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China’s Dairy Demand May Be Sluggish in ’23

Posted on by Alan Bjerga

By Stephen Cain, Director of Research and Economic Analysis, NMPF.

Outside of cheese, China is the number one importer of essentially every major dairy product. Globally, the world’s most populated country purchases 27% of all traded dairy products on a milk solids basis. China accounts for roughly 20% of all U.S. dairy exports and nearly half of all U.S. dry whey exports.

All of this makes China an unquestionably important market; yet, over the last year, Chinese demand has been down significantly. Chinese milk solids imports over the last 12 months are down 16%, and they’re heavily down in skim milk powder (-20%), dry whey (-17%), and whole milk powder (-24%). Two key pieces that have led to the pullback are high stockpiles and COVID-19 lockdowns.

Following the onset of the pandemic and wanting to ensure adequate supplies on hand, China built up some impressive stocks, especially in skim milk power and dry whey. From mid-2020 through mid-2021, Chinese milk solids imports climbed 32% over the preceding 12 months. For the same time period, skim milk powder and dry whey imports rose 32% and 50%, respectively.

This high purchase volume outpaced demand and led to stock build up. These high stocks, coupled with then-high global prices, led China to pull back from the global market and instead work down its stockpiles. That largely kept Chinese purchasing depressed over the past year. Encouragingly, stocks are now approaching more normal levels, which supports China returning to the market, especially for skim milk powder and dry whey.

More COVID-19 lockdowns throughout China are also plaguing demand. While the rest of the world moves on from the pandemic and reverts to pre-COVID-19 life, China seems to be charging in the opposite direction. The zero-COVID policy in China has led to extreme measures in the country, with huge swaths of the population being locked down as the country continues its losing battle against the disease.

Earlier this year, Shanghai, the largest city in China with roughly 25 million residents, was put in lockdown for two consecutive months. Since then, lockdowns have only increased in number and severity, with some estimates as of late October stating there were more than 200 million people affected by lockdowns nationwide.

While many agree China relaxing its zero-COVID approach would be beneficial, rising cases in the country suggest that’s unlikely to occur. The country is facing the highest rate of new cases since the start of the pandemic, which means lockdowns and tough restrictions are only going to become more commonplace. That’s hitting dairy demand. Restaurants and the food service sector are hugely important to dairy consumption in China, but that consumption avenue is being restricted as consumers are increasingly unable to leave their homes. Until lockdowns and restrictions ease, Chinese dairy demand will continue to be challenged.

Source: USDEC, Our World in Data

Dairy is only one part of a Chinese economy that’s facing headwinds. A limited gross domestic product (GDP) growth outlook, a teetering real estate sector, and depressed, COVID-19-driven demand from lockdowns are creating a challenged economic outlook. The 2022 GDP forecast is estimated at 3.2%, which would make for one of the worst performances in nearly half a century; 2023 looks only slightly better, with forecast growth of around 4.4%.

Similarly, Chinese dairy demand in 2023 is likely to see similar sluggish growth. Despite the melancholy economic outlook and lockdown projections, Chinese imports in 2023 will likely be up, but not at substantial volumes, and certainly not same at the growth rate we saw in 2021. As stocks are depleted and domestically produced products (which are largely more expensive than imports) fail to meet demand, China will have to return to the global market. The biggest swing factor, though, remains COVID-19 lockdowns. If China doubles down on lockdowns, demand will likely continue to be depressed and imports will be challenged. Should they ease, China will certainly need product, and greater imports will follow — and that would be good news for U.S. exporters.

 

This column originally appeared in Hoard’s Dairyman Intel on Nov. 28, 2022.

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IDF World Dairy Summit a U.S. Dairy Opportunity

Posted on by Theresa Sweeney

The International Dairy Federation (IDF) World Dairy Summit brings unique opportunities for U.S. dairy as the host nation for the Chicago event, to be held next Oct. 16-19. The global conference returns to the United States for the first time in three decades, at a moment when rising exports and world-leading sustainability gives the U.S. industry a great story to tell, according to three leaders in organizing next year’s events.

“It’s a really exciting time for our industry, and we think that there’s a tremendous opportunity, a tremendous amount of potential that dairy, globally, has here,” said Shawna Morris, Senior Vice President for Trade at the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC). “Looking at how we tap into that together is what we’re focused on doing through the conference.”

“Bringing all of these folks to the United States creates an opportunity to get folks into facilities, to get them out to farms, to really show the rest of the global dairy industry what the U.S. dairy industry is all about,” said Nick Gardner, chairman of the U.S. International Dairy Federation, the Senior Vice President for Sustainability and Multilateral Affairs at USDEC, and with Morris the co-chair of next year’s summit.

“This is an excellent opportunity for the U.S. dairy industry to highlight its world leading dairy production from the farm through our cooperatives and processors and out to the consumers,” said Jamie Jonker, NMPF’s chief science officer and chair of IDF’s Science Program Coordinating Committee. “It’s a way for us to step on the world stage, reintroduce U.S. dairy, its innovation and technology to the global marketplace, and demonstrate how we are world leaders.”

Morris, Gardner and Jonker also discuss how the dairy community can get involved with supporting the event, already highlighted by platinum-level sponsor Dairy Management Inc., as planning for it is already in full swing. More in the summit can be found here. You can find the podcast on Apple Podcasts, Spotify, Google Podcasts and Amazon Music.

Happy Thanksgiving! There’s Plenty of Butter

Posted on by Theresa Sweeney

First, the bad news (for consumers): Heading into the holiday baking season, butter prices are, indeed at an all-time high. That’s for a few reasons. The biggest one is simple demand. Americans love butter, with the highest per capita consumption since the 1960s leading to the highest overall demand ever for the nation’s pre-eminent spread and ubiquitous baking ingredient. Overseas markets are also getting in on the act, with another record year for dairy trade possible in 2022.

Meanwhile, butter supplies haven’t, as of yet, been able to keep up with that demand enough to stabilize prices. That’s especially been the case in the past couple months, when retailers traditionally stock up in anticipation of the holidays. And of course, once you get past the actual cost of making butter itself and then add transportation, packaging, labor, and all the other the costs that are making everything else more expensive too, you have a recipe for record butter prices on the grocery shelf. And that’s making consumers (and media) notice.

But are higher prices the same thing as a “shortage”? We posit, not. Are store shelves empty? There’s always some one-off instances somewhere, but with those exceptions, no. Are crowds of consumers lining up for blocks outside local supermarkets to buy out rationed supplies, like early-COVID toilet paper? (Everyone stand six feet apart, please!) No again. And is anyone who wants to buy butter currently being deprived of anything other than $5 should they choose a four-pack, maybe a little extra if it’s extra-creamy European Style?!?? (And often less is you catch a good sale.)

That’s three strikes, and still, no one’s out of butter.

It’s easy to understand the concern: Butter is, after all, nature’s most perfect sandwich spread, the ingredient that makes a top-quality croissant worthy of a nasal-sounding French pronunciation. And even with all this, the underlying concern that’s fueled the “shortage” worries is itself showing signs of fading. Milk production is on the rise again, and with that, butter futures traded on commodities markets are declining. While some product prices rise and stay that way, butter goes up and down. Take a look at this chart — a dozen years of butter-price history that includes both the value of butterfat to a farmer (blue line) and the cost at the grocery store (orange line). See how they move together – and see where the blue line’s expected to go in 2023.

“What goes up, must come down” applies to butter. Production chases prices, and eventually higher production pushes prices down. That’s not always so great for farmers, by the way – and one nice thing for them about current pricing is that it’s helping farmers smooth out a challenging few years and rebuild the balance sheets they need to thrive. So be patient if you’re feeling sticker shock, and in the meantime, feel good that you’re helping a farmer.

But above all, don’t feel like you’re at risk of a butterless Christmas. The food chain, and the law of supply and demand, are ensuring that doesn’t happen. The holidays would be less happy without butter, but it just ain’t gonna happen. So Happy Thanksgiving. And here’s to, um, butter days ahead.

NMPF Calls on Lawmakers to Support Domestic Infant Formula Production

Posted on by Alan Bjerga

In a letter to lawmakers, the National Milk Producers Federation urged support for domestic infant formula production as the production shortfalls that stripped store shelves of necessary infant formula have eased. Given the improving situation, tariff waivers that could discourage the production of a safe, secure domestic infant formula supply should be allowed to expire at end of this year as scheduled, NMPF said in the letter to the chairmen and ranking members of the Senate Finance Committee and House Ways and Means Committee.

“Given that the temporary production shortfall that gripped American families in need of formula earlier this year has abated, we urge Congress to ensure that the unique, unilateral tariff benefits granted to our trading partners under the Formula Act and the Bulk Infant Formula to Retail Shelves Act end as scheduled at the close of this year,” said NMPF Chairman and CEO Jim Mulhern in the letter, dated Nov. 17 . “We respectfully request your opposition to any effort to extend these preferential tariff benefits beyond the end of this year.”

A strong, diversely sourced domestic infant formula production industry ensures the highest quality, safest products while supporting rural jobs and domestic producers.

NMPF, IDFA Seek to Fix WIC Proposal that Would Decrease Access to Dairy’s Nutrients

Posted on by Alan Bjerga

ARLINGTON, Va. and WASHINGTON, DC – Representing dairy farmers, cooperatives, and processors, the National Milk Producers Federation (NMPF) and the International Dairy Foods Association (IDFA) issued the following joint statement in response to USDA’s proposed changes to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) released today:

“It is unfortunate for WIC participants that the proposed rule would decrease access to dairy products and the unique nutrient profile they provide, especially considering the current Dietary Guidelines for Americans (DGA) note that a staggering nearly 90 percent of the U.S. population does not consume enough dairy to meet dietary recommendations. At a time of rising food costs and high food insecurity, we should focus on increasing access to a wide variety of healthful, nutrient-dense, and affordable foods, including both fresh produce and dairy products. It’s disappointing that the proposed rule would limit WIC family purchasing power for nutritious dairy foods, particularly at a time like this.

“WIC is central to helping ensure pregnant women, new mothers, infants, and children have access to the nutrients needed for growth and development at the critical life stages surrounding pregnancy, birth, and early childhood. The vast body of nutrition science demonstrates that nutritious dairy products like milk, yogurt, cheese, and cottage cheese are especially important in the diets of women, infants, and children. Dairy is a source of 13 nutrients, including three of the four nutrients of public health concern as noted by the DGA, which is why dairy has always played a significant role in the WIC program.

“NMPF and IDFA commend USDA for suggesting approaches to make the nutrient-dense food provided by the WIC program more accessible, including expanded options for yogurt and cheese varieties and for proposing WIC participants be able to purchase these dairy products in a wider variety of product package sizes that are more commonly found in grocery stores. We also applaud USDA for its continued commitment to nutritional equivalency in substitute products, rejecting those that do not provide an equivalent nutrition package, as recommended by the DGA.

“We look forward to working with USDA to modernize the WIC food package for eligible families to access nutrient-dense milk, yogurt, and cheese varieties that are a part of their everyday diets and accessible in neighborhood stores, thus fulfilling the program’s nutritional objectives. IDFA, NMPF, and our members will advocate against reducing the amount of nutritious dairy foods provided through WIC in USDA’s final rule because we are committed to reducing food insecurity, malnutrition, and diet-related disease while improving health outcomes by making it easier for all Americans to access healthy, affordable foods, including nutritious dairy products. We hope USDA will work to achieve these same objectives as they develop a final WIC rule, which, given dairy’s unique nutrient package and incomparable role in nourishing WIC participants, will require USDA not to decrease access to dairy in the WIC program.”

 

NMPF Urges Sped-Up FDA Approval of Climate Friendly Feed Additives

Posted on by Alan Bjerga

ARLINGTON, VA — NMPF called on the U.S. Food and Drug Administration to use existing legal authority to modernize its regulations allowing for faster approval of animal-feed additives that reduce greenhouse gas emissions, submitting comments to the agency today that highlighted the need for urgent action to enhance dairy’s role as a climate solution.

“Innovative and voluntary solutions are needed to reduce greenhouse gas (GHG) emissions, including methane,” said Dr. Jamie Jonker, NMPF’s chief science officer, in the comments submitted today. “Enteric emissions directly from cows currently account for roughly one third of all GHG emissions from dairy farms and present an important area of opportunity for methane reductions. Feed composition changes can directly or indirectly reduce enteric emissions resulting from livestock.”

While animal-feed additives are a promising path toward a net-zero future for dairy as outlined in industry goals, the pace of their approval lags that of competitors such as the European Union due to current FDA processes. By streamlining bureaucracy and allowing feed-additives to be treated as foods rather than as drugs, the United States can maintain and advance its global leadership in sustainability, Jonker wrote.

Through the U.S. Dairy Net Zero Initiative, a collaboration across dairy organizations, dairy-farm research is advancing new technology and new market development opportunities to make sustainability practices more accessible and affordable to farms of all sizes, including enteric methane reduction.

“One of the greatest opportunities that exists for U.S. dairy farmers is their ability to provide real solutions to many of today’s biggest environmental challenges like GHG emissions,” Jonker wrote. “Embracing new practices and technologies is key to making America’s dairy farmers an environmental solution while providing wholesome and nutritious dairy products to the U.S. and the world.”

For more on how dairy is advancing its stewardship and best practices, visit the National Dairy FARM (Farmers Assuring Responsible Management) Program’s Environmental Stewardship page.

Congressional Balance Affects Dairy Policy but Doesn’t Shift Priorities

Posted on by Theresa Sweeney

Control of the House of Representatives remains in doubt nearly one week after last Tuesday’s elections. But regardless of who is in charge in 2023, dairy’s priorities will move forward, says Paul Bleiberg, NMPF’s Senior Vice President for Government Relations, in a Dairy Defined podcast released today.

“The basic policy priorities remain the same,” said Bleiberg. “There are some areas where we might have more support from Republicans, some where we might have more support from Democrats, some where we might have more support on regional lines, and it’s really a question of strategy. Who’s going to be on the Agriculture Committee? Who’s going to be on the Appropriations Committee or the Ways and Means committee? Who are the members that we might go to kind of champion different priorities in those or other committees? That sort of is subject to those dynamics, but our priorities will be our priorities.”

You can also find the podcast on Apple Podcasts, Spotify, Google Podcasts and Amazon Music. Broadcast outlets may use the MP3 file. Please attribute information to NMPF.

NMPF’s Bjerga on the Congressional Elections and Dairy’s Challenges

Posted on by Alan Bjerga

 

NMPF Senior Vice President of Communications Alan Bjerga details some of the policy and marketplace challenges U.S. dairy is striving to meet, regardless of the cloudy outcomes of Tuesday’s congressional elections, in an interview with RFD-TV. Opportunities to grow markets via sustainability, an adequate safety net in the upcoming farm bill, and sensible industry regulation all loom in 2023, with dairy well-positioned to make progress.

October CWT-Assisted Dairy Export Sales Totaled 5.1 Million Pounds

Posted on by Theresa Sweeney

CWT member cooperatives secured 39 contracts in October, adding five million pounds of American-type cheeses and 77,000 pounds of cream cheese to CWT-assisted sales in 2022. In milk equivalent, this is equal to 47 million pounds of milk on a milkfat basis. These products will go to customers in Asia, Central America, Europe and Middle East-North Africa, and will be shipped from October through April 2022.

CWT-assisted 2022 dairy product sales contracts year-to-date total 86.1 million pounds of American-type cheese, 657,000 pounds of butter, 7.6 million pounds of cream cheese and 30.3 million pounds of whole milk powder. This brings the total milk equivalent for the year to 1.090 billion pounds on a milkfat basis.

Exporting dairy products is critical to the viability of dairy farmers and their cooperatives across the country. Whether or not a cooperative is actively engaged in exporting cheese, butter, anhydrous milkfat, cream cheese, or whole milk powder, moving products into world markets is essential. CWT provides a means to move domestic dairy products to overseas markets by helping to overcome U.S. dairy’s trade disadvantages.

The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT will pay export assistance to the bidders only when export and delivery of the product is verified by the submission of the required documentation.

FARM Participants Opt-In to the Environmental Stewardship Conservation Practice Questionnaire

Posted on by Theresa Sweeney

Since its launch in August, when FARM Environmental Stewardship (ES) launched the Conservation Practice Questionnaire (CPQ), an optional add-on questionnaire to the FARM ES Version 2.0 evaluation. Since its launch, seven FARM Program participants have opted to implement it.

The existing FARM ES evaluation focuses on greenhouse gas emissions and energy use; this conservation questionnaire goes beyond these topics to ask about dairy farmers’ field and dairy-level conservation practices to capture a more holistic sustainability story. The questionnaire addresses areas covered in the industry’s 2050 environmental stewardship goals along with other topics that are of growing interest to customers and consumers.

Organizations that participate in FARM ES Version 2.0 have the option to voluntarily sign on to use the CPQ. Organizations may also choose not to use the CPQ with no impact on their participation in FARM ES. Interested participants should email dairyfarm@nmpf.org.

NMPF Provides Opportunities for FARM Participants, YCs at World Dairy Expo

Posted on by Theresa Sweeney

The National Dairy FARM Program and YC Program joined industry stakeholders in Madison, WI Oct. 3-7 for the 2022 World Dairy Expo, boosting NMPF’s presence at the prestigious event for dairy farmers yet again.

FARM hosted a Lunch & Learn session with Zoetis and Alltech about employee management on, Oct. 6, with a session recording made available here. FARM also co-sponsored a Fitness to Transport “Knowledge Nook” session with Elanco Animal Health on Oct. 7.

The YC Program hosted a workshop, “Road Markers to the Future Business of Milking Cows,” on Oct. 6, in which YCs explored the steps that young and beginning dairy farmers must take to be successful today, and in the future. The session recording is available here. Forty YCs from seven member cooperatives participated in the session and reception later that day.

NMPF also sponsored a panel on the Federal Milk Marketing Order system, “The Future of our Dairy Markets – What Reforms Are Needed?” to introduce FMMO reforms and highlighted the NMPF internship program at the “Career Connections Networking Event”.

NMPF, USDEC Strengthen Ties Throughout Latin America

Posted on by Theresa Sweeney

NMPF, USDEC and Sociedad Rural Argentina (SRA) announced an agreement Sept. 8 to foster cooperation between the three groups to advocate for science-based regulations across food and agricultural trade policy. SRA, a civil association of agricultural landowners, is an influential economic and political player in Argentina, and will be a valuable partner in advocating for international food policy priorities.

NMPF and USDEC built on the momentum with an agreement finalized Sept. 30 with the Chilean Federacion Nacional de Productores de Leche (Fedeleche). The memorandum of understanding places an emphasis on improving mutual understanding through conferences, seminars and events so that the three organizations can collaborate in fighting for clear, fair, science-based rules.

These latest developments complement the long-standing relationship NMPF and USDEC have cultivated with the Pan-American Dairy Federation (FEPALE), which held its 16th Congress in Quito, Ecuador, Oct. 19-21. NMPF Executive Vice President for Policy Development & Strategy Jaime Castaneda presented on behalf of FEPALE member USDEC at its Board of Directors meeting, supporting collaboration and joint work in international forums. Castaneda discussed supplemental partnership opportunities with dairy farmers in Ecuador that would increase dairy consumption and bilateral trade.

NMPF and USDEC look forward to continuing to expanding and collaborating with their regional partners to promote and defend the image of dairy and increase trade.