Still no story to suggest market lift
USDEC’s dairy market outlook has not changed materially since the early December “Global Dairy Outlook” webinar. The headlines at the start of the new year are dominated by anxiety over global commodity and equity markets. Oil prices are at 12-year lows. Grain prices are at their lowest since 2009 and the outlook keeps softening. Global stock markets are rattled. Concerns about the health of China’s economy continue to spread. This broadly reflects fragility in the world economy, which doesn’t suggest a near-term turnaround in dairy.
For the full analysis of global conditions and the key factors we’re watching, read USDEC’s January Global Dairy Market Outlook, released today.
TPP gets mention in State of the Union; Philippines reaffirms intent to join
President Obama largely steered clear of trade and agricultural topics in this week’s State of the Union address. TPP garnered a few sentences, when he extolled the virtues of the deal for the U.S. economy, U.S. workers and the U.S. position in the world. “With TPP, China does not set the rules in that region, we do. You want to show our strength in this century? Approve this agreement,” he told Congress.
Pro- and anti-TPP groups continue to trade statements alternately supporting and opposing the deal. Rumors are circulating that TPP members might sign the agreement in New Zealand in early February, but no U.S. source has confirmed any such plans.
Separately, Malaysian lawmakers are slated to meet later this month to decide whether Malaysia will remain party to the deal. And Philippine Secretary of Foreign Affairs Albert del Rosario said the nation remained in close consultation with the United States on how it can accede to TPP “at the soonest possible time.” (The White House; Politco.com, 1/13/16; Radio New Zealand, 1/13/16; Bloomberg, 1/5/16)
Hotel discount for spore seminar ends tomorrow;
early bird registration, hotel discount for ingredient symposium closes Monday
The discount rate for hotel rooms ($139/night) for the 2016 U.S. Dairy Industry Spore Seminar ends tomorrow, January 15. The discount room rate and early bird registration deadline for the subsequent Cal Poly 18th Annual Dairy Ingredients Symposium is Monday, January 18. Both events take place at The Cliffs Resort in Pismo Beach, Calif., from February 16-18. Call The Cliffs at 805-773-5000 and mention the U.S. Dairy Industry Spore Seminar and Dairy Ingredients Symposium to get the discount rate.
The daylong Spore Seminar (February 16) features the latest information and research findings on spores and overall milk powder quality. To register or view the agenda, go the Meetings & Webinars section of the USDEC website or contact Katie Radloff at kradloff@usdec.org. Registration is free to USDEC members.
The Dairy Ingredients Symposium (February 17-18) offers the latest science and technology developments to help dairy suppliers innovate, improve products and better compete for customers. The two-day event includes presentations on potential new targets for dairy ingredient innovation, manufacturing advancements and high-protein ingredients. To view the full agenda, click here. To register for the symposium, click here.
Innovation Center seeks comments on proposed sustainability indicators
On January 11, the Innovation Center for U.S. Dairy released a series of proposed new indicators for the Stewardship and Sustainability Guide for U.S. Dairy. Launched in 2013, the guide provides a voluntary, science-based framework for the dairy value chain to measure and communicate sustainability progress.
The new indicators are the result of a multi-year effort led by the Innovation Center’s Sustainability Alliance to identify and define the sustainability indicators that matter the most. The Innovation Center is accepting comments on the proposal through March 10, 2016. To read the document and submit your comments, go to USDairy.com/SustainabilityGuide and view the links under the section “Feedback needed for new dairy sustainability indicators.”
USDEC releases alternative-protein report
USDEC released a new research report outlining the growing category of plant-based protein alternatives. Soy, pea, wheat, rice and potato protein ingredients benefit from favorable demographics, attractive pricing and the same general trend toward protein consumption that is driving the dairy protein market. The study examines how these plant-based products stack up against dairy nutritionally, functionally and economically, lists applications and suppliers, and looks at strategic implications. The report is free to USDEC members. Go to the Research Reports section of the USDEC website to get a copy delivered right to your inbox.
MARKET CONDITIONS
NZX developing farmgate milk price futures and options program
NZX has said little publicly about its effort to develop a futures and options program for farmgate milk prices (see Global Dairy eBrief, 10/2/15), but USDEC has learned of some of the proposed details of the scheme. USDEC contacts report that the contracts would be seasonal, with up to four seasons available for trading. They would be priced in NZ$/kgMS, and NZX’s target launch date is March-May this year. (USDEC staff)
Almarai makes U.S. land purchase as Saudi input costs rise
Escalating input costs are spurring changes in the Saudi Arabian dairy sector. Processors are signaling a general dairy price hike may be on the horizon to cope with increased government taxes on fuel, electricity and water. The nation’s leading dairy company, Almarai, said the taxes would add more than $50 million in direct expenses in 2016 and another $25 million in indirect costs from local suppliers raising their prices.
Separately, all dairy farmers in Saudi Arabia are facing the phase-out of locally grown green fodder over the next three years. The government is banning production of certain crops to conserve the nation’s water resources. Almarai this week paid $32 million for nearly 1,800 acres of land in California to grow alfalfa hay to supply its business. The dairy expects its costs will increase by another $50 this year due to the ban, with additional expenses annually until 2019 when it will be forced to import all its green fodder. (Arab News, 1/12/16; Reuters, 1/10/16)
Data updates on USDEC.org
Have you checked out the interactive charts of market and trade data on the USDEC website? Key metrics like milk production, exports and imports and prices are updated regularly. This week we learned:
- In November, Australia exports of cheese were up 22 percent vs. prior year, but SMP (-10 percent) and WMP (-15 percent) shipments were lower.
- Indicative commodity prices and currency graphs are updated each week as well.
To browse the full Market Data section of usdec.org, click here.
Bushfires hit dairy farmers, processor in Western Australia
Bushfires, many of which were still burning as of midweek, hit 430 farms (not all of them dairy) covering more than 76,000 acres of land in the southwest section of Western Australia. Flames destroyed infrastructure and ruined pastures. Farmers were forced to dump milk and at least one dairy processor, Parmalat-owned Harvey Fresh, shut down operations for a time. At press time, authorities were still battling fires and the full extent of the damage was unknown. (The West Australian, 1/11/16; ABC Rural, 1/12/16)
COMPANY NEWS
Starbucks maintains ambitious China plans
Starbucks, which already operates 2,000 Chinese outlets, plans to open 500 additional stores annually in China over the next five years. “We have confidence in the future of the Chinese economy, despite all the rhetoric, noise and issues,” said CEO Howard Schultz. Euromonitor projects an 18 percent gain in coffee cups drunk per capita in China from 2015-2019. (Wall Street Journal, 1/12/16)
Ornua buys China’s Ambrosia Dairy
Ireland’s Ornua purchased Ambrosia Dairy, a Shanghai-based manufacturer of cheese yogurt and sour cream. Ornua said the purchase significantly increases its access to China’s high-end retail market and provides an entry point into supplying dairy ingredients to the rapidly growing Chinese foodservice sector. The deal includes a new-product development center that Ornua intends to use to create cheeses tailored specifically to Chinese tastes. (Company reports; Business Post, 1/13/16)
Company news briefs
Midfield Group aims to get its Penola, South Australia, milk powder plant up and running by the end of the year (see Global Dairy eBrief, 5/7/15). The A$70 million facility is located in a former potato processing plant . . . In late December, Tnuva opened a new $89 million factory in Tel Yosef, Israel, to manufacture yellow cheese. The company, owned by China’s Bright Foods, plans to begin exporting the product to China this year . . . Lithuanian dairy processor Vilkyskiu Pienine plans to build a $28-million whey processing facility in the city of Taurage. The estimated completion date is the first quarter of 2017 . . . Canadian dairy co-ops Gay Lea Foods and ADL created the Co-operative Dairy Alliance, a joint venture that aims to maximize sales and marketing efficiency and optimize processing. The co-ops said they remain independent, and the Alliance is neither a merger nor a first step toward a merger . . . A group of Indian entrepreneurs and Israel’s AlefBet Planners are looking to develop a $600 million dairy farm complex in South Sudan. Should the deal move forward, it would be one of the largest dairy farms in Africa . . . Arla Foods plans to increase organic milk production in Denmark by 25 percent due to rising demand locally and globally. (The Weekly Times, 1/15/16; Journal Pioneer, 1/13/16; Copenhagen Post, 1/13/16; DairyReporter.com, 1/11/16; Haaretz, 1/20/15)
From the U.S. Dairy Exporter Blog
