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Global Dairy eBrief
May 21, 2015, Volume 22, Issue 20


McConnell pledges TPA vote before recess
Senate Majority Leader Mitch McConnell (R-Ky.) vowed to complete the Trade Promotion Authority (TPA) bill this week, even if that required the Senate to delay its Memorial Day recess. The bill cleared a critical cloture vote this morning, triggering up to 30 hours of debate, which would allow a vote on the completed TPA legislation late Friday or Saturday.

However, at press time, there were eight pending amendments attached to the bill, including one on currency manipulation that is seen as a high risk to successful passage of TPA as well as a potential roadblock to finalizing a Trans-Pacific Partnership (TPP) agreement. The Senate will vote on those prior to a final TPA vote. USDEC has been weighing in with Senate offices in support of TPA and in opposition to the problematic currency amendment given the threat it poses to TPA and TPP. (USDEC staff, Wall Street Journal, 5/21/15; Inside U.S. Trade, 5/21/15)

Chinese audits of U.S. dairy facilities expected mid-June
Discussions between the Certification and Accreditation Administration of the People’s Republic of China (CNCA) and USDA-FAS have progressed to the point where CNCA is planning to conduct a systems audit of U.S. facilities June 15-26. The U.S. proposed agenda is for CNCA to audit seven dairy manufacturing sites (four fluid milk facilities, two powder plants, and one cheese and ingredients operation) and five infant formula plants.



Click charts to view larger images in your web browser.


A rising index means that an importer’s currency is strengthening against the U.S. dollar. A falling index means that an importer’s currency is weakening against the dollar. When an importer’s currency is strengthening against the U.S. dollar (weak US$), the importer’s purchasing power increases; when an importer’s currency is weakening against the U.S. dollar (strong US$), the importer’s purchasing power decreases. Source:


Note: Numbers in parentheses are changes from previous period. Source: USDA and commercial contacts

USDEC continues to coordinate with USDA-FAS, AMS and FDA to refine the audit schedule and logistics, and we will work with the identified U.S. facilities to help prepare for the audits. Barring unforeseen issues, we expect the audit to meet CNCA’s requirements to list any U.S. dairy facility seeking CNCA plant registration (see Global Dairy eBrief, 12/4/14). (USDEC staff)

Nations blast Lisbon decision to expand GI system; U.S. leads strong coalition highlighting agreement’s shortcomings
U.S. Ambassador Pamela Hamamoto strongly criticized the Lisbon Agreement Diplomatic Conference that concluded in Geneva, Switzerland, this week. Lisbon Union members adopted sweeping revisions to the Lisbon Agreement, dramatically expanding international protections for geographic indications (GIs).

Ambassador Hamamoto, permanent representative to the United Nations and other international organizations in Geneva, again criticized the decision to strip 160 members of the World Intellectual Property Organization (WIPO) of “meaningful participation rights” and defy the long-standing WIPO principle of inclusiveness and participation (see Global Dairy eBrief, 5/14/15).

Her comments were echoed throughout the conference by a vocal group of a dozen WIPO members shut out of the rulemaking process, including the United States, Argentina, Australia, Chile, Japan, South Korea, Uruguay and others. That group called on WIPO to create an inclusive and legitimate process to discuss the revisions, and fought for targeted improvements to the proposal. Even though Lisbon Union members blocked equitable participation rights for the broader WIPO membership, the leadership of those allied governments “shone a spotlight on the flaws in the current Lisbon Agreement, and bolstered the resolve of many nations to defend the rights of their consumers and food producers in using generic names and terms,” noted the Consortium for Common Food Names (CCFN) in a release supporting the WIPO nations who took a stand at the conference. CCFN was among a limited number of organizations authorized to formally participate in the conference and in attendance.

“WIPO’s decision to force non-Lisbon members into second-class status at this conference strips the resulting outcome of its legitimacy as an international agreement,” USDEC President Tom Suber noted in a joint USDEC-NMPF-IDFA release on the conference. “It is clear that this agreement is an effort to promote the interests of GI holders at the expense of generic users, rather than trying to balance both those concerns in good faith. It is also clear that there are serious WTO consistency problems with the approach.”

USDEC has asked USTR to carefully examine how to address these trade commitment violations. To view the joint USDEC-NMPF-IDFA press release, click here. To view the CCFN release, click here. (USDEC staff; U.S. government)

COOL ruling opens door to retaliatory tariffs; House looks to repeal act
The WTO ruled against U.S. country of origin labeling (COOL) laws for certain meat products, clearing the way for Canada and Mexico to enact retaliatory tariffs on U.S. goods, including dairy. It was the third such ruling since Canada and Mexico first challenged the regulation in 2009. Once the WTO finalizes the latest decision at the end of the month, both countries can formally request authorization to retaliate based on the estimated amount of losses caused by COOL. Both nations said they intended to make such a request.

A panel will then have 60 days to review and sign off on the tariff amount, meaning Canada and Mexico could implement retaliatory dairy tariffs as early as late summer or fall. Alternately, the United States and its neighbors could settle the issue before the 60-day clock runs out.

Canada published a preliminary retaliatory products list that includes certain dairy categories. Canada estimates the law is costing its livestock industry C$3 billion annually (about US$2.5 billion).

Although Mexico has not yet issued a cost estimate or published a retaliatory products list, the nation set a precedent by including dairy in retaliatory tariffs in 2010 and 2011 when the United States failed to live up to its NAFTA trucking obligations.

U.S. Ag Secretary Tom Vilsack as well as the COOL Reform Coalition, a diverse collection of ag producer groups, food and beverage processors and other organizations (including USDEC), called on Congress to revise the portions of the law that breach WTO commitments.

The House Agriculture Committee acted quickly to resolve the issue, approving legislation to repeal COOL on Wednesday, May 20. Ag Committee Chairman Mike Conaway (R-Texas) and more than 50 co-sponsors introduced a bill earlier in the week. Conaway said he expected the full House to consider the legislation in early June. A repeal faces opposition from consumer groups and a number of Democrats who support the law. (USDEC staff; AP, 5/20/15; Inside U.S. Trade, 5/20/15, 5/18/15; Wall Street Journal, 5/19/15; Reuters, 5/18/15)

New Zealand says El Niño call might be premature
New Zealand’s National Institute of Water and Atmospheric Research (NIWA) suggested U.S., Australian and Japanese weather forecasters were premature in their pronunciations that El Niño had arrived (see Global Dairy eBrief, 5/14/15). NIWA says we are still “on the cusp” of the weather phenomenon, despite dry spells in the southern Philippines and eastern Australia. NIWA said it would be able to make a more definitive pronouncement by the end of May. (Dairy Trader, 5/15/15; Reuters, 5/12/15)


Market Conditions

GDT drops 2.2 percent
The GlobalDairyTrade (GDT) Price Index declined for the fifth straight auction on May 19, with the average winning price dropping 2.2 percent to US$2,472/ton, the lowest it has been since August 2009. Higher volumes on offer from Fonterra Co-operative Group contributed to the decline: the co-op increased offerings by 6,210 tons over the next three months (and by 7,530 tons over the next year)—primarily WMP, AMF and cheese. But strong milk production and soft demand remained the primary influences.

Cheddar led the declines on May 19, with the average winning price falling 7.1 percent to US$2,745/ton. AMF fell 4.8 percent to US$3,337/ton and butter dropped 3.2 percent to US$2,911/ton. SMP dipped below US$2,000/ton for the first time in the history of GDT, falling 3.6 percent to an average winning price of US$1,992/ton. WMP slipped just half a percent to US$2,390/ton. (USDEC staff; GDT; BusinessDesk, 5/6/15)



Port operators ratify contract; ILWU decision expected tomorrow
West Coast port operators ratified a five-year contract with the International Longshore and Warehouse Union (ILWU) yesterday, May 20. The ILWU is expected to announce tomorrow whether its rank-and-file members (who voted on the pact over the past few weeks) approved the agreement. ILWU approval is expected given that union leaders overwhelmingly endorsed the deal in April. (Journal of Commerce, 5/20/15)


Company News

New Zealand to investigate domestic dairy competition
New Zealand’s Commerce Commission plans to launch a study on the state of competition in the domestic dairy sector. The Dairy Industry Restructuring Act that led to the formation of Fonterra Co-operative Group in 2001 mandates the report to ensure “there is workable competition” in the market. Fonterra controls an estimated 86 percent of the nation’s milk supply. The commission plans to begin the study in June and estimates it will take nine months. (New Zealand government)

Arla, Juhayna form joint venture
Denmark’s Arla Foods and Egypt’s Juhayna Food Industries formed a joint venture to market Arla products across Egypt. Arla said its cheese, butter and cream products fill a hole in Juhayna’s portfolio, which centers around UHT milk, yogurt and juice. Juhayna will own a 51 percent stake in the unit, Arla 49 percent. Arla expects the new company, ArJuFood Industries, will launch sales operations this October. (Company reports)

Lion targets Asia through Burnie specialty cheese plant
Lion officially opened its upgraded and expanded specialty cheese manufacturing plant in Burnie, Tasmania. The plant, which Lion calls “The Heritage,” can produce 11,000 tons per year. Lion plans to use the facility, which it claims is the largest specialty cheese facility in the Southern Hemisphere, as a launch pad into Asia, starting with its South Cape, Tasmanian Heritage, Mersey Valley and King Island cheese brands. The company has already been testing new supply chains in China via its Lion Dairy Asia arm, which it opened last year. (Company news; The Land, 5/20/15; Sydney Morning Herald, 5/19/15)

Huishan commits to Shenbei dairy expansion
China’s Huishan Dairy signed an agreement with the government of Shenbei New Area, Shenyang City, Liaoning Province, to invest $1.6 billion in a vertically-integrated dairy production cluster, including farms and processing plants. Huishan has already spent $1.7 billion building two manufacturing plants and 43 dairy farms and developing 860,000 acres of farmland to support dairy operations in Shenbei. (USDEC China office)

Mergers and acquisitions
Dutch cheesemaker DOC Kaas rejected a takeover offer from Germany’s Hochwald Foods. Kaas is reportedly seeking a merger deal with Germany’s DMK. (RTV Drenthe, 5/18/15)

Company news briefs
Glanbia Co-operative Society spun off about 5 percent of its stake in Glanbia plc, a deal that will deliver each of its farmers an average windfall of 15,000 (about US$16,800) and create a 68 million (about US$76 million) member support fund. The society is still the majority shareholder in Glanbia plc with a 36.5 percent stake . . . Glanbia Foods purchased a 120,000 sq. ft. warehouse in Gooding, Idaho, to meet expanded storage needs . . . Latvia’s Food Union shipped its first 10-tons of ice cream to China. The company said it expects a substantial increase in volume moving forward. Chinese regulators recently approved a list of 10 Latvian food manufacturers to export to the nation . . . Finland’s Valio signed a deal with Australia’s MPD Dairy Products for MPD to market its low-lactose and lactose-free milk powders in Australia and Asia. (Company reports; The Baltic Course, 5/20/15;, 5/20/15; Irish Independent, 5/15/15; KMVT-TV, 5/14/15)

From the U.S. Dairy Exporter Blog