer, following the recent election of Andrés Manuel López Obrador as the new president of Mexico.

However, President Trump recently indicated he was not happy with the status of a revised NAFTA, and now he is saying he does not want to sign a new agreement until after the midterm elections in November, news reports say.

At the same time, U.S. Trade Representative Robert Lighthizer this week announced that Congress has extended Trade Promotion Authority (TPA) for three more years.

Lighthizer says extension of TPA is critical to negotiating accountable, enforceable and reciprocal trade deals that will benefit American workers, farmers and ranchers.

“The Trump administration is pursuing a number of potential bilateral free trade agreements, and TPA extension means we may continue to aggressively pursue these opportunities,” he says.

CMN


May cheese production up 1.4 percent over year earlier

July 6, 2018

WASHINGTON — Total cheese output in the United States in May, excluding cottage cheese, was 1.09 billion pounds, up 1.4 percent from May 2017’s 1.08 billion pounds and 1.7 percent above April 2018’s 1.07 billion pounds, according to data released Thursday by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart on page 16.) When adjusting for the length of the months, May cheese production was down 1.6 percent from April on an average daily basis.

Production of Mozzarella totaled 356.3 million pounds in May, up 1.7 percent from May 2017, according to NASS. The most-produced cheese in the United States, Mozzarella is the largest component of the Italian-type cheese category, production of which totaled 457.2 million pounds in May, an increase of 1.1 percent from a year earlier.

Production of Cheddar, the nation’s second most-produced cheese, was 317.5 million pounds in May, down 3.0 percent from May 2017. Production of American-type cheese, of which Cheddar is the largest component, was 442.7 million pounds in May, down 0.1 percent from May 2017.

According to NASS, Gouda production experienced the biggest percentage increase in the May-to-May comparison, climbing 54.3 percent to 6.3 million pounds.

Wisconsin led the nation’s total cheese production, excluding cottage cheese, with 287.5 million pounds in May, up 0.5 percent from its production in May 2017. California followed with 216.8 million pounds, a decrease of 1.3 percent from its production a year earlier.

According to NASS, U.S. butter production in May was 167.9 million pounds, up 2.8 percent from May 2017’s 163.4 million pounds. May butter production was down 4.2 percent from April 2018’s 175.3 million pounds (down 7.3 percent on an average daily basis).

California led the nation’s butter production with 50.7 million pounds in May, up 10.6 percent from its production a year earlier.

NASS reports U.S. production of nonfat dry milk (NDM) was 160.4 million pounds in May, down 4.5 percent from May 2017’s 167.9 million pounds. May NDM production was down 2.1 percent from April’s 163.9 million pounds (down 5.3 percent on an average daily basis).

California led the nation’s NDM production with 48.7 million pounds, a 16.8-percent increase over its production in May 2017.

CMN


OECD-FAO outlook says ag trade key to food security

July 6, 2018

OECD-FAO outlook says ag trade key to food security

PARIS — Global agricultural production is growing steadily across most commodities, reaching record levels in 2017 for most dairy products, cereals, meats and fish, according to an annual report from the Organization for Economic Cooperation and Development (OECD) and the United Nations Food and Agriculture Organization (FAO). The report stresses that agricultural trade plays an important role in promoting food security, underscoring the need for an enabling trade policy environment.

“OECD-FAO Agricultural Outlook 2018-2027” projects weakening growth in global demand for agricultural commodities and food, while anticipating continuing productivity improvements in the sector. As a result, prices of main agricultural commodities are expected to remain low for the coming decade.

The report, presented this week in Paris by OECD Secretary-General Angel Gurría and FAO Director General José Graziano da Silva, attributes the demand slowdown to a deceleration of demand growth in major emerging economies, like China, stagnating per capita consumption of staple foods and a further gradual decline in global population growth rates.

The outlook finds that global agricultural and fish production is projected to grow by around 20 percent over the coming decade but with considerable variation across regions. Strong growth is expected in developing regions with more rapid population growth, including Sub-Saharan Africa, South and East Asia, and the Middle East and North Africa. By contrast, production growth is expected to be much lower in developed countries, especially in Western Europe.

The outlook projects that the weakening of global demand will persist over the coming decade, sapped by declining population growth, flat levels of per capita consumption for staple foods and slowing demand growth for meat products.

With slower consumption and production growth, agricultural and fish trade are projected to grow at about half the rate of the previous decade, the outlook says. Net exports are expected to increase from land-abundant countries and regions, notably the Americas. Countries with high population growth — in particular in the Middle East and North Africa, Sub-Saharan Africa and in Asia — will see rising net imports.

“While overall exports from countries and regions abundant in land are set to increase, many poorer countries with rising populations and limited land resources will be increasingly dependent on food imports to feed their people,” Gurría says. “It will be essential that exporters and importers alike have access to an open and predictable trade policy environment.”

Silva adds that the “Green Revolution” of the last century largely increased the world’s capacity to feed itself but it now needs a sustainability revolution.

“This includes tackling high-input and resource-intensive farming systems that impose a high cost to the environment,” Silva says. “Soil, forests, water, air quality and biodiversity continue to degrade. We need to adopt sustainable and productive food systems that offer healthy and nutritious food, while also preserving the environment and biodiversity.”

The outlook notes that demand for cereals and vegetable oil for the production of biofuels is expected to be largely unchanged over the forecast period, in contrast with the past decade, when biofuels expansion led to more than 120 million metric tons of additional cereal demand, predominantly maize.

With existing policies in developed countries unlikely to support biofuels expansion, most demand growth will come from developing countries that have introduced policies favoring biofuel use. In particular, the use of sugarcane for biofuel production is expected to increase.

This year’s edition of the Agricultural Outlook includes a special chapter on the Middle East and North Africa (MENA), which faces simultaneous issues of food insecurity, rising malnutrition and management of limited natural resources. Undernourishment is concentrated in countries riddled by conflict and political instability, the outlook says. In other countries of the region, food demand is rising fast, due mostly to population growth. Very high consumption levels of wheat together with continually rising sugar and fat consumption are leading to an alarming spread of overweight and obesity in the region.

While the MENA region’s agriculture and fish production is expected to increase by 1.5 percent annually, it will be increasingly challenged by both limited land and water resources and the expected impact of more frequent extreme climate-related events. As a result, import dependence will remain high for most commodities.

The outlook recommends that countries in the region reorient policies away from supporting water-thirsty cereals, and toward greater support for rural development, poverty reduction and farming of higher-value horticulture products.

As a baseline projection, the Agricultural Outlook assumes policies currently in place will continue into the future. Beyond the traditional risks that affect agricultural markets, there are increasing uncertainties with respect to agricultural trade policies and concerns about the possibility of rising protectionism globally.

To download the report, visit www.agri-outlook.org.

CMN


Overall specialty food category continues to grow

July 6, 2018

NEW YORK — Specialty food remains one of the fastest-growing segments of the food business, according to the Specialty Food Association’s (SFA) recently released annual “State of the Specialty Food” industry report.

Fueled by increasing interest from both consumers and retailers, total sales jumped 11 percent between 2015 and 2017, hitting $140.3 billion last year, according to SFA.

Retail dollar sales for specialty foods grew 12.9 percent versus 1.4 percent growth for all food, the organization says, noting product innovation and the wider availability of specialty foods through mass-market outlets is playing a part in the industry’s success.

At retail, the cheese and plant-based cheese category grew at a bit slower pace — 6.6 percent — between 2015-2017 but remains the largest specialty food category at retail with sales of $4.0 billion in 2017. The specialty yogurt and kefir retail category grew by 20.6 percent between 2015-2017 to $2.2 billion in sales in 2017.

Overall specialty food sales through foodservice increased 12.8 percent and online by 21 percent as U.S. consumers make specialty food a regular part of their diets both at home and when dining out, SFA says.

“The specialty food industry is a business that is constantly evolving,” says Phil Kafarakis, president of the Specialty Food Association. “Consumers of all ages are embracing specialty foods and making purchases everywhere they happen to be — from convenience stores to big box retailers to online, as well as in traditional gourmet shops and groceries. Foodservice and retailers are relying more and more upon our products. The industry’s growth has been building and will continue to maintain momentum for years to come. Our research provides a comprehensive picture of where we are today and can be used to help businesses prepare for future success.”

Beginning this year, the Specialty Food Association has refocused its annual research into a single, comprehensive State of the Specialty Food Industry report. Working with Mintel, the report explores where the current market stands, the opportunities and challenges it faces, where it is going based on sales forecasts in key categories, and how the specialty food consumer is evolving.

According to SFA, the top five categories with the highest dollar growth (percent change from 2015-2017) are: water, up 76.1 percent; rice cakes, up 64.1 percent; refrigerated RTD tea and coffee, up 63.2 percent; jerky and meat snacks, up 62.1 percent; and shelf-stable creams and creamers, up 61.7 percent.

SFA says the share of consumers buying specialty foods by generation (2018) are: iGens (age 18-23) 79 percent; Millennials (age 24-41) 67 percent; Gen Xers (age 42-53) 65 percent; and Baby Boomers (age 54-72) 60 percent.

For more information see Specialtyfood.com/stateindustry2018.

CMN


Stakeholders: Mexican tariffs harmful to dairy trade, NAFTA

June 29, 2018

WASHINGTON — More than 60 companies and organizations representing U.S. cheesemakers and dairy farmers this week commended President Donald Trump for his efforts on equitable trade and for insisting that Canada halt its market-distorting dairy practices. At the same time, the companies urged the administration to reconsider its imposition of new tariffs on Mexico in light of that country’s constructive engagement in North American Free Trade Agreement (NAFTA) negotiations and the harm that Mexico’s retaliatory tariffs will have on U.S. dairy’s trade with its largest and most reliable market.

In retaliation for U.S. actions on steel and aluminum imports, Mexico recently added new tariffs — some of which will reach as high as 25 percent next month — on American-made cheeses, among other products. These tariffs will diminish demand for high-quality dairy products that are produced across the United States, stakeholders say.

The additional Mexican duties also will allow the European Union (EU), which recently signed a bilateral free trade agreement with Mexico, to take hard-earned market share from American dairy companies, says a letter from stakeholders.

In the letter to President Trump, the companies and organizations ask the administration to work collaboratively with Mexico and suspend the steel and aluminum tariffs on Mexican products until the negotiations for a modernized NAFTA have been concluded.

“Our industry recognizes that the U.S. must be resolute in ensuring our trading partners uphold their end of the bargain with us,” they say. “We trust that your administration’s skilled staff can find a way to resolve this issue, given Mexico’s strong commitment to working with the U.S. to further improve U.S.-Mexican trade.”

The letter notes Mexico has been a model for open dairy trade with the United States. Through investment and cooperation, the United States has become Mexico’s biggest dairy supplier, with cheese purchases last year totaling nearly $400 million. Today, Mexico accounts for about one-quarter of all U.S. dairy exports. Until the tariffs were imposed, all U.S. dairy products enjoyed duty-free access into the Mexican market.

Several leading national dairy industry’s trade associations, who were not signatories on the letter, say they support the goals set forth in the letter to President Trump.

“Our first four months of 2018 showed a strong expansion in the volume of U.S. dairy exports into Mexico,” says Tom Vilsack, president and CEO of the U.S. Dairy Export Council. “But these tariffs have introduced uncertainty and concern. A renegotiated NAFTA 2.0 would go a long way toward restoring our industry’s momentum.”

Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA), says maintaining dairy market access in Mexico is IDFA’s No. 1 priority in the NAFTA modernization efforts.

“We’re confident that the administration and U.S. negotiators will find a way to preserve this vital partnership, which allows the U.S. dairy industry to create more jobs and drive our economy,” Dykes says.

“After rising during the spring, dairy futures markets and the farm-level milk price outlook for the rest of 2018 have deteriorated significantly in recent weeks, in reaction to the prospects of lost dairy export sales,” adds Jim Mulhern, president and CEO of the National Milk Producers Federation. “No one wants to see lasting damage to our farmers result from lost access to our top foreign market. That’s why resumption of tariff-free trade between the U.S. and Mexico is so critical.”

This week the Wisconsin Cheese Makers Association (WCMA) said it is joining the request to the Trump administration to suspend steel and aluminum tariffs on Mexican products to encourage an end Mexico’s retaliatory tariffs on U.S. cheese.

“Our cheese manufacturer members with export sales are expressing concern that their customers may turn sales over to competitors in the European Union,” says John Umhoefer, WCMA executive director. “Lost cheese sales in Mexico and other key markets can lower overall cheese prices in the U.S. and reduce the price farms receive for their fresh milk. Farms in Wisconsin and around the U.S. need free-flowing trade and export growth, not collapse, if they’re going to climb out of a three-year slump in farm-level milk prices.”

Meanwhile, stakeholders such as IDFA note several countries are forging ahead with new pacts, giving preferential market access to other trade players and changing the landscape for U.S. dairy products abroad.

Most recently, the EU announced it will begin negotiations on a free trade agreement with Australia and will hold trade talks with New Zealand in the future. The EU likely will ask both countries to embrace geographical indications (GIs) for products like cheeses, limiting several common names to EU-only use. Australia and New Zealand historically have voiced strong support for ensuring the appropriate use of GIs, but these protections are a top EU trade priority, so it is unlikely that deals will be reached with Australia or New Zealand without them, IDFA says.

The first round of negotiations for the EU-Australia free trade agreement will begin in early July in Brussels. The EU and New Zealand currently are in the process of setting up the guidelines for their negotiations, and formal meetings likely will start before the end of 2018.

Countries in the Asia-Pacific region also are pursuing trade agreements, which will change the landscape in one of U.S. dairy’s fastest-growing export markets.

After years of negotiation, the 15 countries participating in the Regional Comprehensive Economic Partnership (RCEP) likely will conclude the free trade agreement by the end of this year. The partners are Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand and Vietnam. The agreement is not expected to include standards for protecting workers or battling corruption, and those omissions, among others, could make it more difficult for the United States to work with these trading partners or demand higher standards in future trade agreements, IDFA says.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a modified version of the Trans-Pacific Partnership agreement that emerged after the United States withdrew, may be implemented as early as the end of this year or the beginning of 2019. Several countries still must ratify the agreement through their national governments. The countries that make up the CPTPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

This region is extremely valuable for U.S. dairy exports, IDFA says. Japan, for example, represents the industry’s fourth-largest market and accounted for U.S. dairy sales of more than $290 million in 2017.

IDFA notes it has stressed to the administration and Congress that trade agreements with markets in the Asia-Pacific region are critically important to the continued growth of the U.S. dairy industry, and the organization will continue to work with federal officials and members of Congress on expanding opportunities for dairy in new trade agreements and seeking more market access for dairy products abroad.

CMN


Arizona benefits from local dairy, faces land challenges

June 29, 2018

Editor’s note: As part of our series, “From Cow to Curd: A Look Across the Nation,” Cheese Market News takes a look at the cheese and dairy industry across the United States. Each month we examine a different state or region, looking at key facts and evaluating areas of growth, challenges and recent innovations. This month we are pleased to introduce our latest state — Arizona.

By Rena Archwamety

MADISON, Wis. — When Arizona shoppers buy milk, chances are they’re buying local. According to the Arizona Farm Bureau, 97 percent of the milk sold in Arizona grocery stores comes from Arizona family dairies, and Arizona’s dairy industry currently is the largest agricultural commodity in the state, edging out the beef industry this past year.

In 2017, Arizona was home to an average 203,000 milk cows, producing 5.0 billion pounds of milk. Output per cow is the fourth-highest in the nation at 24,680 pounds, according to USDA data.

“I think we would lead the country if not for the hot, humid weather in July and August during ‘monsoon season.’ Milk drops 15 percent during those two months,” says Keith Murfield, CEO of United Dairymen of Arizona (UDA), the full-service cooperative which represents all but three of Arizona’s commercial dairy farmers. “The rest of the year has great milking conditions. Mornings are cool, around 70 degrees during the wintertime. Even during May and June when temperatures hit 110, milk doesn’t really drop because producers use fans with misters on them and provide very nice conditions for milking and cow comfort.”

At the beginning of this month, UDA had 54 producers and 79 dairies that produced a total of 4.5 billion pounds of milk. However, five milking parlors are set to close between June and July for various reasons, from retirement to cow reduction to exiting the current challenges facing dairy farmers, Murfield says.

The average farm size in Arizona is large. Currently UDA membership averages 2,800 head per dairy, and Murfield predicts that number will grow closer to an average of 4,000 per producer in the future as some leave and others grow.

The Arizona Farm Bureau says the state’s smallest dairy farm has 850 milking cows, while Arizona’s largest dairies can run around 10,000 active milk cows.

• Dairy processing and products

Shamrock Farms is one of the most well-known milk brands in Arizona. It also has one of the state’s largest dairy farms with more than 10,000 cows. It was founded in Tucson in 1922 by Irish immigrants W.T. and Winifred McClelland with 20 cows and a Model T milk delivery truck. Their grandson, Kent McClelland, currently is the company’s president and CEO.

Now in its 96th year of business, Shamrock Farms is one of the largest family-owned dairies in the country and one of the top 100 employers in Arizona. It has manufacturing facilities in Phoenix, Arizona, and Augusta County, Virginia. The company produces ready-to-drink milk found in retailers and more than 50,000 quick service restaurants nationwide. It also manufactures Rockin’ Refuel protein-milk beverage, Shamrock Farms Cold Brew Coffee & Milk and a wide variety of other dairy products including sour cream and cottage cheese.

The UDA cooperative operates a manufacturing facility in Tempe, Arizona, that produces nonfat dry milk, milk protein concentrate, cream, butter, skim milk, condensed skim milk and lactose powder. It also has two cheese plants on is property — one that is leased to Wisconsin-based Schreiber Foods, and another that is home to Arizona Cheese, a joint venture between UDA and Wisconsin-based Wiskerchen Cheese Inc. Additionally, UDA is 51-percent owner of a cutting and shredding operation in Mexico City.

Other dairy manufacturers in Arizona that receive UDA milk include three bottling plants, a Greek yogurt plant (Ehrmann) and a cream cheese plant (Franklin Foods).

“UDA processes about half of our milk. Most of it stays within the state — probably 90 percent of the milk. All of our customers are within a 50-mile radius,” Murfield says. “About 20-25 percent of the milk goes toward cheese.”

Arizona also is home to a handful of smaller-scale cheese artisans. One of these is Fiore di Capra, where owner Althea Swift crafts cheese and confections as well as yogurt and kefir from goat’s milk. She also sells raw milk from her 200-goat herd in Benson, Arizona, about an hour outside of Tucson.

While Swift only sells her products in Arizona, her cheeses have won national awards through the American Dairy Goat Association and the American Cheese Society.

“Our marinated Chevres are very popular. We have six flavors, and several of those have won awards,” Swift notes. “We try to do things that go with the area — lots of spicy stuff. Chipotle, Habanero, things people in this area want, where they’re used to the heat.”

Currently Fiore di Capra is working on developing hard cheeses to use up more of its summer milk.

“Goats are seasonal. December is a really low-production month. January-March is the big kidding season. All summer, there is a lot of milk and a lot of product,” Swift says.

“Business is lower in the summer because so many people leave during the heat,” she adds. “We’re looking at aged, hard cheeses for when the snowbirds are back. We get a lot of requests for Cheddar and things you can grate and melt.”

Fiore di Capra sells most of its cheese at farmers’ markets as well as to local chefs.
“There are quite a few restaurants that buy,” Swift says. “We’ve seen an increase in chefs looking for cheese, who want local products. They’re very supportive of small farms.”

• Arizona advantage

Swift and Murfield both note that the state is great to work with when it comes to regulations and oversight. When it first opened in 2006, Fiore di Capra was the only Grade A goat dairy licensed and inspected by the Arizona Department of Agriculture.

“They’ve been great for us,” Swift says. “There aren’t really any programs for goats, but they’ve been very easy to work with. We’re very lucky to have the Arizona Department of Agriculture doing all our licensing and inspections. Of course we do what they ask, but they’ve been easy to work with.”

Murfield says the No. 1 challenge for Arizona’s dairy industry is immigration and workforce issues. Also, Arizona’s proximity to Mexico provides both advantages and disadvantages, with particular challenges now as Mexico has imposed retaliatory tariffs on U.S. cheeses, and the North American Free Trade Agreement (NAFTA) is under renegotiation.

“NAFTA, with Mexico, is a huge concern with us,” Murfield says. “Being so close to Mexico, and it’s our largest customer.”

Another potential challenge dairy producers face is water supply. Water levels of Lake Mead, used to determine shortages and water allocation to Arizona and other areas supplied by the Colorado River, are at near record lows.

“Water hasn’t been as much a concern as it’s getting to be now because of Lake Mead getting to be so very low,” Murfield says. “If they shut down the irrigation of water to our producers, we’re very concerned. When you live in the desert, that’s always in the back of your mind.”

As for positives, in addition to cooperation with state ag officials, Murfield says Arizona farmers’ ability to raise their own crops is another advantage in the state. And as milk production in Arizona continues to increase, the co-op is always looking for new customers.

“Because of great conditions and good milk quality, I think we will continue to draw customers to Arizona that want to have a location in the West,” he says.

CMN


Industry lauds passage of 2018 Farm Bill in Senate

June 29, 2018

WASHINGTON — The U.S. Senate on Thursday passed its version of the 2018 Farm Bill on a bipartisan 86-11 vote.

With the House having adopted its version of the bill last week, the two chambers now must reconcile differences in the two bills in a conference committee later this summer. The current farm bill expires Sept. 30.

The National Milk Producers Federation (NMPF) thanked Senate Agriculture Committee Chairman Pat Roberts, R-Kan., and Ranking Member Debbie Stabenow, D-Mich., for their leadership in finalizing the measure in a timely manner, and commended Stabenow for her work to secure $100 million in additional funding for the dairy title baseline.

“Sens. Roberts and Stabenow have crafted a bipartisan farm bill that includes important dairy policy improvements at a time when many farmers are facing a very tough economic time,” says Jim Mulhern, NMPF President and CEO. “We are pleased that the two chambers now have the opportunity to harmonize their versions to produce a final bipartisan, bicameral bill that can be signed into law by Sept. 30.”

The Senate version of the farm bill contains enhancements to the Dairy Margin Protection Program (MPP) sought by NMPF, including improved coverage levels and greater program flexibility. The bill — which renames MPP the “Dairy Risk Coverage” program — raises the maximum covered margin to $9 per hundredweight and adjusts the minimum percentage of milk that can be insured. It also includes an important agreement reached between NMPF and the International Dairy Foods Association (IDFA) on price risk management.

NMPF commended Sens. Dianne Feinstein, D-Calif., and John Cornyn, R-Texas, for their efforts to strengthen dairy policy for producers of all sizes, and says it looks forward to continuing this work as the process continues.

The Senate bill also contains conservation provisions that will help producers access technical and financial assistance to carry out conservation practices on their operations. Sen. Patrick Leahy, D-Vt., added an amendment to give dairy farmers greater flexibility in meeting their goals under the Environmental Quality Incentives Program.

Under the trade title, the farm bill reauthorizes the trade promotion programs that are critical to dairy farmers and their cooperatives. Mulhern says NMPF also appreciates the successful efforts of Sens. Joni Ernst, R-Iowa, and Bob Casey, D-Pa., to include provisions in the bill that promote the consumption of fluid milk.

NMPF also thanked Sen. Tammy Baldwin, D-Wis., for including provisions of her Dairy Business Innovation Act in the bill to help foster innovation and new opportunities for the dairy industry.

IDFA welcomes provisions that will allow greater access to risk management tools for dairy processors and producers to address price fluctuations and that will extend the Dairy Forward Pricing Program to 2023.

IDFA notes the bill also will improve the safety net for dairy farmers and add a new milk incentive program within the Supplemental Nutrition Assistance Program (SNAP) to improve participants’ diets by increasing fluid milk consumption.

“Managing price risk and increasing consumption are the dairy industry’s key priorities, and we’re pleased that the Senate and House will enter conference considerations with agreement on these key provisions,” says Michael Dykes, IDFA president and CEO. “We commend the leaders of the Senate Agriculture Committee, Chairman Roberts and Ranking Member Stabenow for their leadership on these issues and their efforts to keep the bill moving forward.”

CMN


Agri-Mark letter to Perdue seeks minimum prices

June 29, 2018

WASHINGTON — In light of low farm milk prices and export tariffs that are hurting an already struggling U.S. dairy industry, this week the board of directors of Agri-Mark Inc. voted to send a letter to U.S. Agriculture Secretary Sonny Perdue asking him to set minimum wholesale price floors for dairy products.

Specifically, the co-op is asking Perdue to use his authority to set a price floor for Cheddar at $1.64 per pound; butter at $2.30 per pound; and nonfat dry milk (NDM) at $0.81 per pound.

Agri-Mark notes these prices are lower than price highs already reached this month and should not affect consumers. However, taking such action will help stabilize markets for dairy farmers, many of whom have exited the industry in 2018, Agri-Mark says, noting that as part of the program, USDA would purchase any dairy products offered to the government at those prices.

“After more than three years of extremely low income, farm milk prices were finally rising earlier this month with strong cheese, butter and nonfat dry milk market prices,” says Neal Rea, a dairy farmer from Cambridge, New York, who serves as chairman of the board of Agri-Mark. “When tariffs were announced, prices collapsed overnight.”

Agri-Mark economist Robert Wellington adds that the U.S. dairy industry recently has been exporting about 18 percent of its national production overseas in storable commodities like NDM, whey proteins, butter and cheese.

Any disruptions in that export pipeline will flood the U.S. market and force farm prices down, Wellington says.

“Mexico is the largest buyer of U.S. dairy products, and both China and Canada are in the top five,” he says. “Dairy farmers have worked hard to grow export markets and be a steady supplier of top-quality dairy products to the world. Dairy farms support our rural economies and USDA needs to take action now, before more of these families go out of business.”

In an op-ed published Monday in USA Today and posted on USDA’s website, Agriculture Secretary Sonny Perdue says there is no denying that the disruption in trade relations with China is unsettling to many in agriculture, but if the president succeeds in changing China’s behavior, America’s farmers will reap the benefits.

“In the meantime, the president has instructed me to craft a strategy to support our farmers in the face of retaliatory tariffs,” Perdue says. “At USDA, we have tools at our disposal to support farmers faced with losses that might occur due to downturns in commodities markets.”

He adds that farmers should know this: They have stood with President Trump and his policies, and the administration will make good on its promise to stand with them as well.

Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA), says IDFA knows and appreciates that these are tough times for dairy farmers, especially with all the uncertainty caused by trade issues.

“At IDFA, we are about expanding markets and gaining greater market access, and we prefer market-oriented policies,” he says. “Prices are the way buyers and sellers talk to one another and read the market signals.”

CMN


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Today's Cheese Spot Trading
July 16, 2018


Barrels:$1.4225 (NC)
Blocks: $1.5650 (+1/2)


Click here for more market activity
Cheese Production
U.S. Total May
1.092 bil. lbs.


Milk Production
U.S. Total May
19.100 bil. lbs.

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