NMPF President & CEO Gregg Doud discusses dairy’s response to Highly Pathogenic Avian Influenza (HPAI), the path forward for Federal Milk Marketing Order Modernization through an approach that puts farmers first, and opportunities for dairy in global markets. Doud spoke in an interview with the Agriculture of America podcast.
By Jaime Castaneda, Executive Vice President, Policy Development & Strategy, National Milk Producers Federation
Exports are critical to America’s dairy farmers and processors. Last year, the American dairy industry exported $8.1 billion in dairy products, roughly 17% of total U.S. milk production. That’s the second-best year on record, falling just short of 2022.
As global demand for high-quality and sustainably-produced dairy products will grow, the U.S. dairy industry must keep exports expanding to thrive today and over the long term. To help encourage that, and in the absence of efforts by the U.S. government to secure new market openings, the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) have taken the initiative to drive forward projects to pursue Most-Favored Nation (MFN) tariff reductions in multiple key export markets.
U.S. dairy’s quarter-century of export expansion hasn’t been by chance. The strong commitment from U.S. dairy producers and manufacturers to investing in painstakingly growing international sales, coupled with multiple trade agreements that opened the door for that growth to occur, are key drivers of the trend. Unfortunately, in recent years, anti-trade rhetoric has gained momentum from politicians on both sides of the aisle. Meanwhile, major competitors — namely in Europe, Australia, and New Zealand — have successfully negotiated new market access, advantaging their domestic producers through lower tariff rates and favorable trading conditions. The result is that U.S. producers are increasingly at a disadvantage in several key markets, including China and most countries in Southeast Asia.
MFN tariffs are tariff rates that one country applies to imports from all trading partners that are members of the World Trade Organization. Importantly, MFN tariffs do not apply to products that benefit from even lower rates due to preferential trade agreements, such as a free trade agreement or customs union.
Not content to yield key markets to trade competitors, NMPF and USDEC launched a formal initiative in 2014 to lower duties on U.S. dairy exports in China. Following years of engagement, that resulted in a tariff cut on U.S. cheese exports. A few years later in 2019, NMPF and USDEC’s efforts scored another breakthrough by securing tariff reductions on a variety of exported dairy products into Vietnam.
Halfway around the globe, NMPF and USDEC tallied a small victory in March by successfully petitioning the United Kingdom government to eliminate its 6% tariff on fat-filled milk powder for at least two years.
NMPF and USDEC are continuing to pursue MFN tariff cuts in other key markets around the globe as well, with an emphasis on the growing Asian region, even as government initiative is lacking.
For example, the Philippines is a sizable dairy importer, using those inputs in the Philippine food processing and food service sectors. NMPF and USDEC have impressed upon the Philippine government the advantages of diversifying its dairy supply chains further and are petitioning for MFN tariff reductions for a variety of products, including cheese, lactose, and milk powder.
Although these initiatives by NMPF and USDEC cannot fully replace government negotiation of new trade agreements, efforts to drive down tariffs in these countries represent just a few examples of the markets that NMPF and USDEC are prioritizing as they continue to fight for fair opportunities for U.S. dairy producers and companies to compete in the global market.
This column originally appeared in Hoard’s Dairyman Intel on April 4, 2024.
The U.S. Trade Representative’s (USTR) annual National Trade Estimate (NTE) report released Mar. 29 highlights several trade barrier and market access priorities that NMPF and USDEC have pointed out to the agency.
In Oct. 23 comments submitted to USTR as it developed the document, NMPF and USDEC detailed how the United States’ ongoing lack of new tariff-reducing trade agreements and uneven enforcement of existing agreements has put the U.S. dairy industry at a competitive disadvantage. The comments also summarized country-specific barriers that governments around the world are using to impede U.S. dairy exports.
Several of those nontariff barrier concerns were captured in the trade estimate as priorities for USTR, including:
The House passed the bipartisan Ocean Shipping Reform Implementation Act of 2023, a key NMF trade-policy priority, on Mar. 21 by unanimous consent.
Led by Reps. Dusty Johnson, R-SD, and John Garamendi, D-CA, the legislation would update supply chain data standards, establish reciprocal trade as part of the Federal Maritime Commission’s mission in enforcing the Shipping Act, and introduce a formal process to report complaints against certain shipping exchanges. NMPF and USDEC endorsed the legislation to help provide greater supply chain transparency and reliability for dairy exporters.
The bill complements the Federal Maritime Commission’s Feb. 23 publication of its final rule on detention and demurrage billing practices, which incorporates several recommendations made by NMPF and the U.S. Dairy Export Council (USDEC).
As an important part of the Ocean Shipping Reform Act (OSRA) implementation – which NMPF championed – the final rule requires common carriers and marine terminal operators to:
NMPF Executive Vice President Jaime Castaneda discusses efforts to expand dairy market access at recent World Trade Organization meetings in Abu Dhabi in an interview with the Red River Radio Network. Castaneda also discusses trade relations with India and the importance of the NMPF-led Cooperatives Working Together program for the future of U.S. dairy exports.
NMPF helped coordinate a pair of letters in February urging policymakers to prioritize new market access, as U.S. agriculture continues to lag behind competitors in the global economy.
NMPF, USDEC and other agricultural organizations signed a Feb. 15 letter to Congress that detailed how the lack of new market access is threatening food and agriculture industry profitability. The letter called for Congress to work with and press the current and future Administrations to open more doors for U.S. agriculture exports.
Meanwhile, the newly launched Ag Trade Caucus, created by Farmers for Free Trade with support from NMPF, sent a Feb. 20 letter to U.S. Trade Representative Ambassador Katherine Tai and U.S. Department of Agriculture Secretary Tom Vilsack, urging the administration to continue to pursue agreements that address the trade barriers that are most harmful to U.S. dairy.
Let’s say it plainly: Exports are critical to the future of U.S. dairy, and dairy cooperatives that point themselves toward benefiting from exports will gain additional opportunities to thrive. That’s why one of NMPF’s most important projects this year is rethinking and renewing its Cooperatives Working Together program. CWT has played a major role in boosting U.S. dairy exports and increasing milk prices for all producers in recent years. It promises to become even more significant in the future as its reach and resources potentially expand.
For those less familiar with the program, here are the basics: It’s a voluntary, marketing-focused program managed by NMPF and funded by CWT participating member cooperatives that boosts U.S. dairy product sales and strengthens relationships with overseas customers by helping participating cooperatives weather the ebbs and flows of international markets. Increasing overseas sales helps U.S. producers grow new markets. It also helps them sell products abroad that otherwise would stay at home, which better aligns supply and demand for everyone, regardless of where their milk is marketed. And by pooling resources to build member exports, CWT is a classic example of the self-help cooperative spirit in action.
Trade is the central way U.S. dairy producers have been able to find markets for production that’s grown faster than U.S. mouths can consume it: 17 percent of U.S. milk is now being shipped overseas in some form, up from 13 percent in 2010. CWT has significantly assisted that expansion. Last year, despite global economic challenges and sluggish international demand, CWT member cooperatives secured 553 contracts overseas, representing 58.4 million pounds of American-type cheeses, 1.1 million pounds of butter, 46,000 pounds of anhydrous milkfat, 39 million pounds of whole milk powder and 9.1 million pounds of cream cheese. In milk equivalent, that equals 922.1 million pounds on a milkfat basis.
Other than cheese, every product included in CWT saw its volume of sales supported by the program increase in 2023, including a 73 percent gain in butter and a 27 percent jump in whole milk powder. CWT-supported sales also reached more countries than the year before, thriving both in places where the U.S. is establishing itself as a reliable partner and in new destinations where CWT has encouraged buyers to take a closer look at U.S. dairy. All of this shows how CWT is a proven winner for U.S. dairy, one that, even in challenging years, shows growth and greater potential.
That’s where we stand, heading into a pivotal year for the program.
CWT is renewed every three years, and 2024 is a renewal year in that cycle. We have exciting opportunities this time around to enhance CWT’s export assistance program, including expanding the number of products supported. We have also initiated conversations about how CWT could help member sales through means other than providing direct export support, such as providing logistical, manufacturing and marketing support. To generate ideas and assess the merits of various innovative proposals, we’ve convened a task force of experts from our cooperatives to identify what the collective investment in CWT can achieve.
Membership is open to any dairy cooperative – most, but not all, members are part of NMPF – and its business benefits outweigh its membership costs. Every cooperative has good reason to join: Larger, established co-ops can use export assistance to solidify and expand sales and markets, while co-ops less acquainted with the international arena can use CWT to help them break in, knowing they have the backing of an established, successful way to reach foreign markets.
CWT can help co-ops keep their bottom lines healthy, and they can provide impetus for expansion. It’s been helping everyone in dairy for years by encouraging demand that lifts the entire industry, driven by the cooperatives who effectively use it.
As this conversation unfolds, we’re both interested and eager to gain input that both improves CWT’s value for current members and encourages new ones to join. Cooperatives Working Together gives its members an advantage in facing dairy’s future, and it’s an important asset to the entire industry. We’re excited to see where we can take it in its next chapter. Thank you for any help you can provide.
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CWT-assisted dairy product sales contracts in 2023 totaled 58.4 million pounds of American-type cheese, 1.1 million pounds of butter, 46,000 pounds of anhydrous milkfat, 9.1 million pounds of cream cheese and 39.0 million pounds of whole milk powder. This brings the total milk equivalent for the year to 922.1 million pounds on a milkfat basis, equal to 107.7 million pounds on a product volume basis. Product destinations include Aisa, Central America, the Caribbean, Middle East-North Africa, Oceania and South America.
Apart from cheese, all CWT supported products increased sales volumes through the program in 2023. Notably, CWT-assisted butter sales rose 73% and whole milk powder gained 27%. CWT supported sales also reached more countries than the year before – helping more consumers around the world access high-quality, U.S. dairy products.
CWT member cooperatives secured 55 contracts in December, adding 12.4 million pounds of American-type cheeses, 20,000 pounds of anhydrous milkfat, and 827,000 pounds of cream cheese to CWT-assisted sales in 2023. In milk equivalent, this is equal to 121.3 million pounds of milk on a milkfat basis. These products will go to customers in Asia, Middle East-North Africa, Oceania and South America and will be shipped from December 2023 through May 2024.
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.
Today’s ruling by a U.S-Mexico-Canada Agreement (USMCA) dispute panel allowing Canada to restrict the dairy access that the United States negotiated for in the USMCA pact weakens the agreement’s value to the US dairy industry, according to the National Milk Producers Federation and the U.S. Dairy Export Council.
An earlier panel ruled in January 2022 that Canada had improperly restricted access to its market for U.S. dairy products. In response, Canada made insufficient changes to its dairy tariff rate quota (TRQ) system, resulting in an outcome that still fell far short of the market access the U.S. expected to receive under USMCA. To address that shortcoming, the U.S. brought a second case to challenge the changes that Canada instituted. Today the panel announced that Canada was not obligated to make further changes.
“It is profoundly disappointing that the dispute settlement panel has ruled in favor of obstruction of trade rather than trade facilitation,” said Jim Mulhern, president and CEO of NMPF. “Despite this independent panel’s adverse ruling, we’d like to thank the Biden Administration and the many members of Congress who supported us for their tireless pursuit of justice for America’s dairy sector. We urge Ambassador Tai and Secretary Vilsack to look at all available options to ensure that Canada stops playing games and respects what was negotiated.”
Since the U.S. Trade Representative initially launched the first dispute settlement case against Canada in 2021, USDEC and NMPF have worked with USTR, USDA, and Congress to try to secure full use and value of USMCA’s dairy TRQs for American dairy producers and processors.
“By allowing Canada to ignore its USMCA obligations, this ruling has unfortunately set a dangerous and damaging precedent,” said Krysta Harden, president and CEO of USDEC. “We do however want to express our appreciation for allies in Congress and the Administration for their efforts and commitment to fighting for U.S. dairy. This is unfortunately not the only shortcoming in Canada’s compliance with its international commitments. We are committed to working with USTR and USDA to evaluate efforts to address Canada’s continued harmful actions that depress dairy imports while simultaneously evading USMCA’s dairy export disciplines.”
When first implemented in 2020, USMCA established 14 different TRQs, which allow a predetermined quantity of imports at a specified low tariff rate. The TRQ system that Canada implemented awarded the vast majority of TRQ volumes to Canadian processors and granted very limited access to TRQs to distributors – resulting in limited market access for U.S. exporters. Minor modifications to that system made in 2022 have continued that imbalanced approach.
Incoming NMPF President & CEO Gregg Doud explains NMPF’s role in Washington policy formulation and dairy farmer priorities, including a new farm bill, Federal Milk Marketing Order modernization, integrity in plant-based labeling and dietary guidelines that maximize the benefits of dairy, in an interview with RFD-TV. He also emphasized the importance of international trade and global issues to U.S. dairy’s future. “We need to look five, 10 years ahead and see what this industry needs,” he said.
By Allison Wilton, Coordinator, Economic Policy and Global Analysis, NMPF
U.S. dairy consumption has been steadily rising for years, reaching more than 11.5 million metric tons (milk solids equivalent) in 2022. This is up 15% from ten years ago. As one of the highest dairy consuming countries in the world, U.S. per capita consumption of cheese, yogurt, and butter has grown steadily for years. Recent food trends are bringing fun and innovative twists on common dairy products; as examples, butter boards went viral last year as a new “charcuterie” option, and health influencers are raving about the benefits of adding cottage cheese into recipes for higher protein and healthy fats. Ultimately, dairy demand remains resilient even when facing significant headwinds.Dairy’s resiliency is true on a global basis, too. On average, 13% of the global consumer’s protein came from dairy in 2022, a rise compared to 2021 and a significant leap over the past decade. In fact, global dairy protein consumption has grown by nearly 25% over the last decade.
Still, despite that resiliency, inflation and economic uncertainty have affected consumers and the dairy industry.
Inflation had mixed effects
In 2022, consumers started to really take notice of rising grocery and food costs. Prices for goods across all categories, not just dairy, were starting to climb more than usual due to several factors, including the ongoing COVID-19 pandemic and international supply chain disruptions. Inflation reached a peak in summer of 2022, and though it has eased slightly since, prices are still significantly higher compared to three years ago.
Source: NMPF-USDEC, IRI, NPD
Grocery and food items were some of the most prevalent and hardest hit areas by inflation, and dairy products were not immune. The price of dairy in food and beverage stores rose by more than 15% in 2022 compared to 2021, the highest jump in prices of all categories. The value of dairy sales grew significantly in 2022. Even so, and although this can partially be attributed to the higher prices, the growth in dairy sales (up 14.7%) outpaced that of non-dairy categories (8.3% greater).
Additionally, though all categories’ volume fell, the volume of dairy products sold fell less than that of non-dairy products. In other words: even though dairy had higher inflation rates, the slide in volume sold was less than the dip of other food and beverage categories. Shoppers were continuing to put dairy products in their cart despite the higher prices. That’s a testament to the dairy’s place as a dietary staple for many around the country and the world.
Dairy demand persists
Consumers prefer dairy products over plant-based alternatives: sales of cheese, frozen products, and other dairy goods dwarf plant-based imitations in stores. As even more alternatives fill shelves, dairy doesn’t lose shelf space. Rather, per capita consumption in several areas have grown, including cheese (up 17% from 2020), yogurt (up 5%), and butter (up 21%). The dairy aisle remains of top value when compared to other aisles within major food and beverage stores and is one of the fastest growing aisles in terms of sales dollars, topping $75 billion in 2022.
Cheese is expected to grow only more popular as time goes on, as is butter and yogurt. The U.S. dairy industry is poised to meet this demand as the industry advances in the coming years. As inflation wanes, consumers may return to trying higher value dairy products, of which there is no shortage. U.S. dairy will continue to be a major part of consumers’ diets and shopping carts.
This column originally appeared in Hoard’s Dairyman Intel on Nov. 9, 2023.
