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U.S.-Mexico-Canada trade agreement enters into force

July 3, 2020

WASHINGTON — The United States-Mexico-Canada Agreement (USMCA) entered into force Wednesday, replacing the North American Free Trade Agreement (NAFTA).

“The USMCA contains significant improvements and modernized approaches that will deliver more jobs, stronger worker protections, expanded market access and greater opportunities to trade for companies large and small,” says U.S. Trade Representative Robert Lighthizer, who worked with Congress to win bipartisan approval for the new trade pact. “We have worked closely with the governments of Mexico and Canada to ensure that the obligations and responsibilities of all three nations under the agreement have been met, and we will continue to do so to ensure the USMCA is enforced.”

U.S. dairy and ag industries say they look forward to the full benefits for farmers under USMCA. The American Farm Bureau Federation notes that under this agreement, Canada will increase quotas on U.S. dairy products, benefiting American dairy farmers by $242 million. Mexico also has agreed that all grading standards for ag products will be non-discriminatory and has assured market access for U.S. common name products. Additionally, the agreement enhances science-based trading standards among the three nations.

According to the International Trade Commission, if USMCA is implemented as negotiated, U.S. dairy exports are projected to increase by more than $314 million a year. The dairy industry estimates this could bolster dairy farm revenue by an additional $548 million over the first six years of implementation.

The National Milk Producers Federation and U.S. Dairy Export Council (USDEC) say the full benefit of this agreement now relies on its robust enforcement, particularly as Canada in the next few months will finalize its plans for future tariff rate quota (TRQ) allocations and the elimination of its Class 6 and 7 pricing programs. Canada’s recently-announced TRQ allocations run counter to USMCA commitments crafted to expand access to the Canadian dairy market, the groups add.

“If implemented in good faith and diligently enforced, USMCA will deliver positive benefits to dairy, and all of agriculture, as it facilitates the smooth flow of trade in North America,” says Tom Vilsack, president and CEO, USDEC. “The implementation of USMCA’s provisions is not the end of our work, it’s simply the beginning as we continue our efforts to break down global barriers to fair dairy trade and to ensure this agreement is fully enforced.”

CMN


Borden Dairy to be acquired by Capitol Peak, KKR

July 3, 2020

DALLAS — Borden Dairy, which filed for bankruptcy earlier this year, has announced that Capital Peak Partners and its affiliates have been approved to acquire substantially all Borden assets following completion of a court-supervised sale process. Capitol Peak will assume majority ownership of the new company, and KKR, an existing lender to Borden, will be a minority investor.

Following the transaction, Borden says it will be appropriately capitalized and the business will remain intact, including all plants, branches, routes and the Borden brand. The newly reorganized Borden will be able to continue employment for approximately 3,300 Borden employees and service for Borden customers.

“Borden received strong investor interest and multiple bids throughout this sale process, which is a testament to the terrific work the people of Borden have done to build a valuable and enduring 163-year-old brand,” says Borden CEO Tony Sarsam. “Despite being in the midst of Chapter 11 and a global pandemic, our team managed to generate positive cash flow, grow our customer footprint and maintain an uninterrupted food supply to nourish American families. We are exiting Chapter 11 as a thriving company that is meeting and exceeding its performance forecasts, making our outlook very promising.”

Borden initiated voluntary reorganization proceedings Jan. 5, 2020, to pursue a financial restructuring designed to reduce its current debt load, maximize value and position it for long-term success, the company says. On June 26, the court granted approval of the approximately $340 million sale. Upon closing of the transaction, Borden’s former controlling and majority equity holders, ACON Investments and Group Lala, respectively, no longer will have ownership interest in the business. Capitol Peak and KKR will establish a new board of directors.

“Borden has a rich history of partnering with America’s dairy farmers and leading retailers to provide wholesome nutrition for American consumers and families,” says Capitol Peak’s Founder and Managing Partner Gregg Engles, who also is former chairman and CEO of Dean Foods and WhiteWave Foods. “The Capitol Peak team is excited by this unique opportunity to work alongside KKR and build this iconic dairy company.”

The transaction, which is subject to certain closing conditions, including the entry of a final order, is expected to be finalized in mid-July. KKR’s investment is held by business development companies co-managed by KKR Credit. For additional information about the Borden reorganization, visit bordenfinancialreorg.com.

CMN


Cheese production declines 0.7% in May over year earlier

July 3, 2020

WASHINGTON — U.S. cheese production in May totaled 1.098 billion pounds, down 0.7% from May 2019’s 1.106 billion pounds, according to data released this week by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart on page 23.) May’s total was up 3.2% from April’s 1.064 billion pounds or down 0.1% on an average daily basis.

Italian-type cheese production in May totaled 481.7 million pounds, up 1.5% from May 2019. Production of Mozzarella, the largest component of Italian-type cheese production, totaled 378.2 million pounds in May, up 0.9% from a year earlier.

American-type cheese production in May totaled 442.6 million pounds, down 0.2% from May 2019. Production of Cheddar, the largest component of American-type cheese, totaled 319.4 million pounds in May, down 0.5% from last year.

Wisconsin was the leading cheese-producing state with 280.7 million pounds produced in May, down 1.8% from the previous year. California produced the second most cheese in May at 209.7 million pounds, down 3.8% from a year earlier.

U.S. production of butter totaled 178.3 million pounds in May, up 4.9% from May 2019. May U.S. butter production was down 18% from April’s 217.5 million pounds, or down 20.7% on an average daily basis. California led the nation in butter production with 55.6 million pounds in May, up 7.1% from a year earlier.

CMN



Gossner Foods focuses on relationships, consistency to drive legacy of success

LOGAN, Utah — For more than 50 years, Gossner Foods has built its success as a leading Swiss cheese and aseptic milk processor on strong relationships with its customers, farmer suppliers, employees and family owners.

Founder Edwin Gossner started Gossner Foods in 1966 after bringing his family tradition of cheesemaking from Switzerland and working as a cheesemaker and plant manager for more than 30 years at other companies in Wisconsin, California and Utah. Gossner’s daughter, Dolores Wheeler, became president and CEO of Gossner Foods in 1982 and oversaw unprecedented growth, from the addition of a fluid milk plant to additional construction projects that took place nearly every year of her 36-year tenure as leader of Gossner Foods.

In 2018, the same year Wheeler passed away, her granddaughter — and Edwin Gossner’s great-granddaughter — Kristan Earl was elected president and CEO by Gossner Foods’ board of directors, establishing the company’s fourth generation of family leadership.

Earl, who grew up next door to her grandparents, was raised on her family’s farm and remembers working the fields with her grandfather on his tractor. At Gossner Foods she spent summers working at the retail counter and kitchen, and in high school working on various office projects from accounts payable to cheese quality. She later joined the accounting department and, after graduating from Utah State University, moved into milk procurement. She had a desk just outside her grandmother’s office.

“From Dolores I learned that the success of our business is directly related to the success of our employees and milk producers,” Earl says. “Our obligation to the community is to create a premium market for the milk produced in our area and to provide a safe work environment for our employees. Dolores left behind a group of talented and dedicated employees who feel passionate about producing a high-quality product.”

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Specialty cheesemakers team with supply chain to drive sales

June 26, 2020

By Alyssa Mitchell

CHICAGO — Dairy market analysts offered key insights and projections for the global dairy market for the second half of the year during a “Global Dairy Outlook Webinar” this week hosted by HighGround Dairy, The McCully Group and Gira.

The free two-day webinar was held in lieu of the groups’ inaugural Global Dairy Outlook Conference, originally set for this week in Chicago.

The Chicago Mercantile Exchange (CME) has been experiencing unprecedented volatility for the spot cheese market, with block Cheddar prices reaching multiyear lows and record highs in a matter of weeks.

CME Cheddar blocks reached a new record high price of $2.81 on Tuesday before falling 23 cents Wednesday and another half-cent Thursday to settle at $1.575 per pound.

“Volatility persists and is not finished as CME spot cheese prices fell nearly a quarter from their record high on Wednesday,” says Lucas Fuess, director of dairy market intelligence, HighGround Dairy.

He notes the renewal of USDA’s Farmers to Families Food Box Program means that government-induced dairy demand will persist into the summer months and could keep prices elevated.

“While cheese processors are doing everything possible to increase production, the potential for strong cheese demand in the coming weeks is an upside risk to the forecast numbers,” Fuess says.

Meanwhile, cheese, butter and nonfat dry milk stocks have increased in recent months to record levels. The latest monthly Cold Storage report released by USDA earlier this week showed a record-high cheese stock level for May. (See article on page 20.)

“While immediate demand is more impactful on the day-to-day spot price movement, strong stocks will weigh on the market into the back half of the year and limit meaningful price increases,” Fuess says. “Strong supply and demand shifts (retail versus foodservice and government spending) have caused extreme market volatility in recent months and have allowed fundamental data to mean less than it usually does, but at some point, the market will need to reconcile with the heavy stocks that exist across most of the complex.”

Michael McCully, owner of The McCully Group LLC, notes dairy markets have gone through the COVID-19 disruption phase and now are in transition to find a new equilibrium.

COVID-19 disrupted supply chains of all kinds, he says. However, the speed and effectiveness of reducing milk supplies was unprecedented.

“Going forward, cooperatives and plants may be more willing to limit milk flow as needed,” McCully says. “This would be far preferable to a government-mandated supply management program advocated by some farmers.”

Consumer tastes and preferences will continue to evolve, he adds.

“The challenge will be to build a dairy supply chain that can be responsive enough to quickly adapt and produce what consumers want,” McCully says.

Meanwhile, analysts from Gira provided some global perspective on dairy markets, particularly for China and Europe.
Gira’s James Caffyn says while China is a bit “ahead of the curve” in terms of navigating the impacts of COVID-19, uncertainty still remains.

Caffyn says consolidation of the Chinese dairy industry will accelerate, and imports will be pressured into the second half of this year, with a significant reduction in imports of cheese and milk powders expected.

However, demand for high value-added ingredient imports will have a higher growth rate, and significant opportunities exist to leverage the continued expansion of Chinese demand, he adds.

Gira’s Chrisophe Lafougere says “the only thing guaranteed is uncertainty.”

In particular, foodservice recovery in the European Union (EU)-28 will take time and will be different for each category, he says.
While stock accumulation is delayed, it is expected to continue weighing on prices, he adds.

A notable change moving forward is the growth in e-commerce as consumers have adjusted to new buying patterns during the pandemic, Lafougere says.

McCully agrees, noting online grocery shopping trends accelerated rapidly in recent months, as did carry-out meals.

“Are dairy products well-positioned to take advantage of what are likely to be long-term trends?” he asks.

CMN


Specialty cheesemakers team with supply chain to drive sales

June 26, 2020

By Alyssa Mitchell

MADISON, Wis. — As consumer shopping habits and supply chain channels have shifted in the wake of the coronavirus pandemic, specialty cheesemakers have collaborated with key members of the supply chain to continue to get their products in front of consumers and ultimately into their shopping carts.

Cheesemakers’ distribution channels, particularly for foodservice, have been heavily impacted by closures in the early stages of the COVID-19 pandemic. As some restaurants and foodservice channels look to reopen in certain states, the supply chain shakeup continues to present challenges for steady sales and distribution.

A recent survey conducted by the American Cheese Society (ACS), “COVID-19 Pandemic Impact on the American Cheese Industry,” found that in May, cheese industry survey respondents reported a 50% or more decline in overall sales. Managing cash flow, obtaining financial support and managing staff all are challenges that resulted in 71% of respondents saying they have applied for debt relief or financial assistance to stay afloat in this new reality. Some 30% either have laid off or furloughed employees, and 4% have reduced employee hours.

However, ACS says many of its members are using this as an opportunity to pause and improve business models as well as explore new methods to package and distribute products directly to consumers. The survey says 57.5% of respondents have identified new distribution methods for their products, with 51% seeing an increase in overall e-commerce sales.

“Our team was quick to respond to the changing needs in both retail and foodservice channels,” says Tim Omer, president and managing director of Emmi Roth USA, Monroe, Wisconsin. “We immediately focused on implementing additional safety measures at our production facilities and prioritized flexibility and service. We have continued to work with our customers to shift products and quantities to meet our customer needs, and altered our production schedules to meet them.”

For example, due to the slowdown of the airline industry, Emmi Roth partnered with other customers to sell airline cheese trays directly to consumers, Omer notes.

“The biggest challenges we have been facing are in the foodservice and airline industries, and reacting to their changing needs. Our sales and marketing teams have been challenged to think outside the box on product development and formats for the new ways people will consume food products at restaurants and during air travel,” he says. “On the other side, we also saw increased demand in products from our retail customers, where we needed to increase production or shift products from the foodservice channel to meet changing needs.”

Omer adds Emmi Roth has had a focus on e-commerce for the past several years, and the company’s work in that area has set it up for success during this time.

“Since we do not sell direct to consumer through our own e-commerce site, we are using platforms like Instacart to promote our cheeses at the grocery retailers who sell them,” he says. “The sales we are generating on the online grocery sites we work with are incredible, and we are investing in the growth we’re having.”

Sheana Davis, award-winning chef, cheesemaker, caterer, culinary educator and owner of The Epicurean Connection, Sonoma, California, has been supporting the artisan and farmstead cheese movement for more than 20 years. She notes the company’s restaurant wholesale business has dropped by 80% since COVID-19 hit the market.

“We are seeing it gradually build back up, as we had our first orders two weeks ago,” Davis says.

“We are lucky we self-distribute our cheeses,” she adds, noting the company had to cease cheese production in March and April and just restarted production earlier this month.

For its own cheese sales, Davis says the company currently is repacking its 5-pound tubs to 8- and 16-ounce tubs for consumers. As far as purchasing cheese, the company has gone to all pre-cut and wrap for the time being.

The Epicurean Connection also offers a home delivery service.

“We deliver weekly between 25-50 boxes of prepared foods and artisan cheeses,” Davis says. “We sell our own cheeses along with guest cheeses in the box. Each week we feature a selection of cheeses, with information on how to serve them, and they are paired with a wine, beer or cider.”

For retail, Davis says partnerships are key.

“It can really help sustain a small cheesemaker by having a retailer step up and sell their cheeses. In these times, no samples are offered, so really the trust is in the cheese departments and their staff. Relationships in this business go a long way; cheesemakers that have taken the time to get to know the retailers over time have the advantage of good sales. If a retailer has a story to tell, then that ultimately sells cheese,” she says.

New York City-based specialty shop Murray’s Cheese says its staff is looking for ways to bring more focus to independent cheesemakers who need help as their businesses grapple with COVID-related supply chain challenges.

“A lot of our artisan producers have been hard hit by the drop in restaurant business. Those sales have not translated 1:1 to retail,” says Nick Tranchina, president, Murray’s Cheese. “Giving focus and visibility to these producers and finding ways to help them connect with customers is important at this time and something we are very focused on at Murray’s.”

He adds as consumers have shifted to cooking at home more, Murray’s has seen big spikes in demand for classic cooking cheeses like Parmigiano, Mozzarella and others.

Schuman Cheese, Fairfield, New Jersey, says due to the increase in home cooking the company has seen a great increase in larger cheese package formats because consumers are buying more cheese in bulk.

“Our value blends are a great example of this pivot,” says Neil Cox, chief customer officer, Schuman Cheese. “We developed three varieties of shredded cheese, sold in pillow packs or twist ties, in a variety of sizes. This is quality product, following our True Cheese guarantee, at a value price.”

Cox notes that during the pandemic, the demand for cheese in retail and club stores has been unprecedented and caused Schuman Cheese to shift its process some to accommodate.

“Luckily, we have a broad portfolio of prepacked cheese to meet the needs of the retailers and therefore the consumers during this time,” he says.

Omer says Emmi Roth also has adapted to the increased demand for bulk purchases.

“As consumers stock up at club stores in particular, we are seeing more demand for some bulk consumer items such as our Emmi Triple Source Gruyere and Roth 4 Variety Pack Cheese Slices, both sold at Costco,” he says. “Cheeses that have a longer shelf life and are versatile are also selling well right now. In addition, we have seen a large increase in demand for our imported Emmi Gruyere cheese as people prepare more home-cooked meals.

“To be relevant from a marketing perspective right now, we are focusing much of our budget on e-commerce and digital marketing promotions to support these items,” he adds.

In the months ahead, the specialty cheese community wants to make sure that its products continue to reach consumers and that the makers of these products continue to survive.

“While we are aware that specialty cheese is not a crucial everyday food item, many consumers rely on our cheeses for snacking, increased cooking at home and treating themselves during the mental toll the pandemic is having on many people,” Omer says.
Cox agrees.

“For our customers, truly for everyone, there is comfort in being able to access food items that they love and enjoy,” Cox says. “As shoppers hit the stores, we saw that they were looking for items that were comforting, nostalgic and even a little fancy to help keep spirits up and bellies full. Having Copper Kettle with a glass of wine after home-schooling kids, working from home and all of the other changes that COVID brought is a nice treat.”

Tranchina notes in addition to being delicious and joyful, specialty cheese also supports a broad community of mongers, distributors and agricultural businesses.

“Many of these businesses are not guaranteed to exist in the future if we don’t support them today,” he says.

CMN


Rabobank: Foodservice sector begins to recover from COVID-19

June 26, 2020

NEW YORK — As the U.S. foodservice sector begins to recover from the impacts of COVID-19, sales declines are expected to moderate — from down 50% at peak to down 12% to 14% over the next 12 months, according to a new report, “U.S. Foodservice in the Post-COVID-19 World,” from Rabobank’s RaboResearch Food & Agribusiness division.

Just as dairy producers were enjoying high milk prices at the end of 2019 and looking forward to more of the same, so were foodservice operators. U.S. foodservice sales were up 8% in January and February compared to the prior year and were set for continued growth due to low unemployment levels, rising incomes and high consumer confidence, according to the report’s author, Rabobank’s senior consumer foods analyst Amit Sharma. However, total sales fell by nearly 25% in March and nearly 50% in April, reversing the year’s strong start. Independent and smaller chains likely suffered even greater damage.

Now in recovery mode, quick-service restaurants (QSR), particularly pizza operations with high exposure to the drive-thru, delivery and take-out channels, recently have posted double-digit sales gains. Restaurant operators and consumers now seem to be adapting to the “new normal,” Sharma says in the report. “Assuming no COVID-19 relapse in the fall, we expect U.S. foodservice sales declines to moderate — from the peak 50% drop in late March/April, to a 16% to 18% decline over the next 180 days, and a 12% to 14% decline for the next 12 months, as restaurants are beginning to open for dine-in services.”

Rabobank’s global dairy strategist Mary Ledman notes that nearly one-third of U.S. dairy product use is through the foodservice channel. Prior to COVID-19, dairy sales in the foodservice channel were rising more rapidly than at the retail level, she adds.
“But the companies servicing this market felt the brunt of the demand destruction inflicted by COVID-19,” Ledman says. “Dairy sales to high-end, white tablecloth restaurants came to a standstill as government-mandated bans on dine-in took hold. Specialty cheese companies were particularly hard-hit. In contrast, sales of cheese and other dairy products to QSR and pizza chains have done well.”

Ledman says some companies were able to pivot and fill the orders for retail demand, which was booming from mid-March to May. Also, as the Chicago Mercantile Exchange spot Cheddar price fell, there was a considerable amount of cheese made for aging programs, and April cheese stocks soared by 108 million pounds, which Ledman says wasn’t too far off from Rabobank’s initial estimated 50% loss of foodservice cheese sales near 125 million pounds per month.

“Due to continued strength in retail sales and the government stimulus buying of dairy products, the window of opportunity to put low-cost cheese away for aging closed by early May,” Ledman says.

The report predicts a full recovery from the current disruption will take longer than the seven quarters it took to return to pre-recession levels during the Great Recession from 2008 to 2010.

Any recovery in the foodservice segment is positive news for the dairy sector, but it’s important to understand that the speed of recovery is unlikely to be uniform, Ledman adds.

Sharma notes that both limited-service and full-service restaurants shifted focus to delivery, drive-thru and takeout, which now accounts for as much as 90% of sales for many operators. For example, he says, off-premise sales accounted for nearly 85% of Denny’s average store sales in April, up from only 12% pre-COVID-19. Additionally, since most QSR chains already generate nearly two-thirds of sales from the to-go channel, these restaurants are well-positioned to see continued growth.

“Longer term, the macro-economic impacts from the recession will also favor QSRs as consumers trade down from full-service restaurants,” he notes. “As a result, the dairy companies most impacted from COVID-19, servicing the higher-end full-service restaurants, will remain under pressure unless they are able to pivot to another sales channel. In contrast, cheese and dairy product sales to QSRs are on track for continuous improvement.”

CMN


Dairy maintains its key role in Dietary Guidelines draft report

June 19, 2020

WASHINGTON — Dairy stakeholders this week touted the benefits of dairy products in a balanced diet amid the release of a draft scientific report Wednesday by the Dietary Guidelines Advisory Committee (DGAC). The release of the draft report sets the stage for the final 2020-2025 Dietary Guidelines for Americans report to be published later this year by USDA and the Department of Health and Human Services (HHS).

Currently, the standards for federal nutrition programs and education messages are based on the 2015-2020 Dietary Guidelines for Americans, which both affirms the nutritional contribution made by dairy foods and reminds Americans that a healthy diet for ages 9 years and older includes three daily servings of lowfat and fat-free dairy, stakeholders note.

Earlier this week, the International Dairy Foods Association (IDFA) and National Milk Producers Federation (NMPF) sent a joint letter to Dr. Barbara Schneeman, chairwoman of the DGAC, and the secretaries of USDA and HHS urging the committee to consider the full range of studies on different types of fats and their role in a healthy diet when crafting its final report, noting that scientific understanding has evolved.

“We would like to reiterate our strong view, as explained more fully in previous comments to the DGAC, that a body of science in recent years has found that dairy foods, regardless of fat level, appear to have either neutral or beneficial effects on chronic disease risks,” IDFA and NMPF say. “We are concerned that a number of well-recognized studies appear to have been excluded from consideration.”

Focusing on the need for the most robust review of science possible, the letter asks the committee “to complete its review by including all relevant scientific studies that bear on these questions and, if the findings so indicate, recommend Americans incorporate dairy foods in all forms as an integral part of all dietary patterns.”

If the committee fails to examine the validity of existing dietary advice, “this will represent a lost opportunity to share newer science with consumers, health professionals and policymakers and contribute to ongoing confusion about the healthfulness of dairy,” the letter adds.

Following the release of the draft report Wednesday, IDFA issued a statement noting that the DGAC confirmed dairy products should maintain a central, important role in federal nutrition recommendations for people beginning at a very early age.

In addition to maintaining three servings of dairy per day, the committee found strong evidence pointing to positive health outcomes from dairy foods. In fact, a diet including lowfat and fat-free dairy, legumes, whole grains, fruits and vegetables is considered the ideal, healthy dietary pattern for all ages, IDFA says.

“In other key findings from their draft scientific report, the DGAC highlighted new evidence strengthening dairy’s role in maintaining bone health for adults. For mothers, the committee dispelled misinformation about dairy’s link to asthma, saying there is no association between a mother’s consumption of dairy and the development of asthma in children. And a new topic introduced in these Dietary Guidelines lays the groundwork for clearer nutrition recommendations for children from birth through 24 months of age, with the experts recommending small amounts of some foods including dairy foods, alongside fruits and vegetables, nut and seed products, and whole grain products, beginning at 6-12 months and continuing thereafter,” IDFA notes. “For toddlers, dairy foods are particularly important for the vitamins and nutrients they provide. This recommendation could not be clearer, demonstrating what the American Academy of Pediatrics has stressed for years, that dairy plays a critical role in the diet of children to bolster long-term health.”

Once again, the committee found no linkage between consumption of dairy foods and incidences of breast cancer, “which should put an end to a longstanding disinformation campaign to alarm and confuse the public.” IDFA adds.

IDFA says it is disappointed that the reported outcomes did not include a mention of relevant scientific studies that show the benefits of dairy at each fat level.

“There is robust evidence to support the inclusion of dairy foods at all fat levels in recommended food patterns. With the DGAC’s role coming to an end, IDFA encourages USDA and HHS to remedy this oversight in the final guidelines to be released this year,” the organization says.

However, IDFA says the conclusions offered by the committee “firmly establish dairy as one of the most nutritionally beneficial foods in dietary patterns alongside fruits and vegetables, legumes and whole grains. IDFA is pleased to see federal nutrition guidance continue to affirm the important nutritional contributions made by dairy foods and remind Americans that a healthy diet includes three daily servings of dairy.”

Stakeholders say barring any delay, USDA and HHS will work together to develop and finalize the 2020-2025 Dietary Guidelines for Americans and update MyPlate by December 2020.

CMN


U.S. dairy voices concerns on Canada trade, EU intervention

June 19, 2020

WASHINGTON — The U.S. Dairy Export Council (USDEC) and the National Milk Producers Federation (NMPF) sharply criticized Canada’s allocation of its tariff-rate quotas (TRQ) under the U.S.-Mexico-Canada trade agreement (USMCA), the details of which were released Tuesday.

USMCA, which enters into force July 1, contains important provisions to the U.S. dairy industry that will facilitate the smooth flow of U.S. dairy products through North America at a time of critical need and economic uncertainty, USDEC and NMPF say. However, Canada has announced the distribution of the TRQs in such a way as to discourage high-value foodservice or retain products from entering the market, the groups say, adding that most of the TRQs are given to competitors who have not incentive to import products.

The U.S. dairy industry groups are urging U.S. Trade Representative (USTR) Robert Lighthizer to immediately raise this issue with Canada and insist that Canada adheres not just to the letter of its commitments under USMCA, but to its spirit as well.

“Canada’s administration of previous TRQs under existing free trade agreements gave the U.S. dairy industry ample cause for concern, which has unfortunately been confirmed by the announced TRQ allocations,” says Tom Vilsack, president and CEO, USDEC. “Canada’s actions place the U.S. dairy industry at a disadvantage by discouraging utilization of the full use of the TRQs and limiting the market access granted by USMCA. We urge the U.S. government to act immediately to ensure that these provisions are implemented in good faith so that the U.S. dairy industry is able to reap the full range of benefits negotiated by USTR and its interagency partners at the U.S. Department of Agriculture.”

Meanwhile, NMPF and USDEC also recently joined the International Dairy Foods Association (IDFA) in sending a letter to Lighthizer and U.S. Agriculture Secretary Sonny Perdue highlighting a recent economic analysis that shows damage to the U.S. dairy industry caused by the European Union’s (EU) skim milk powder (SMP) intervention program from 2016-2019.

“It’s time for the EU to stop dumping government-purchased SMP on the world market and implementing policies that undermine global dairy markets under the guise of protecting its farmers,” says Michael Dykes, president and CEO, IDFA. “The EU program has harmed U.S. dairy export prospects by artificially inflating the EU’s market share and damaging the competitiveness of the United States in historically important export markets.”

The report, “Impact of the European Union’s SMP Intervention Program on the United States: 2016-2018,” was written by Kenneth Bailey and Megan Mao from Darigold, a wholly-owned subsidiary of the Northwest Dairy Association. Its authors conclude that the United States was “economically harmed by the EU’s intervention program for SMP” in three ways. First, the EU program depressed the global price of SMP, which lowered U.S. milk prices in 2018 and 2019, contributing to a $2.2 million loss of U.S. dairy farm income in those years. The EU program also artificially inflated its global export market share, resulting in drastically lower market share for U.S. dairy exporters and other SMP exporters and U.S. dairy export losses of $168 million from 2018-2019. Finally, the analysis shows that when the EU released its stockpile of intervention SMP onto the global marketplace, the disposal of the product had harmful effects on the competitiveness of the United States in historically important export markets including Southeast Asia.

“This report puts into hard numbers the bitter truth that U.S. dairy farmers already know: the EU’s dump of intervention stocks onto the world market depressed farmgate milk prices in the U.S. in 2018 and 2019,” says Jim Mulhern, president and CEO, NMPF. “Now, as farmers and cooperatives are working tirelessly amid a global pandemic to keep an essential food ingredient moving to those markets that need it most, it’s time to do the advance work necessary to ensure we don’t see a repeat of those harmful impacts form EU intervention policy in the future. The EU SMP intervention program needs serious reforms, and the administration should examine the best tools at its disposal to help drive that needed change.”

To read the full economic analysis, visit https://www.nmpf.org/wp-content/uploads/2020/06/Impact-of-EU-SMP-Intervention-Program_6.5.20-3.pdf.

CMN


May U.S. milk production down 1.1% from a year earlier

June 19, 2020

WASHINGTON — Milk production in the 24 major milk-producing states in May totaled 17.96 billion pounds, down 1.0% from May 2019, according to data released this week by USDA’s National Agricultural Statistics Service (NASS). For the entire United States, May milk production was estimated at 18.84 billion pounds,down 1.1% from May 2019. (All figures are rounded. Please see CMN’s Milk Production chart.)

April’s revised production for the 24 major states totaled 17.78 billion pounds, a decrease of 47 million pounds or 0.3% from last month’s preliminary production estimate.

May production per cow in the 24 major states averaged 2,031 pounds, 32 pounds below May 2019 but up 23 pounds from a month earlier. For the entire United States, production per cow in May is estimated at 2,011 pounds, 31 pounds lower than May of last year but up 23 pounds from a month earlier.

NASS reports the number of milk cows on farms in the 24 major states was 8.84 million head in May, up 50,000 head from May 2019 but down 12,000 head from the previous month. In the entire United States, there were an estimated 9.37 million milk cows in May, 37,000 cows more than a year earlier but 11,000 cows less than April.

California led the nation’s milk production in May with 3.50 billion pounds of milk, down 1.5% from a year earlier. Wisconsin followed with 2.58 billion pounds of milk produced in May, down 3.1% from May 2019.

CMN


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Today's Cheese Spot Trading
July 2, 2020


Barrels: $2.4150 (+1 1/2)
Blocks: $2.6750 (+3 1/2)


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


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

Guest Columnist

Total quality management to ensure absence of coronavirus in cheese

Dr. Mali Reddy, American Dairy and Food Consulting Laboratories and International Media and Cultures (IMAC Inc.)

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