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Cheesemakers innovate with new snack shapes, formats

Jan. 17, 2020

By Trina La Susa

MADISON, Wis. — Cheese companies are delivering new formats and shapes to meet consumer demand for portable and convenient snacking options in 2020. Single-serve cups, crispy cheeses, and formats like spread, string, stick, cube and curds continue to pop up at retailers across the nation.

“The traditional three-meals-a-day eating schedule is being replaced with and complemented by smaller and more frequent snacks,” says Brenda Bell, insights manager, Sargento Foods. “With this shift, consumers will continue to demand their snacks balance taste and nutrition, as well as convenience and portability to fit their busy lifestyles.”

Convenience will be a key factor among many growing cheese segments, especially in snacking. About 69% of U.S. adults say they snack in between meals at least once a week, and 30% say they replace meals with snacks once a week or more, according to The Hartman Group research data provided by Dairy Management Inc. (DMI), which manages the national dairy checkoff program.

“Cheese remains a staple for cooking, but consumers are turning to cheese as a quick and enjoyable snack because it really fits that on-the-go mentality they have,” says Chad Galer, vice president of product research, DMI. “Where we’re seeing a lot of growth and changes among cheesemakers and converters is really in convenience, flavor and also in the offerings for shape and texture.”

For one company, cottage cheese is taking on a new shape, similar to that of an ice cream bar, as a grab-and-go refrigerated snack. Spēka brand has brought chocolate and caramel coated bars of cold cottage cheese to the United States through its importer and marketer, Baltic Marketing Inc., Montclair, New Jersey.

“The cottage cheese bar, but in a somewhat less nutritious form, has been a popular dairy staple of the Baltics throughout the years,” says Anita Batarags, co-developer, Spēka. “Thus came the idea that, given the gradually rising trend toward cottage cheese among the U.S. consumer, coupled with the increasing surge of interest in high-protein, natural snacks, that we ourselves could jump onto improving and branding the cottage cheese bar for the U.S. consumer. We worked with the dairy producer to increase the protein, decrease the sugar content, and in conjunction with flavor companies here in New Jersey, provide a new and interesting flavor assortment.”

Since the Spēka Bar launched September 2019 at Natural Products Expo East in Maryland, the bars have become popular on the West Coast as refrigerated grab-and-go dairy snacks, Batarags says. On the East Coast, Spēka currently is in a smattering of coffee shops and natural products stores, and is under review in a number of large retail chains.

“The Spēka Bar is a healthy, all-natural sweet dairy selection to the person craving a late morning or midday snack,” Batarags says. “It pairs well with coffee and is a very viable coffee shop or grab-and-go refrigerated snack that — with its combination of protein, fat and sugar — will provide lasting energy. Additionally, consumers will be pleased to find that with just 140-150 calories per 1.3-ounce bar, their urge to snack is happily satisfied.”

Made with milk sourced from Latvia and Estonia, the 1.3-ounce Spēka bars currently are sold in vanilla, Greek yogurt and salted caramel flavors.

While consumers might primarily think of Ricotta as an ingredient for cooking, a new format of Ricotta has been designed for snacking. RifRaf Ricotta Cups, Brooklyn, New York, has launched 4.6-ounce single-serve Ricotta cups with sweet and savory stir-in flavors.

“My co-founder, David Eisenman, was making lasagna one night, and he started snacking on the leftover Ricotta, when a light bulb when off,” says William Hickox, co-founder, RifRaf. “After some research and the realization that no one had made a snackable Ricotta cup, he shared the idea with me and our other co-founder, Chris Sojka, and we started putting the wheels in motion.”

Hickox says that initially RifRaf Ricotta cups were envisioned as a fruit-on-the-bottom format, but that ended up drawing moisture out of the cheese and creating a watery consistency. After revisiting the drawing board, he says they decided on the cup with a compartment for stir-in flavors inspired by Greek yogurt packaging.

“Ricotta, with its high protein and a truly unique format, is the excitement people are looking for,” Hickox says. “Also, its neutral pallet sets the stage for both sweet and savory flavors, something yogurt has tried but has never been able to capture in that market.”

To develop RifRaf’s flavor profiles, Hickox says they tweaked the Ricotta recipes by adding different jams from the shelves and looking at top yogurt flavors.

“Yogurt consumers are some of the most adventurous in trying new flavors and brands,” Hickox says. “We are positioning our Ricotta cups to be a flavor-forward, indulgent snack for consumers who are looking for an adventurous alternative to their typical yogurt cups.”

The Ricotta cups are available in Meyer Lemon, Strawberry Balsamic, Wildflower Honey, Sundried Tomato and Serrano Pepper Honey flavors and sold in select Whole Foods and independent grocery stores throughout the Northeast and Mid-Atlantic Regions; Kings/Balducci’s in New Jersey; and Central Market in Texas.

“I think we will continue to see that trend of cottage cheese and Ricotta, really playing off that healthy halo of a good source of protein and low sugar, continuing to grow,” Galer says. “They are really affordable sources of protein that consumers continue to rediscover, and they pair well because they are mild, milky cheeses.”

Another growing snack trend is baked cheese crisps made from 100% cheese. Low in carbs and a source of protein, Cello Whisps Cheese Crisps from Schuman Cheese, Fairfield, New Jersey, offer bite-sized, crunchy cheese crisps in Asiago & Pepper Jack, Cheddar, Parmesan, Bacon BBQ and Tomato Basil flavors for snacking straight out of the bag.

Other formats of dehydrated cheeses include cheese bites resembling spherical pieces of the moon from Moon Cheese, Ferndale, Washington; cheese crisp bars, o-shaped crisps and cracker-like square crisps from Sonoma Creamery, Sonoma, California; and popped cheese bites in single-serve cups from Cheesebop B.V., Utrecht, Netherlands.

The cheese crisp category, while small, offers a new snacking option for consumers, and 100% natural cheese crisps volume sales in the United States have grown to 2.18 million pounds as of November 2019, from 1.28 million pounds in 2017 and 1.60 million pounds in 2018, according to IRI data provided by DMI.

According to Galer, snacking will continue to be driven by convenience, portability, single-serve packaging and bite-size shapes such as crisps, sticks, cubes and half circles.

“It’s paramount that cheese companies continue to innovate and stay on top of trends because consumer expectations, tastes and preferences are constantly changing,” Galer says.

CMN


U.S.-China trade agreement includes benefits for U.S. dairy

Jan. 17, 2020

WASHINGTON — President Trump signed the first phase of a trade agreement between the United States and China during a signing ceremony Wednesday at the White House.

The agreement addresses structural barriers to trade and will support expansion of U.S. food and agriculture exports, according to statements released by the Office of the U.S. Trade Representative (USTR).

Under the phase one agreement, China has agreed to purchase and import on average at least $40 billion of U.S. food, agricultural and seafood products annually for a total of at least $80 billion over the next two years. On top of that, China will strive to import an additional $5 billion per year over the next two years.

Regarding sanitary and phytosanitary (SPS) measures, the parties agreed to not implement food safety regulations or require actions of the other party’s regulatory authorities that are not science- and risk-based, and will only apply such regulations and actions to the extent necessary to protect human life or health. Additionally, the parties have agreed that China will improve SPS measures affecting a wide variety of products, which will facilitate exports of U.S. food and agricultural products to China.

Additionally, regarding geographical indications (GIs), China has agreed not to undermine market access for U.S. exports to China using trademarks and generic terms through any GI measures taken in connection with an international agreement, to use certain relevant factors when making determinations for genericness, and to not provide GI protection to individual components of multi-component terms if the individual component is generic.

The Consortium for Common Food Names (CCFN), together with the U.S. Dairy Export Council (USDEC) and National Milk Producers Federation (NMPF), worked extensively with U.S. and Chinese trade officials to create these transparency and due process obligations regarding GIs to help guard against future restrictions on common food names in China.

“American producers and manufacturers are unduly harmed when foreign nations intentionally misuse geographical indications to restrict fair competition,” says Jaime Castaneda, executive director, CCFN. “We are grateful that the U.S. Trade Representative and his team of negotiators recognized the severity of these trade barriers to U.S. growth in China and took decisive action to improve protections for common food names.”

Specific to dairy and infant formula, China has agreed to the following:

• Recognize the U.S. system of oversight for dairy products as providing the same level of protection as China’s, eliminating the need for China-specific inspections of U.S. dairy facilities;

• Update its dairy facility registrations within 20 business days of receiving a list from FDA;

• Allow goat’s and sheep’s milk dairy product imports from the United States, which previously were ineligible for export to China;

• Clarify the market access requirements and regulations related to fluid milk, including fortified, pasteurized, extended shelf life and ultrafiltered milks, and eliminate questionnaire requirements for fluid milk producers to obtain their facility registration;

• Complete the approval process for imports of dairy permeate powder for human consumption;

• Adhere to specified timelines when administering the product and facility registration of U.S. infant formulas;

• Ensure the confidentiality of any trade secrets disclosed during the infant formula product registration process; and

• Not require on-site inspections or audits as a prerequisite to registering either a U.S. dairy or infant formula facility, although China still will inspect manufacturers for purposes of registering an infant formula product.

U.S. dairy groups praised the progress made on trade with China, though they note retaliatory tariffs that have hurt U.S. dairy exports still remain in place.

Tom Vilsack, USDEC president and CEO, says the signing of the first phase is a positive step forward, making progress on regulatory restrictions and other nontariff barriers hindering dairy trade.

“These are important deliverables that USDEC has been pressing China for over the course of the last few years,” Vilsack says. “We need to continue to work with our government, China’s government and our customers to finish the job by lifting the remaining Chinese retaliatory tariffs against our exports.”

Over the next decade, China represents a $23 billion market opportunity for U.S. dairy, and it is essential that a trade relationship with China further levels the playing field for U.S. dairy and provides expanded market access to the growing industry, says Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA).

“The dairy industry welcomes news of this deal and looks forward to beginning negotiations on phase two that must remove all existing tariffs and nontariff barriers and create a level playing field for U.S. dairy products,” Dykes says. “IDFA is hopeful that this deal — alongside the recently implemented phase one Japan deal as well as the U.S.-Mexico-Canada Agreement — signals the United States has embraced a market- and rules-based system of international trade that is essential for the future of the U.S. dairy industry.”

The current phase one agreement is likely to have little noticeable short-term impact on U.S. dairy trading, according to Nate Donnay, director of dairy market insight, INTL FCStone. Many of the U.S. dairy exporters wanting to ship to China already have plant approval, though the improved SPS measures will make it easier to grow exports in the future, he says.

Donnay notes that he, like many others, remains skeptical that China will follow through with the agreement to increase its commodity purchases to $40 billion a year — which would be about double its average purchase amount from the last several years.

“Word from Chinese officials after signing is that Chinese companies will buy U.S. goods when it makes sense financially to do that,” Donnay says. “There is no indication that they will make that happen by fiat, or that they will drop tariffs or subsidize imports on U.S. products. Theoretically the numbers are possible, but the will isn’t there.”

He adds that it is hard to get too optimistic for further trade progress with China until after the election.

“If the president wins again, China might have to go back to the table and make bigger concessions and a more beneficial agreement. If Trump doesn’t win, it’s tough to call if Democrats would go softer on China or not,” Donnay says.

Furthermore, details are not yet available on how the extra purchases will be divided among commodities, and stakeholders say challenges remain.

“After so many months of uncertainty and escalating tensions, it is a good sign that our two countries appear to have found common ground,” says Roger Johnson, president of the National Farmers Union. “Not only has this trade war cost farmers billions of dollars worth of sales to China, but it has also bruised our reputation, making other trading partners reluctant to work with us. To justify these lasting damages, this deal must deliver more than vague, unenforceable, short-term commitments — we need real and lasting behavioral change from China, and we need reliable and robust agricultural export markets. That is the standard the Trump administration should be aiming for as it negotiates the next phase of this agreement.”

CMN


U.S. dairy industry stakeholders laud Senate passage of USMCA

Jan. 17, 2020

WASHINGTON — The U.S. Senate yesterday voted to ratify the United States-Mexico-Canada Trade Agreement (USMCA) by a vote of 89-10. President Trump is expected to sign the agreement, which will replace the previous North American Free Trade Agreement (NAFTA). Canada has yet to ratify USMCA, but Mexico already has done so.

For dairy, USMCA preserves the Mexican market, eliminates Canada’s Class 6 and 7 pricing program that allowed Canadian producers to undersell U.S. producers, increases market access to the Canadian market and strengthens provisions to protect common cheese names, stakeholders say. U.S. dairy exports to Mexico and Canada totaled more than $2.1 billion in 2018, or roughly 40% of total U.S. dairy exports, says the International Dairy Foods Association (IDFA).

“The new USMCA deal delivers peace of mind for our businesses, removing the handcuffs of uncertainty that have constrained business decisions over the past two years as the deal was negotiated,” says Michael Dykes, president and CEO, IDFA. “The USMCA deal is a major win that levels the playing field with our largest trading partners.”

The U.S. Dairy Export Council (USDEC) and National Milk Producers Federation (NMPF) also cheered the Senate vote but urged U.S. officials to carefully monitor Canada and Mexico’s USMCA commitments once the trade deal takes effect to ensure its provisions are enforced so the dairy industry can realize its full benefits.

“Under President Trump’s leadership, USTR and USDA negotiated an agreement that will deliver a more certain future for our dairy farmers and rural economy,” says Jim Mulhern, president and CEO, NMPF. “The U.S. must now remain diligent and proactively work with Canada and Mexico to implement USMCA in both letter and spirit. Full compliance is essential to achieving more fair trade with Canada and protecting American-made cheeses in Mexico.”

The Wisconsin Cheese Makers Association (WCMA) applauded members of the Senate and thanked administration officials for recognizing the urgency of action on USMCA.

“Approval of this trade deal is a major victory for American dairy processors, as both Mexican and Canadian consumers are essential to the stability and growth of our industry,” says John Umhoefer, executive director, WCMA. “Free-flowing trade with neighboring nations will provide a measure of security for dairy farmers and their processor partners that is sorely needed.”

The American Dairy Coalition says it is pleased to see U.S. producers enjoy expanded markets and the certainty their products will be able to compete fairly.

“After suffering severe economic losses over the last five years, the nation’s dairy farmers look forward to stability, certainty and growth of dairy products into the markets of Mexico and Canada,” says Laurie Fischer, CEO, American Dairy Coalition. “This has been a huge week on Capitol Hill with agreements on two major trade barriers.”

CMN



The Epicurean Connection settles into new space in Sonoma, Calif.
Business offers education, cheesemaking and catering

SONOMA, Calif. — Sheana Davis, owner of The Epicurean Connection, is a proud foodie, coming from a family of foodies even before foodie was a word.

Owner of The Epicurean Connection in Sonoma, California, Davis has been immersed in food from a young age, first assisting her grandfather, a professional chef, and then apprenticing under M.F.K. Fisher, a food writer and founder of the Napa Valley Wine Library, while she was still in high school.

It was only natural, then, that Davis would study culinary arts in college and soon after start The Epicurean Connection in 1992 as a marketing firm.

In the almost 30 years since she launched The Epicurean Connection, the business has taken on a few different forms, evolving from consulting to cheese retailer to educator to producer — and often a mix of all of them — to meet the demands of a changing marketplace. Constant through it all, though, has been Davis’ appreciation of all things cheese and her enthusiastic support for the artisan and farmstead cheese movement.

Earlier this year, Davis secured a 15-year lease in the Sonoma Industrial Parkand moved The Epicurean Connection to a 2,000-square-foot space that is large enough that she can hold cheesemaking classes on site as well as cater events. The new space is allowing her to further hone in on three of her cheese-related loves: education, production and catering.

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U.S. Senate to vote on USMCA; Hearing held on French tariffs

Jan. 10, 2020

WASHINGTON — The Senate Finance Committee this week voted overwhelmingly to pass the United States-Mexico-Canada Agreement (USMCA) Implementation Act. The legislation was reported out of committee Monday on a bipartisan 25-3 basis and will update the North American Free Trade Agreement (NAFTA).

“This modernized trilateral trade agreement will open new markets for American exporters, create hundreds of thousands of new jobs, grow the national economy and protect U.S. workers,” says Senate Finance Committee Chairman Chuck Grassley, R-Iowa. “I expect the full Senate will act soon and that final approval of USMCA is just around the corner.”

Last month, the full House voted to ratify USMCA (see “House votes in favor of USMCA ratification” in the Dec. 20, 2019, issue of Cheese Market News).

The National Milk Producers Federation (NMPF) says America’s dairy farmers are counting on the Senate to move quickly to finalize USMCA, which provides tangible benefits to the dairy industry.

“USMCA will expand trade opportunities with our most valuable partners and secure immediate benefits for our rural communities,” says Jim Mulhern, president and CEO, NMPF.

The trade pact contains several provisions specifically focused on improving export prospects for U.S. dairy, including USMCA’s elimination of Canada’s Class 7 dairy program and the deal’s assurances that the use of many common food names will not be impeded in Mexico, NMPF notes, adding that the agreement is expected to add $548 million in dairy farm revenues in its first six years of implementation. NMPF believes advancements made during negotiations between lawmakers and the White House will strengthen USMCA, including more effective enforcement measures that will give the dairy industry greater assurance and improve tools that will put USMCA’s reforms into place.

The American Farm Bureau Federation (AFBF) notes that USMCA is expected to increase U.S. ag exports by $2 billion and result in a $65 billion increase in gross domestic product. AFBF notes the agreement gives U.S. dairy products access to an additional 3.6% of Canada’s dairy market, even more than what had been proposed in the Trans-Pacific Partnership trade agreement the United States abandoned.

“The United States-Mexico-Canada Agreement will protect our valuable trade relationships with our nearest neighbors and return certainty to our markets,” says Zippy Duvall, president, AFBF. “We urge immediate approval by the full Senate to deliver a much-needed win for agriculture.”

Also this week, the Office of the U.S. Trade Representative (USTR) held a public hearing on proposed tariffs that would be imposed on a number of French products, including cheeses, in response to French taxes on digital services provided by U.S. companies.

Last month, USTR determined that France’s digital services tax of 3% on annual revenues of certain companies is unreasonable or discriminatory and burdens or restricts U.S. commerce. USTR proposed action in the form of additional duties of up to 100% on certain products of France, including Roquefort and other cheese and dairy products.

Comments from NMPF commended USTR for the inclusion of dairy products in the preliminary list of French goods eligible for retaliatory measures in response to $2.4 billion in damage that USTR determined arises from France’s digital services tax.

“Given France’s and the EU’s long history of discouraging dairy imports via a complex web of trade barriers, the addition of French cheeses, yogurt, whey protein and butter on the list is entirely justified,” NMPF says. “Highlighting the disparity in dairy trade between our two countries, the U.S. imported nearly $261 million of French dairy products but exported a total of only $4 million of dairy products to France in 2018, per the U.S. Department of Agriculture.”

Meanwhile, some U.S. cheese manufacturers with parent companies in France oppose the additional proposed duties on French cheese and dairy products.

Savencia Cheese USA LLC says it opposes the additional duties because they would undermine the company’s ability to continue to increase the sales and market share of its operations in the United States.

“Although our primary business is the domestic production of cheese, we import a significant amount of cheese that is manufactured by our affiliates in the Republic of France,” says Dominique Huth, president and CEO, Savencia Cheese USA. “These imports create a direct, positive impact on our sales, responding to specific demand for high-end specialty imported cheese from France. They also impact sales indirectly, by allowing us an opportunity to introduce customers to our broad range of cheeses produced right here in the United States. Either way, the cheese we import from France drives our sales, thereby contributing to our revenue in the U.S.”

Savencia Cheese USA says it strongly believes USTR should not include dairy products in its proposed action and particularly should exclude two lines regarding cheeses not containing cow’s milk, as well as blue-veined cheese in original loaves.

Bel Brands commented that it is in the process of moving production of its cheese products to the United States, and tariffs will disrupt its ongoing new job creation here. The company adds that its cheese products from France recently were removed from the retaliation list for the World Trade Organization aircraft dispute and should again be removed in this dispute for the same reasons.

The Cheese Importers Association of America (CIAA) says while it shares the administration’s opposition to French policies that discriminate against U.S. businesses, these proposed tariffs would have a negative impact on U.S. cheese importing companies and the individuals they employ.

The Specialty Food Association (SFA) says it supports the taxation of services in France rather than consumer goods produced in France, arguing that the preliminary list of 63 tariff subheadings contains products that have nothing to do with digital services.

“Many of these products are produced by small farmers in France, brought to the U.S. by small importers and sold to consumers by small retailers and independent restaurants,” says Philip Kafarakis, president, SFA. “Small and very small businesses would be affected along the supply chain in this retaliation for taxes on digital service giants.”

SFA has requested that the following be removed from USTR’s list of proposed additional tariffs: yogurt; whey protein concentrates; butter; fresh cheese; Roquefort; Edam and Gouda; processed Gruyere; processed cheese; Blue-veined cheese; Cheddar; Romano, Reggiano, Parmesan, Provolone and Provoletti cheese; Swiss and Emmenthaler; cheese made from sheep’s milk; and Pecorino.

In other trade developments, the U.S.-Japan Trade Agreement, which includes a staged tariff elimination for cheese and whey among other tariff reductions for U.S. ag products, went into effect Jan. 1. Next week, the United States and China are scheduled to sign the first phase of a trade deal where China has committed to substantial purchases of U.S. agricultural goods (see “Trump announces China trade deal to be signed January 15” in last week’s issue of Cheese Market News).

CMN


Borden Dairy files for bankruptcy but plans to continue operations

Jan. 10, 2020

DALLAS — Borden Dairy this week announced that it and certain affiliates have initiated voluntary reorganization proceedings in the District of Delaware under Chapter 11 of the Bankruptcy Code. This comes just two months after Dean Foods Co. announced its bankruptcy and that it was in talks over a potential sale (see “Dean Foods files for bankruptcy, in advanced talks for sale to DFA” in the Nov. 15, 2019, issue of Cheese Market News).

Borden Dairy says it intends to use the court process to pursue a financial restructuring designed to reduce its current debt load, maximize value and position the company for long-term success. Borden plans to continue operating in its ordinary course of business under the court’s supervision.

“Borden is EBITDA-positive and growing, but we must achieve a more viable capital structure,” says Tony Sarsam, CEO, Borden Dairy. “This reorganization will strengthen our position for future prosperity.”

Sarsam adds the company will continue serving its customers, employees and other stakeholders and operating businesses as usual throughout the process. Last year, the company launched several new products and grew its year-over-year sales.

“Despite our numerous achievements during the past 18 months, the company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry,” Sarsam says. “These challenges have contributed to making our current level of debt unsustainable. For the last few months, we have engaged in discussions with our lenders to evaluate a range of potential strategic plans for the company. Ultimately, we determined that the best way to protect the company, for the benefit of all stakeholders, is to reorganize through this court-supervised process.”

Sarsam notes the company had proactively filed expected motions as part of the court-supervised process, which allow it to pursue day-to-day operations. The company says it intends to work closely with creditors, customers and employees to identify value-maximizing restructuring plans that will benefit all stakeholders.

Dairy Farmers of America licenses the name Borden for its cheese but notes that Borden Dairy is a separate business entity.

For additional information about Borden Dairy’s reorganization, visit www.bordenfinancialreorg.com.

CMN


November cheese production up 0.5% from one year earlier

Jan. 10, 2020

WASHINGTON — In November 2019, U.S. cheese output, excluding cottage cheese, totaled 1.101 billion pounds, 0.5% above November 2018’s 1.096 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.) November cheese production was 3.2% below October 2019’s 1.138 billion pounds, but when adjusted for the length of the months, November cheese production was up less than 0.1% from October on an average daily basis.

Italian-type cheese production in November totaled 473.8 million pounds, 1% above November 2018. Production of Mozzarella, the largest component of Italian-type cheese production, was 377.6 million pounds in November 2019, up 2% from a year earlier.

American-type cheese production in November totaled 434.8 million pounds, up 0.2% from November 2018. Production of Cheddar, the largest component of American-type cheese production, was 310.3 million pounds, down 1.2% from November 2018.

Wisconsin was the nation’s leading cheese producer with 284.4 million pounds in November, up 0.3% from cheese production a year earlier. California followed with 217.6 million pounds, up 0.6% from November 2018.

U.S. butter production in November totaled 156.0 million pounds, up 4.4% from a year earlier. November butter production was down 0.6% from October’s 156.9 million pounds, but up 2.7% on an average daily basis. California led the nation in butter production at 48.7 million pounds in November 2019, up 11.9% from a year earlier.

U.S. production of nonfat dry milk (NDM) suitable for human consumption totaled 142.1 million pounds in November, up 5.7% from a year earlier. California led in NDM production with 44.9 million pounds in November, virtually unchanged from its production in November 2018.

CMN


CMN’s annual round table: Panelists address declining farm numbers, recruitment

Jan. 3, 2020

MADISON, Wis. — In the second half of Cheese Market News’ annual round table, industry leaders from across the United States discuss dairy farm consolidation, transportation and the importance of recruiting new talent, among other top-of-mind issues. If you missed last week’s part one, please visit www.cheesemarketnews.com to read their discussion about dairy pricing, international trade and plant-based dairy alternatives.

We thank each of our panelists for taking time in the midst of busy schedules to provide written responses to our questions.

This year’s panelists are:

• Nate Donnay, director of dairy market insight, INTL FCStone Financial, Minneapolis

• Mike Glick, president and CEO, G&R Foods Inc., Reedsburg, Wisconsin

• Dominique Huth, CEO, Savencia North America, New Holland, Pennsylvania

• Rachel Kaldor, recently retired executive director, Dairy Institute of California, Sacramento, California

• Jeff Lyon, general manager, FarmFirst Dairy Cooperative, Madison, Wisconsin

• Mike McCully, owner of The McCully Group LLC, New Buffalo, Michigan

• Sheryl Meshke, co-president and CEO, Associated Milk Producers Inc., New Ulm, Minnesota

Dairy farm numbers continue to decline even as U.S. milk production continues to trend upward. Do you view this as a positive or a negative? How does consolidation on the farm side of the industry affect the industry as a whole?

Glick: Farm evolution will continue, and unfortunately needs to continue so we can support rising demand. There will be niche places where smaller dairies will be able to supply specialty items such as A2 milk, grass fed and organic. The Norman Rockwell view of the family farm is more about nostalgia and a way of life, and the loss of the 100-head dairy farm is no longer feasible.

Lyon: The decline in dairy farms has been going for years and each one has their own story. Some have been due to normal retirements, some due to financial reasons and others due to families and/or nonfamily members with separate farms coming together in a merger.

The presence of livestock agriculture and having many, diverse operations has generally been good for our rural communities because the money made by dairy farmers and other livestock producers gets circulated in the local economy and provides employment for others. Consolidation on the farm side, while providing employment opportunities, is not always compatible with rural communities and local businesses.

Consolidation if you are a dairy processor may be beneficial because there are less stops to pick up milk and fewer dairy farmers to work with. However, if a dairy farmer chooses to leave the plant, the plant may have a difficult time finding the milk they need. In Wisconsin, with many and different sized dairy processors it has been beneficial to have a large number of dairy farms of different sizes to meet processor needs.

McCully: The decline in dairy farmer numbers and increase in milk production are long-term trends that are not expected to change. On the positive side, the growth in milk production helps fulfill growing demand in the United States and global market for dairy products. The downside is the loss of farms and the economic and social impacts that come with it. For the dairy industry, where does the next generation of people come from? There are a lot of people that work on dairy farms and at dairy and food companies that grew up on farms. There is also a visible impact on rural communities around the United States with the decline in farm numbers. If it can be fixed, it will take a combination of economic and social policies to stem the decline in farm numbers. Simple demographics are also in play as the average age of a farmer is in the 50s. As they retire, there are fewer in the next generation to take over.

Meshke: Every cow, every farm significantly impacts local economies. When farmers are lost, rural communities are impacted.

Farm consolidation is driven by economies of scale, but it means a reduction in the number of people directly employed and living on a farm. As a result, the next generation of “farm kids” — sought-after, hard-working employees — is shrinking. This has the potential to be a significant long-term loss to our country’s economy.

Is the new Dairy Margin Coverage (DMC) program mandated by the 2018 Farm Bill an appropriate price protection for producers? How effective do you believe it will be in the long run?

Glick: DMC is a great tool for the educated farmer to help minimize the risk in the event of low markets. The cost is very minimal and will allow farms to plan a successful financial plan to minimize the ever increasing volatility of the dairy markets. Every farmer should have forward sold milk when the futures are showing a profitable futures. “You never go broke when you hedge a profit.”

Lyon: Getting legislation passed is the “art of the possible” and the DMC program is what could get passed into law. Several other policy options were floated that had some regional support but they did not get traction with Congress. Overall, the DMC had general support from across the United States. The dairy industry had a challenge when it came to developing the 2018 dairy title. First, dairy farmers had to be convinced that the new program would be better than the 2014 Farm Bill’s Margin Protection Program, which was ineffective, and then deliver a dairy title that would provide protection. The fact that $303 million went to just under 23,000 dairy farmers says we did pretty good. Time will tell whether the DMC will provide appropriate price protection. The dairy industry will need to work for improvements to the DMC when economic conditions change.

Kaldor: Milk Income Loss Contract, Margin Protection Program, and now Dairy Margin Coverage. As well intended as these programs have been, none are a substitute for, or are as effective as, comprehensive producer price risk management.

McCully: The DMC program is an improvement over the Margin Protection Program, and has paid out generously in 2019. Longer term, the program will have to be used to be effective. The sign-up for 2020 is far behind the 2019 level as farmers may decide there is less use for the program next year. However, as with all risk management tools, to be effective over time, they need to be used consistently. This program helps address the concern over declining farm numbers, but might only slow, not stop or reverse, the loss of small to mid-size farms.

Meshke: Dairy Margin Coverage is a much-improved program AMPI strongly advocated for last year. It’s been reassuring to see it operate as intended by providing a milk price minus feed costs margin floor at an affordable cost. The program has provided a piece of certainty for dairy farmers during uncertain times.

How are overall U.S. transportation issues (driver shortages, fuel costs, etc.) affecting how dairy companies do business, both on the input side and in terms of selling and transporting finished products?

Donnay: This is driving costs higher and adding pressure to margins, further increasing the need and rate of consolidation (M&A) on both sides of the industry; until Elon Musk solves it with driverless electric trucks.

Glick: The transportation continues to be more and more problematic, especially when we see areas of the country with surplus or diminished supplies and freight is the only way to level the issue at hand. The ability to make emergency deliveries from 400 miles away are gone. Companies have to carry more inventory or have a broader group of approved suppliers.

Huth: In 2018 transportation shortages led to very high costs — when you could find a truck. The sudden and unexpected rise in prices forced Savencia, and every player in the industry, to refocus on transportation efficiency. We worked closely with our suppliers and customers to develop as many win-win solutions as possible. Whether identifying where customers could more efficiently pick up product via a back-haul, or moving from weekly to semi-weekly deliveries — we rebuilt our transportation routings from scratch to get more product delivered on fewer trucks. Investing in our own small fleet also secures our ability to maintain higher than industry average service levels when it matters most.

In 2019 there has been a shift from transportation scarcity to warehousing scarcity — whether it’s skilled labor or cold storage availability. We’ve taken actions to retain our best employees and expanded our relationships with existing partners to maintain service levels.

McCully: One of the main impacts has been how higher transportation costs have altered the competitive dynamic between dairy products from different regions of the United States. Prices for products from the West Coast move lower to compensate for higher trucking costs to the Midwest in order to compete with Midwestern products. With additional cheese production capacity being added in the Midwest, this places additional pressure on West Coast plants. Truck and driver availability have also been issues that add more costs to transporting milk, cream and other dairy products.

As a generation of dairy industry leaders approaches retirement age, what does the industry need to do to attract and retain new leadership? What are the challenges and opportunities facing new entrants in today’s dairy workforce?

Donnay: Technology, technology and technology. The industry needs to innovate and increase technology to retain well-educated young people who have the choice to become a farm/food business leader or head in a different direction. Vertical integration, larger scale operations and decisions guided by empirical evidence and technology are likely to attract what the industry needs for the next generation.

Huth: The industry will need to offer competitive pay and benefits as well as flexible work schedules, and opportunities to work from anywhere in the world, using the latest communication technology. Up-to-date technologies will be key to attracting talent, from the application and onboarding process to the tools and social media platforms available in the workplace. In addition, companies that are focused on green initiatives, reducing their environmental footprint and providing volunteerism opportunities will be quite attractive to new leaders. Training and knowledge transfer can be a challenge, particularly for new entrants, because as retirees leave the workplace, the knowledge leaves with them. Companies will need to have a robust succession planning and training and integration process to retain high potentials and attract new talent. The new leaders are thinking globally but acting locally. The dairy industry, particularly Savencia, offers the opportunity to delve into the latest global technology, knowledge and innovation, but act locally in partnerships with dairy farmers and suppliers.

Kaldor: The people coming into our industry have no shortage of talent. Dairy is a passion and those drawn to spend their careers here are well equipped to drive innovation and grow markets. A dynamic industry has the best odds of attracting and retaining these folks. New leadership is looking well beyond traditional approaches to sourcing, product and market development and customer outreach. Exciting challenges await.

McCully: The dairy industry needs to make itself more attractive — to people, consumers and investment. In short, dairy needs to be more vibrant. In some ways, today’s dairy industry is a reflection of plants, products and policies from past generations. The industry needs to develop a more consumer centric vision of the future and determine how to make the vision become reality. Dairy Management Inc.’s Dairy 2030 project is an important initiative to help answer some of those questions.

The opportunities are clear for new entrants to the dairy workforce. There are jobs available across the dairy value chain — from farms to cooperatives to dairy plants to food companies. A common refrain is one of the best things about the dairy industry is the people. This is an opportunity for the older generation to help the next generation learn about the dairy and food industry, and also be open to new ideas to move the industry forward.

Meshke: We recognize the need to fill the pipeline with cheesemaking talent. To do this, we are investing time and money in our employees to have a skilled and motivated workforce.

Short courses currently offered by the Center for Dairy Research and the Wisconsin Cheese Makers Association are positive moves, but we need more. Mentoring programs and immersive, hands-on training opportunities are critical to developing new and current cheesemakers.

Thankfully, employment within the food business — agriculture — is appealing as it provides stability. Everyone needs to eat. The high-tech industry can’t state this claim. In addition, research tells us millennials seek out and enjoy working for a cause. Dairy cooperatives, at their core, are a cause.

AMPI remains connected to colleges, universities and youth development organizations, such as 4-H and FFA, that are teaching and training the next generation of leaders in agriculture. AMPI employees and the co-op’s dairy farmer-owners are actively connecting with the next generation of leaders.
The primary challenge in this pursuit will be capturing the attention of potential employees in a crowded job marketplace.

Do you think new Food Safety Modernization Act (FSMA)regulations are helping to improve food safety, specifically in cheese and dairy? What are some of the challenges, particularly for smaller operations, in adhering to these increasing regulations?

Donnay: Safety, traceability and quality are all getting better. These also come at a cost and that cost is less tolerable to a small-scale business, furthering consolidation today and tomorrow. We’d anticipate more M&A activity as a result.

Huth: Yes. The idea behind the FSMA regulations is to improve food safety by preventing food safety problems rather than reacting to problems after they occur. This is a huge development in the food safety arena affecting thousands of lives every year. All Savencia subsidiaries including domestic and international plants have already implemented a type of food safety/quality control system (BRC, SQF, FSSC 22000 etc.) based on GFSI requirements. Our domestic transition and implementation of FSMA regulations have been completed with some modifications to our current system; however, we have encountered some challenges regarding the compliance of our foreign suppliers. We worked with them closely to make sure that they understand the new regulations and implement accordingly. Food safety can only be achieved by collaboration of governments, producers, manufacturers and others in the supply chain, so transparency and information sharing are extremely important.

Lyon: Measures to improve food safety are good for maintaining consumer confidence. Unfortunately, regulations are uniform with consistent language for all production facilities and enforcement of protocols for everyone to abide by equally. While all food processing operations need to be held to a high standard to ensure safe food, greater flexibility is needed. The focus needs to be on the end result; food recalls come from both large and small operations.

Smaller operations generally have a handful of employees responsible for a number of things while a larger operation may be able to hire additional people that have fewer responsibilities. The introduction of new regulations requires training, paperwork and corrective action plans that may stress an already thin workplace. Smaller operations most often have to take on the additional workload with the same number of employees, and adding employees is not an option.

Kaldor: FSMA was long needed. If you count in dog-years, it has taken nearly as long to adopt its implementing regulations. Preventive controls should facilitate manufacture of safe products over the long term. Smaller operations are challenged to modify record-keeping and quality control procedures to comply with FSMA’s requirements. Overall, FSMA will be a positive for the U.S. dairy industry.

What are some ways the cheese industry can respond to consumer interest in convenience? What are the challenges and opportunities?

Donnay: Decrease cost of delivery, increase speed of delivery and get the product to people’s doors without them having to leave the house. Restaurants are closing dining sections and opening new ones absent of seating, all to accommodate increasing food delivery. Amazon bought a grocery store. We need to make dairy deliverable to the door in a fast and affordable way or the youth will not adopt it into their regular diet unless it’s part of something else they eat.

Glick: The dairy industry always needs to respond to the consumer needs, and the dairy industry has notoriously been slow to respond to that. Our competition (plant based/alternative) are marketing strictly to the consumer’s needs/wants, and they have the flexibility to alter when the time arises. Too many times in the past, the dairy philosophy was “here is the cheese we make, take it or leave it.”

Huth: I think convenience comes also with the idea of partially eliminating food waste. We work diligently to bring offers to the market that fit different types of households and needs. For instance, we are offering smaller cut size of our cheese and recently launched some Brie Bites under our Supreme brands. Not everybody wants to buy a 7- or 8-ounce piece of Brie, yet still would like to indulge. This is where the 0.9-ounce Brie Bites wrapped in a flow pack are the perfect response to those looking for more flexibility. While we are making traditional cheese with 21st century equipment, it is important to bring diversity in size with a proper packaging to deliver on simplicity and flexibility. The challenges are of course to remain at an affordable price point to the end consumers and find ways to have our cheese with different formats, shelf life and a great taste throughout its journey.

Meshke: Health and wellness snacking continue to be front-of-mind with consumers and convenience is key. We should be utilizing point-of-impulse locations — check-out aisles and convenience store registers — to market cheese as a great-tasting, protein-packed option for their busy lifestyle.

What other key issues will affect the dairy industry in 2020?

Donnay: Politics, trade wars, currency valuations, emissions controls.

Lyon: Other issues that the dairy industry will have to dive into are Dietary Guidelines and FDA standards of identity labeling. USDA will be updating their dietary guideline and the dairy industry will need to be diligent in making sure that dairy is included in a well-balanced diet. We have health studies to back up our claims. With respect to FDA standards of identity labeling, we made significant progress in 2018 and 2019 and then Commissioner Scott Gottlieb resigned. The dairy industry responded with factual information during a public comment period, and FDA has been given a road map to follow. We need to make sure we get a positive outcome and have FDA enforce laws already in place regarding what is milk and what is not.

Kaldor: Trade policy disarray, immigration and labor shortages, environmental regulation of dairy farming operations, and infrastructure and transportation deficiencies are key challenges, along with tackling a much-needed update of federal milk marketing order manufacturing allowances.
McCully: The overall health of the U.S. and global economy will have an impact on the dairy market in 2020. It seems the likelihood of a recession has fallen, but there remains uncertainty around trade.

Meshke: In agriculture, every year is impacted by weather. Drought, flooding and other acts of Mother Nature can significantly impact the farming community and commodity markets.

Beyond weather, immigration legislation and technology will be important to U.S. dairy moving forward. Recent passage of the Farm Workforce Modernization Act was the first piece of major immigration legislation passed out of the House in decades. Presently, the limited workforce is keeping farms from expanding herds and milk production. As labor is less available and more expensive, farmers could look at technology like robots.

CMN


Trump announces China trade deal to be signed January 15

Jan. 3, 2020

WASHINGTON — Following speculation that the first phase of a trade deal between the United States and China might be signed as early as this week, President Trump has announced that the deal will be signed Jan. 15.

“I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15. The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!” Trump tweeted on Tuesday morning.

The day before, the South China Morning Post reported from an anonymous source that China’s Vice Premier Liu He was scheduled to lead a delegation to Washington this weekend where he was expected to sign the trade deal. White House trade advisor Peter Navarro also appeared on Fox News news this week, where he said he expected a trade deal could be signed in the next week or so.

The United States and China last month reached an agreement on the first phase of a trade agreement that includes a commitment by China to make substantial purchases of U.S. goods and services, staving off new tariffs that the United States has planned to impose on Chinese goods Dec. 15.

“Over the next decade, China represents a $23 billion market opportunity for U.S. dairy, and it is essential to our dairy producers and companies that we secure a trade deal with China that further levels the playing field for American dairy,” International Dairy Foods Association (IDFA) President and CEO Michael Dykes said following last month’s announcement of the agreement. “IDFA is hopeful that this deal signals the United States has embraced a market-and rules-based system of international trade that is essential for the future of the U.S. dairy industry.”

The governments of China and the United States have imposed billions of dollars in retaliatory tariffs during the two-year trade dispute, which has put a drag on the U.S. dairy industry, IDFA says. U.S. dairy export value to China peaked in 2017 at $577 million, fell 29% to just more than $500 million in 2018, and has reached just $305 million through September 2019, a 30% drop over 2018, IDFA adds. China bought 33% of U.S. whey exports by value in 2018, and overall, U.S. whey shipments to China totaled $174 million. From January to September 2019, with the retaliatory tariffs still in place, exports declined 41% year-over-year, IDFA says. Meanwhile, U.S. cheese exports through Sept. 2019 fell 39%, on top of a 39% loss in the second half of 2018.

CMN


Total licensed cheese, dairy imports decline in November

Jan. 3, 2020

WASHINGTON — In November, imports of cheese and other dairy products subject to licensing requirements totaled 6.6 million kilograms, down from 10.5 million kilograms reported by USDA’s Foreign Agricultural Service (FAS) in the November 2018 edition of its “Dairy Import License Circular.” Year-to-date, licensed imports of dairy products total 88.0 million kilograms, compared to 90.7 million kilograms for the first 11 months of 2018.

Licensed imports of Swiss and Emmenthaler with eye formation totaled 1.4 million kilograms in November, down from 1.9 million kilograms reported in November 2018.

November licensed imports of Italian-type cheeses totaled 1.0 million kilograms, down from 1.2 million kilograms in last year’s report.

Licensed imports of Edam and Gouda were 523,390 kilograms in November, down from 657,364 kilograms a year earlier.

November licensed Cheddar imports totaled 303,190 kilograms, down from November 2018’s 880,279 licensed Cheddar imports.

November imports of Blue mold cheeses subject to licensing requirements totaled 56,316 kilograms, down from 201,281 kilograms in November 2018.

Imports of processed Gruyere subject to licensing requirements totaled 45,758 kilograms in November, down from 353,341 kilograms in November 2018.

Licensed imports of other cheese not-specifically-provided-for totaled 2.1 million kilograms in November, down from 3.8 million kilograms in November 2018.

November licensed butter imports totaled 178,663 kilograms, down from 542,919 kilograms in November 2018.

November licensed imports of butter substitutes totaled 768,638 kilograms, up from 732,000 kilograms a year earlier.

CMN


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Today's Cheese Spot Trading
January 21, 2020


Barrels: $1.5975 (+3 1/2)
Blocks: $1.9650 (+1/4)


Click here for more market activity
Cheese Production
U.S. Total Nov.
1.101 bil. lbs.


Milk Production
U.S. Total Nov.
17.440 bil. lbs.

Guest Columnist

Building a memorable brand is crucial in specialty cheese market

Tim Omer, Emmi Roth USA

Also this week:Dairy, dairy, so contrary — how will the future go? by Blake Anderson, and “The impact and influence of education in the retail channel” by Molly Browne

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