Dick Groves
Editor, Cheese Reporter

2018 Editorials

2018: The Year of the Trade Wars
December 28, 2018

What A Concept: An On-Time Farm Bill
December 21, 2018

US Could Do Worse Than Follow EU Dairy Trends
December 14, 2018

WTO Is Worst System Ever, Except For All The Others
December 7, 2018

Lower Retail Prices Could Help Boost Dairy Sales
November 30, 2018

The Thanksgiving of the Future
November 23, 2018

CCC Donations Make a Comeback in USDA Dairy Data
November 16, 2018

25 Years of BST/BGH
November 9, 2018

The Midterm Election
November 2, 2018

Things We'll Miss About the California State Milk Order
October 26, 2018

Packaging Industry Keeps Growing Thanks In Part To Dairy
October 19, 2018

Per Capita Cheese Consumption: 40 Pounds Is Within Read
October 12, 2018

New NAFTA Looks Pretty Good For US Dairy
October 5, 2018

Imitation is the Sincerest Form of Flattery, But
September 21, 2018

New California Federal Order Starts To Get Real
September 14, 2018

Dismal Performance Continues for Fluid Milk
September 7, 2018

It's Time to Terminate The War on Salt
August 31, 2018

Searching for Solutions
August 17, 2018

Agencies Should Agree on Terminology For Dairy Alternatives
August 31, 2018

USDA Assistance To Farmers Will Be Woefully Inadequate
August 3, 2018

A Decade of Global Dairy Trade Auctions
July 27, 2018

Dairy Fats Have A Healthy Future
July 20, 2018

Eating More Milk and Drinking Less
July 13, 2018

Something's Not Healthy In FDA's Nutrition Innovation Strategy
July 6, 2018

An Interesting, But Flawed, Food Safety Consolidation Proposal
June 29, 2018

25 Years of Dairy Futures Success
June 22, 2018

Vegan 'Butter' And Other Strange Foods With Lots Of Potential
June 15, 2018

EU vs New Zealand, Australia on GIs Should Be Interesting
June 8, 2018

Does More Dairy Trade Really Mean Less Price Volatility?
June 1, 2018

Midwest Cheese Manufacturing Makes A Nice Comeback
May 25, 2018

Drop In Class I Use Points To Need For Federal Order Reforms
May 18, 2018

Will California Ever Get Back to A 20% Production Share?
May 11, 2018

The Dairy Industry's Plant-Based and Animal-Free Threats
May 3, 2018

Cheese Industry Attracting Some Impressive Technology
April 27, 2018

Some Good, Lots of Bad in Food Lableing Bills
April 20, 2018

Extending Multiple Component Pricing Makes Sense, And Cents
April 13, 2018

The Significance of A California Federal Order
April 6, 2018

Front-Of-Package Labeling Isn’t The Answer To Anything
March 30, 2018

US Dairy Exports and Global Export Prices
March 23, 2018

The Dairy Industry's New Cash Market
March 16, 2018

Disappearance Statistics Illustrate Importance of Exports
March 9, 2018

US Dairy Industry Can Expect More Milk, More Opportunities
March 2, 2018

Disappearance Statistics Illustrate Importance of Exports
February 23, 2018

California Federal Order Proceeding Continues to Drag On
February 16, 2018

Storm Clouds on the US Dairy Export Horizon
February 9, 2018

Federal Orders Have Many Problems, Including Their Existence
February 2, 2018

Innovate, Innovate, Innovate
January 26, 2018

Memo To Trump, Congress: Ditch The Dietary Guidelines
January 19, 2018

The Illogical World of Retail Milk Prices
January 12, 2018

Dairy Industry Isn't Very predictable, But in 2018...
January 5, 2018

 

 

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Ongoing Trade Wars Are Hurting US Dairy Exports

Full-year US dairy trade statistics were released Wednesday by USDA’s Foreign Agricultural Service, and there’s both good news and bad news in the numbers.

The good news is that 2018 was a pretty darn good year for US dairy exports. As reported on our front page this week, overall dairy exports were valued at about $5.5 billion, up 2 percent from 2017 and the highest level since 2014, when dairy exports reached a record $7.1 billion in value.

Within some individual product categories, results were also pretty impressive in 2018. Cheese exports reached 766.8, up 2 percent from 2017 and the highest level since 2014, when they reached a record 810 million pounds.

Meanwhile, exports of nonfat dry milk/skim milk powder reached a record 1.57 billion pounds, shattering the previous record, set in 2017, by more than 200 million pounds. Exports of whey protein concentrate reached a record 334.3 million pounds, up 4 percent from 2017 and more than 100 million pounds higher than in 2015. And lactose exports topped 800 million pounds for the first time ever, reaching a record 864.7 million pounds.

The bad news is actually twofold. First, last year’s impressive dairy export performance was fueled more by what happened during the first half of the year than by what happened during the second half of the year.

And second, what happened during the second half of 2018 is probably a more accurate preview of 2019 than what happened during the first half of 2018.

FAS statistics help illustrate that first point. Overall, US dairy exports during the first half of 2018 were valued at $2.9 billion, up 6 percent from the first half of 2017, while exports during the second half of 2018 were valued at $2.6 billion, down 1 percent from 2017’s second half.

Granted, just looking at export values can be misleading, since global dairy product prices fluctuate from month to month, not to mention from the first half of a given year to the second half of a given year.

So, getting into some specific products that are affected by retaliatory tariffs, FAS statistics show that US cheese exports to Mexico during the January-June 2018 period were up 1.8 percent from the same period in 2017, on a volume basis, while cheese exports to Mexico during the July-December 2018 period were down 1.1 percent from a year earlier.

Mexico, by far the leading US cheese export market, was imposing retaliatory tariffs on imports of US cheese during roughly the last half of 2018.

Meanwhile, US dairy exports to China during the first half of 2018 were valued at $304.7 million, up 11 percent from the first half of 2017, but exports to China during the second half of the year were valued at $195.6 million, down 35 from 2017’s second half. China, the number three US dairy export market on a value basis (trailing only Mexico and Canada last year), was imposing retaliatory tariffs on most if not all US dairy product exports during roughly the last half of 2018.

Among a few specific products, on a volume basis, US exports of dried whey to China were down 3 percent during the first half of 2018, then dropped 30 percent during the second half; exports of whey protein concentrate were up 31 percent during the first half of 2018 but down 37 percent during the second half; and lactose exports were up 73 percent during the first half but up only 13 percent during the second half.

With these Chinese export figures in mind, it’s worth noting that overall US lactose exports during the first half of last year totaled 463.5 million pounds, up 21 percent, or about 81 million pounds, from the first half of 2017, but then totaled 401.2 million pounds during the second half of 2018, down 3 percent, or almost 13 million pounds, from 2017’s second half.

The good news is, as noted earlier, that lactose exports last year topped 800 million pounds for the first time ever. The bad news is that lactose exports were about 62 million pounds greater during the first half of 2018 than during the second half of 2018.

So what can the dairy industry expect on the export front here in 2019? Well, considering that Mexico’s retaliatory tariffs on cheese remain in place, and that China’s retaliatory tariffs on pretty much all US dairy exports remain in place, it would appear that 2019 will be more like the second half of last year than the first half of last year.

Certainly, there’s a lot more to the US dairy export picture than just cheese exports to Mexico and dairy exports to China. Indeed, dairy exports to Mexico last year reached $1.4 billion, up 6 percent from 2017 and their highest level since 2014, despite the impact of retaliatory tariffs on US cheese exports. Also on a value basis, US dairy exports grew last year to countries including South Korea, the Philippines, Indonesia, Vietnam and Malaysia, among others.

Still, the impacts of retaliatory tariffs by Mexico and China will continue to hamper export growth this year, which means that it’s imperative that the Trump administration end these trade wars as soon as possible. That isn’t necessarily going to be easy; after all, while we’re focusing on 2018 statistics here, it’s already March and those retaliatory tariffs are still in place. That’s another two months of tariffs that are clearly reducing dairy exports, with no end in sight.

Yes, there are reports of progress in ongoing negotiations with China. But at this point, progress doesn’t mean much; ending the trade wars is what’s really needed.

Coke, Pepsi, And The Future Of ‘Milk’

With the news last week that PepsiCo, Inc., is buying CytoSport and its Muscle Milk business from Hormel Foods Corporation, two of the world’s largest beverage businesses have now entered, or further expanded into, the dairy-based beverage business in the US. And at least in some ways, they appear to be pointing the way to future of “milk” as a beverage.

The Coca-Cola Company, of course, is a partner with Select Milk Producers in fairlife, LLC. The Coca-Cola Company is the distribution partner for the products that fairlife creates, markets and sells, including beverages under the fairlife and Core Power labels.

The Muscle Milk brand, meanwhile, includes products such as ready-to-drink smoothies and protein shakes. Some of these products are labeled “non-dairy,” but they do contain such ingredients as milk protein isolate, sodium caseinate, and calcium caseinate. The Muscle Milk brand also includes recently launched Yogurt Protein Shakes, which are made with not only Greek Style Low Fat Yogurt (made from skim milk, milk protein concentrate, cream, enzymes and cultures) as its second ingredient, but also includes whey protein concentrate as its third ingredient.

In other words, dairy or non-dairy, Muscle Milk is using a fair volume of dairy ingredients in its beverages (as well as in its protein powders and protein bars).

So what does the involvement of The Coca-Cola Company and PepsiCo tells us about the future of milk as a beverage? Quite simply, it tells us that the future is going to be different from the past.

Indeed, there are a number of differences between products such as fairlife, Core Power and Muscle Milk and traditional beverage milk.

For starters, they come in different packages than does traditional beverage milk (we’re talking about the packages that are sold out of the dairy case, not the relatively recent convenience-sized milk bottles).
fairlife Ultra-Filtered Milk, for example, comes in a 1.5-liter (52-ounce) bottle (as well as an 11.5-ounce single-serve bottle), whereas traditional milk comes in quarts (32 fluid ounces), half-gallons (64 fluid ounces) and gallons (128 fluid ounces).

Muscle Milk’s beverage products, meanwhile, also are available in unusual package sizes, such as 11-ounce cartons and 15.8-ounce bottles.

The fairlife 52-ounce containers are also more colorful than most traditional milks in the dairy case. For example, many milks distinguish their fat content with colored caps, such as a red cap for whole milk.
fairlife uses different colors for almost its entire bottle. So, for example, a 52-ounce bottle of fairlife whole milk is primarily red, while reduced fat milk is blue. Needless to say, these bottles tend to stand out in the dairy case.

The Muscle Milk beverage line is also less bland than traditional beverage milks. There’s simply no mistaking these products for traditional milk products sold in the dairy case in gallon or half-gallon plastic jugs.

Another significant difference between products such as fairlife and Core Power and traditional beverage milk is shelf life. According to fairlife’s website, fairlife is pasteurized at a higher temperature than ordinary milk, for a shorter time, giving it a “much longer” shelf life unopened (shelf life is the same as ordinary milk after opening). So consumers can stock up more on fairlife than on traditional milk, knowing that, as long as it’s unopened, it will last for a couple of months in the refrigerator.

As far as fairlife’s Core Power is concerned, the company said its ultrafiltration and aseptic packaging allow it to be shelf stable for up to nine months on Elite products and up to 12 months on 26-gram products.
And these products don’t have to be sold in the dairy case or any other refrigerated area.

That’s also the case with all of Muscle Milk’s products, including shakes and smoothies.

So are there any downsides to these products being marketed by The Coca-Cola Company and, in the near future, by PepsiCo? Cost is the most obvious thing that comes to mind.

There are two aspects to the cost issue. First, exact comparisons with traditional milk products are nearly impossible, for the aforementioned reason that fairlife, for example, comes in a 1.5-liter bottle, and is sold alongside half-gallon and gallon containers.

Second, and more important, fairlife is in fact more expensive than traditional milk. Indeed, a quick check of the dairy case in one local supermarket found that a 1.5-liter (52-ounce) bottle of fairlife whole milk is more expensive than a gallon (128-ounce) of whole milk. That’s pretty pricey.

That is, at least in part, because fairlife is a value-added product. Value is added to fairlife in several ways: it has a higher protein content (per serving) than regular milk, has a longer shelf life, and is lactose-free, among other things.

There hasn’t been a lot of value added to traditional milk for a number of years, and sales reflect that fact, having declined from 55 billion pounds in 2010 to under 49 billion pounds in 2017.

Obviously, these value-added milks aren’t for everyone because of their higher price. But they just as obviously have some merit, because, well, because they are being marketed by two of the savviest companies in the beverage business. And the dairy industry could do worse than having its beverage products, or milk components, marketed by The Coca-Cola Company and PepsiCo.

 

Let Them Eat Golana

This darn plant-based dairy alternative issue is so big (at least potentially), and so complex, that we just can’t quite let it go. So for the third week in a row, we’re going to address the issue, albeit from a couple of new angles.

The issue of how to label dairy imitators has been around for, well, for roughly as long as real dairy products have been around. Back in the late 1800s, for example, there were problems with “filled” cheese, which was described by one source as “a compound of skim milk and grease, such as old butter, oleomargarine, or lard, the favorite ingredient being at present stale butter...”

That quote, by the way, dates back to 1890. And related to the issue of filled cheese and filled milk, the Filled Cheese Act of 1896 was repealed by Congress in 1974, while the Filled Milk Act of 1923 was declared unconstitutional in 1972.

More recently, cheese analogs were generating quite a bit of controversy.
For example, a 1986 USDA report, Effects of Casein Imports, noted that the variety of products included in the cheese analog group “is increasing”; products at that time included cheese substitutes (made from casein, vegetable oil, and water), imitation cheese (which can be made from proteins other than casein, such as soy), and blended products (combining, for example, natural and imitation cheeses).

This controversy didn’t just focus on imports of casein and how those imports might or might not be interfering with the dairy price support program. It also focused on what these products should be called.

So in September of 1978, the US Food and Drug Administration published a proposed rule that would have established standards of identity for milk and cream substitutes and cheese substitutes.
More than three years earlier, FDA had received a petition from the National Cheese Institute, proposing the establishment of a standard of identity for cheese analogs under the name “Golana.” The NCI petition stated that the name “Golana” was selected because it was pleasant-sounding, easily pronounced, and not related to another food. “Golana” happens to be “analog” spelled backward.

NCI had rejected the word “cheese” as a root word on the grounds that such terms might be confused with names of natural cheeses. Further, NCI suggested that the word “analog” was more applicable than words such as “alternate,” “substitute” or “imitation” because analog connotes something having properties corresponding to something else, but different in origin.

Briefly, FDA’s 1978 proposed rule explains, the petition for the standard of identity for Golana defines a cheese analog as the food made in semblance of cheese or a cheese product in which safe and suitable nonmilk ingredients supplement or replace any or all nutritive milk components.

The proposed standard would also have established nutritional equivalency requirements for Golana and a system of nomenclature for Golana-type foods based on the degree of semblance to the cheese simulated, including its nutritional equivalency to that food.

So, for example, a Golana simulating Mozzarella that conformed to the organoleptic and physical properties, as well as to the established fat and moisture requirements for Mozzarella, and contained the required levels of protein and nutrients proposed in the standard of identity for Golana would have been named “Golana mozzarella cheese analog.”

FDA withdrew that proposed rule in 1983, for reasons that are too detailed to get into here. But in light of all the current controversy over what to call plant-based dairy alternatives, maybe it’s time to revisit “Golana,” or some other pleasant-sounding name.

Another issue related to these plant-based foods concerns something the Plant Based Foods Association mentioned in its recent comments to FDA. Companies selling dairy alternatives, the PBFA said, are using common English words that consumers understand, including cheese, milk, yogurt and butter.

To PBFA’s members, and to consumers, “these words represent functionality, form and taste, not necessarily the origin of the primary
ingredient” (emphasis added).

But there’s a huge difference between the primary ingredient in dairy products and the primary ingredient in dairy alternatives. In dairy products, the primary ingredient, of course, is milk.
In many if not most plant-based dairy alternatives, the primary ingredient is actually water. Yes, many of these products are named after a plant-based ingredient, such as almond milk.

But how many almonds are actually in almond milk? That’s not easy to tell. For example, Blue Diamond’s Almond Breeze Original Almondmilk lists “almondmilk (filtered water, almonds)” as its first ingredient. The product’s nutrition information also notes that there’s all of one gram of protein per one-cup serving, while one serving of Whole Natural Blue Diamond Almonds has six grams of protein per serving.

Other plant-based products don’t necessarily have a “primary ingredient.” Here are the ingredients in Follow Your Heart’s Smoked Gouda Style Slices: Filtered Water, Coconut Oil, Modified Food Starch, Potato Starch, Sea Salt, Natural Smoke Flavor (Plant Sources), Natural Flavor (Plant Sources), Olive Extract.

Plant-based foods imitating dairy products are crying out for more regulatory oversight.

Plant-Based ‘Dairy’ Products:
FDA Has To Do Something

The US Food and Drug Administration should have learned at least two things from all the comments it received in response to its request for information on the labeling of plant-based products with names that include the names of dairy foods.

First, the agency should have learned that there’s quite a bit of interest in this subject. As reported on our front page last week, FDA received over 13,000 comments in response to its request.

Granted, some of these appeared to be form letters. For example, some comments advocating for the status quo (allowing plant-based foods to continue using dairy terms) started off as follows: “The public is waking up to the horrors of animal agriculture.” But, form letters or not, 13,000 comments indicates that there’s quite a bit of interest in this topic.

Second, the agency should have learned that the status quo is simply not acceptable on the labeling of plant-based products with names that include the names of dairy foods.

That’s because, among other things, FDA currently defines milk as “the lacteal secretion...obtained by the complete milking of one or more healthy cows...” Here in the 21st century, milk is obtained by the complete milking of one or more healthy cows, goats, sheep, camels and other animals. If nothing else, FDA needs to broaden the scope of its definition of “milk” to include other animals.

Beyond that, there are at least a couple of issues FDA should deal with here. First, we found it interesting that the Plant Based Foods Association told FDA that companies selling dairy alternatives “are using easy to understand, clear, descriptive and truthful language” on their labels.

That doesn’t necessarily appear to be the case. For example, PBFA member Daiya Foods sells a number of dairy alternatives, including Daiya Medium Cheddar Style Farmhouse Block (which we mentioned in this space last week). Yes, the label does say “deliciously dairy-free,” right under “daiya,” but the words “MEDIUM CHEDDAR STYLE FARMHOUSE BLOCK are not only in all capital letters but are also in larger typeface than is the “deliciously dairy-free” line.

The label does note that the product is “Dairy & Soy Free,” but again, the typeface is smaller than the MEDIUM CHEDDAR STYLE FARMHOUSE BLOCK.

Another PBFA member company, Follow Your Heart, markets products such as Smoked Gouda Style Slices. On this label, there are a couple of problems (from a consumer and dairy industry, if not regulatory, perspective).

First, the words “Smoked Gouda” and “Slices” are in much larger typeface than the word “Style,” so a consumer just glancing at the product will easily see “Smoked Gouda Slices” but might not see the word “Style.”

And second, the label does say “Dairy Free Cheese Alternative,” but those words appear near the bottom of the label and, again, are in smaller typeface than “Smoked Gouda Slices.”

So if FDA decides to continue allowing companies to use dairy terms to describe non-dairy alternatives, at least it should require labeling that is clear and not misleading. One possible solution would be to require the dairy term, such as Gouda or Cheddar, to be smaller than the qualifying phrase “Dairy Free” or “Dairy Alternative,” or maybe “Non-Dairy.”

FDA might even want to go as far as to define, or ban, the term “style.” We mention this because, under the geographical indication provisions of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, limited GI rights are being provided to the EU on Asiago, Feta, Fontina, Gorgonzola and Munster.

Under those limited rights, current users of those names in Canada can continue to use those names, but future users will be able to use the names only when accompanied by expressions such as “style,” “type” or “kind.”

Granted, this is for an agreement between the EU and Canada, but if a company decides to start producing Asiago in Canada next year, it will have to use a term such as “style,” which is the same term numerous companies are using to describe plant-based cheese alternatives. These are obviously very different products.

The second issue FDA should deal with when it comes to plant-based dairy alternatives has to do with consumer confusion. Actually, that issue is pretty closely related to the first issue, and it’s really what this controversy is all about.

Surveys conducted by and for various dairy organizations have found, among other things, that buyers of plant-based alternatives believe those products are equal to or even superior to conventional dairy products when it comes to such things as protein, vitamin and mineral content, which is not true.

Several comments also pointed out that most conventional dairy products are governed by standards of identity, while plant-based dairy alternatives are not. So maybe FDA can address this disparity when it reopens the comment period on a 2005 proposed rule that would establish a set of general principles for food standards.

Adherence to these principles, FDA explained in that proposed rule, “will result in standards that will better promote honesty and fair dealing in the interest of consumers,” among other things.

That’s really what this whole issue really boils down to: honesty and fair dealing. And so maybe FDA should deal with this issue of plant-based dairy alternative labeling when it revives its food standards proposal.

 

Plant-Based Foods Get Some Nice Endorsements, But...

The dairy business is tough enough these days without its main competitor, plant-based foods, getting ringing endorsements from entities that are at least somewhat respected. But that’s just what’s happened over the past several weeks.

Back on Jan. 14, the EAT-Lancet Commission released a report that promotes diets consisting of a variety of plant-based foods, with low amounts of animal-based foods including dairy (for more details, please see Transformation Of Global Food System, Including Less Dairy, Seen As Urgent,on page 18 of our Jan. 18th issue by scanning the QR Code above).

Then last week, Health Canada released the new Canada’s Food Guide, which includes advice for Canadians on “healthy food choices and healthy eating habits,” but doesn’t specifically endorse dairy products. Instead, consumers are advised to eat plenty of vegetables and fruits; eat protein foods (which includes lower fat dairy products such as milk, yogurt, and lower sodium cheeses); choose whole grain foods; and make water “your drink of choice” (for more details, please see ‘Healthy’ Food Choices In Canada’s Updated Food Guide Omit Dairy Foods, on page 9 of our Jan. 25th issue).

Taken together, these two reports certainly aren’t very positive for dairy, from a nutritional perspective. Canada’s updated Food Guide is especially troubling, given that country’s strong dairy industry, and the government’s role in preserving that industry through various policies.

To further illustrate how ridiculous this new Canadian Food Guide is, this week, Agriculture and Agri-Food Canada announced an investment of up to $2.7 million to support Dairy Farmers of Canada’s efforts to enhance public trust in dairy production. The news release announcing this investment notes that Canada’s dairy sector has a longstanding reputation for producing “high-quality, safe, and nutritious milk and dairy products for Canadians,” and Lawrence MacAulay, Canada’s agriculture minister, stated that building consumer confidence and trust “helps ensure the growth and sustainability of Canada’s dairy sector.”

So one Canadian agency downplays the importance of dairy products in the diet, while another announces an investment aimed at helping to ensure the growth and sustainability of Canada’s dairy sector. Seems a bit inconsistent.

There are at least two really frustrating aspects to these two reports, from a dairy perspective. First, both reports are critical of saturated fats, which seems to ignore a whole lot of recent research that has found, at a minimum, that saturated fats aren’t harmful to health and, possibly, have certain health benefits.

Indeed, it was a case of either bad timing or good timing to hear investigative science journalist Nina Teicholz, author of The Big Fat
Surprise, talk last Monday at Dairy Forum 2019 about how the past 60-plus years of lowfat nutrition advocacy has amounted to an uncontrolled experiment on the entire population, with disastrous consequences for health; and then see Health Canada release its new Food Guide, touting only lowfat dairy products, the very next day.

Actually, the number of studies finding health benefits from full-fat dairy products has risen impressively in recent years. These studies are finding that dairy fats may have beneficial impacts on cardiovascular disease, stroke and type 2 diabetes, among other positives. But you’d never know it from Health Canada’s recommendations.

Another frustrating aspect of these two reports is that they seem to endorse plant-based diets and plant-based foods for the simple reason that they come from plants, not because they are necessarily more nutritious or nutrient-dense than traditional dairy products.

This point was solidified by a new survey, conducted by Ravel and commissioned by Wisconsin Cheese Makers Association, Dairy Farmers of Wisconsin and Edge Dairy Farmer Cooperative, which found that consumers are confused about whether plant-based imitation dairy products are in fact dairy foods and whether they carry the same nutritional value (for more details, please see the story on our front page last week by scanning the QR Code).

One amazing finding from this survey is that about one-third of consumers think that plant-based foods that mimic cheese contain protein, and 21 percent think that it is of a higher quality than dairy even through the imitations have little or no protein while real dairy cheese has seven grams of protein.

In fact, two of the three plant-based foods that mimic cheese that were included in the survey — Daiya Mozzarella Style Shreds and Follow Your Heart Mozzarella Style Slices — contain exactly zero grams of protein. And Daiya Medium Cheddar Style Farmhouse Block (so much for the term “farmhouse” having any actual meaning) has one gram of protein.

So if consumers think switching from real dairy cheese to plant-based “cheese” doesn’t alter their intake of protein or other nutrients, they will be in for a big, nasty surprise.

The EAT-Lancet report is critical of highly processed foods, which is kind of laughable considering how “highly processed” many plant-based “dairy” products are. For example, the aforementioned Daiya Medium Cheddar Style Farmhouse Block is made from, among other things, tapioca starch, coconut oil, vegan natural flavors, pea protein isolate, chicory root extract, xanthan gum, tricalcium phosphate, pea starch and potato protein.

Plant-based diets are gaining credibility in some quarters, but from a nutritional perspective, they remain woefully inadequate compared to traditional dairy foods.

 

Enough Is Enough; Time To End The Government Shutdown

The partial shutdown of the US government entered its second month this week (it started back on Dec. 22, 2018), and as this idiotic political battle continues its destructive path, it’s time to declare that enough is enough, Washington. End this shutdown, once and for all, and get on with the business of governing.

We make this recommendation after listening to Dr. Stephen M. Ostroff, former deputy commissioner of the US Food and Drug Administration, at this week’s Dairy Forum 2019 in Orlando, FL.

There were at least two interesting aspects to Ostroff’s presentation before even getting into the details of why it’s vitally important to end this shutdown quickly. First, Ostroff had more time than expected to speak Monday because the speaker who was scheduled to appear ahead of him, Greg Ibach, under secretary, marketing and regulatory programs, USDA, couldn’t attend due to the shutdown.

And second, Ostroff has a unique perspective on the shutdown, having served as deputy commissioner for foods and veterinary medicine until retiring just a couple of weeks ago. In other words, Ostroff was working for FDA when the shutdown started, knows a lot about the shutdown’s impact because of that, and was only able to appear at the Dairy Forum because he’s now retired from FDA.

From Ostroff’s perspective, there are plenty of negative consequences stemming from the shutdown, some short-term and some long-term. In the area of short-term impacts, Ostroff mentioned several FDA functions that aren’t currently happening, including low-risk inspections, guidance and regulatory work, food additive/GRAS (generally recognized as safe) reviews, nutrition-related work, labeling and standards work, and communication and consumer information.

Let’s look at just one of those areas: standards work. FDA’s Nutrition Innovation Strategy, announced last March by FDA Commissioner Scott Gottlieb, includes modernizing standards of identity as one of its five key elements. This could include specific standards-related “modernization,” such as finalizing a proposed rule, published 10 years ago this month, that would revise the standards of identity for yogurt.

It will also include reopening the comment period for a proposal, released by FDA in 2005, that would establish a set of general principles for standards of identity.

As long as the shutdown continues, FDA’s work on dairy and food standards will go absolutely nowhere.

Ostroff also mentioned some long-term ramifications of the shutdown, including such things as consumer confidence and employee morale. In that latter category, he noted that, thanks to the shutdown (which isn’t the first and probably won’t be the last, and is also now the longest ever), there will be a loss of talented and skilled personnel at FDA and also more challenges in recruiting and retaining needed talents.

Every week the shutdown drags on, the consequences are worse, Ostroff said. So just from the perspective of the dairy industry needing a fully functioning FDA, it’s time to end this shutdown.

Meanwhile, over at USDA, the dairy industry has now gone more than a month since the last key dairy report was released. The monthly “Milk Production” was supposed to be released Wednesday, giving the dairy industry an idea of how milk cow numbers, milk per cow and overall milk production fared in December.

One day before that, the monthly “Cold Storage” report was supposed to be released, giving the dairy industry some hard figures on cheese and butter inventories at the end of December.

And a couple of weeks ago, the monthly “Dairy Products” report was supposed to have been released, giving the industry important data on November cheese, butter, whey products, dry milk products, and other dairy products output.

But USDA’s National Ag Statistics Service hasn’t been open since the shutdown started, so none of these reports have been released as scheduled. The NASS website includes the following “slogan”: “Providing
Timely, Accurate and Useful Statistics in Service to US Agriculture.”
Indeed it does, except when it’s not operating. Eventually, the dairy industry will once again have access to accurate and useful statistics, but initially they won’t be as timely, thanks to the shutdown.

In recent years, the US dairy industry has become more and more reliant on the export market, while also importing around $3 billion in dairy products every years. Back in November, the US exported, well, we don’t know, because those numbers aren’t available due to the shutdown.

Looking ahead, USDA has a lot of work to do in implementing the 2018 farm bill. That piece of legislation ran a total of 807 pages, but the hard work really doesn’t begin until USDA starts writing the rules for implementation.

For example, the farm bill (which was signed into law by President Trump just a couple of days before the shutdown started) establishes a new Milk Donation Program, and gives USDA 180 days to establish the program. At this point, about 35 of those days are behind us, and our guess is that work on this new program is going nowhere fast, thanks to the shutdown.

So enough is enough. It’s time for Congress and the President to start acting like grown-ups, and get the federal government up and running again. As Stephen Ostroff said, every week the shutdown continues, the worse the consequences are.

A Fond Farewell To NCI, MIF, IICA And NYA

In the dairy industry, as well as pretty much every other industry, trade associations come and trade associations go. This is a particularly notable “trade associations go” period for the dairy industry; at the beginning of 2019, the industry bid a fond farewell to four trade associations that had capably served the industry for many, many years.

As we reported two weeks ago, the International Dairy Foods Association has consolidated the governance structure of its constituent organizations — the National Cheese Institute, Milk Industry Foundation and International Ice Cream Association — under one central organization, IDFA. As of Jan. 1, 2019, those three longtime dairy organizations no longer exist.

And as we reported last week, the National Yogurt Association board of directors voted last month to dissolve and transition its assets over to IDFA. So the NYA also no longer exists.

Each of these four trade associations has had a rich and colorful history of serving the dairy industry. The oldest of the four organizations was the International Ice Cream Association, which was founded in 1900 and was known for many years as the International Association of Ice Cream Manufacturers.

Next came the Milk Industry Foundation, founded in 1908. The National Cheese Institute was founded in 1927, and finally the National Yogurt Association came along in 1986.

NCI, MIF and IICA have been constituent organizations of IDFA since 1990. Prior to that MIF and IICA were co-managed and had been based in Washington, DC, for many years.

The National Cheese Institute was a relative newcomer to Washington when it joined MIF and IICA in IDFA. NCI was actually founded in Plymouth, WI, back when that city was first becoming known as the Cheese Capital of the World.

At that time, Plymouth was home to a number of cheese companies (although some of the companies now most associated with Plymouth, including Sargento, Sartori, Masters Gallery and Great Lakes Cheese, didn’t exist back then), and was also home to the Wisconsin Cheese Makers Association (which moved to Madison in 1962) as well as the old Wisconsin Cheese Exchange (which moved to Green Bay in 1956, later changed its name to the National Cheese Exchange, and closed its doors in 1997).

NCI later moved to Chicago, and for many years was co-managed with the American Butter Institute. In a nice illustration of how dairy trade associations have come and gone over the years, NCI and ABI used to have their annual meetings in April in the same location and in the same week as the American Dry Milk Institute and Whey Products Institute; ADMI and WPI merged in 1986 to form the American Dairy Products Institute (another now-defunct group, the Evaporated Milk Association, merged into ADPI in 1997).

NCI moved to Washington in the late 1980s (shortly after the NYA was formed), and then joined MIF and IICA in forming IDFA in 1990. Meanwhile, the NYA was managed for a number of years by the American Frozen Food Institute.

With IDFA hosting its annual Dairy Forum starting on Sunday, Jan. 20th, it’s worth noting that the Dairy Forum hasn’t always been hosted by IDFA. The annual gathering, which was known as the “US Dairy Policy Forum” when it was first held back in 1985, was originally sponsored by MIF and IICA (which was then still known as IAICM). They continued to sponsor the Dairy Forum up until 1990.

Obviously there is a lot of history involved in the four organizations that no longer exist. And that raises the question: Is this really a good idea, to consolidate NCI, MIF, and IICA under one central organization, IDFA, and also to bring in another organization’s assets and operations, NYA?

Yes, this would appear to be a very good idea, for at least two reasons. First, IDFA is now operating under one set of bylaws and financial reporting requirements, as well as one budget.

Prior to Jan. 1, 2019, NCI, MIF and IICA each operated on a separate budget, and IDFA also had its own budget. And IDFA, along with its three constituent organizations, all had their own boards of directors.

Logic would suggest that operating under one set of bylaws and financial reporting requirements, as well as just one budget, would simply be a more efficient way to operate a trade association.

The other way in which this change appears to be a very good idea is in the area of industry advocacy. As Michael Dykes, IDFA’s president and CEO, noted, under its new structure, IDFA “will be more nimble, inclusive and effective in representing the interests of all segments of the dairy processing industry.” This foundation will allow IDFA to “enhance our legislative, regulatory and communication efforts and increase the return on investment for our members.”

Basically, anything that can enhance the dairy processing industry’s legislative, regulatory and communication efforts in the future is a good thing.

The National Cheese Institute, Milk Industry Foundation, International Ice Cream Association and National Yogurt Association no longer exist, but they all left rich legacies spanning many, many years.

More importantly, they left in their place a stronger International Dairy Foods Association, which bodes well for the dairy industry in the years ahead.

USDA Should Buy Milk With Extended Shelf Life

Last August, the US Department of Agriculture announced plans to purchase fresh fluid milk in half-gallon containers for distribution to The Emergency Food Assistance Program.

This was described as the first time ever that USDA was going to buy fresh fluid milk for distribution under TEFAP. And so, understandably, the agency encountered a couple of problems.

First, USDA had a little trouble getting all the milk it was trying to buy, at least initially. Specifically, USDA’s Ag Marketing Service in late August issued three separate solicitations for a total of about 82.8 million pounds of fluid milk.

The agency ended up accepting bids for a total of about 62.9 million pounds of milk. And the three purchase awards specifically mentioned that no offers were received for about 8.1 million pounds, 3.5 million pounds and 8.3 million pounds of fluid milk under the three solicitations.

Then, in October, the agency announced plans to purchase fresh fluid milk, targeting certain orders for milk in half-gallons that were not fulfilled under contracts that had been awarded in late September. Before it issued solicitations for that milk, AMS sought comments from fluid milk industry suppliers regarding the earlier procurement of fluid milk.

Then, in late October, AMS issued a solicitation seeking a total of about 15.7 million pounds of fluid milk, for delivery between late 2018 and March 2019. The agency ended up accepting bids for a total of 13.4 million pounds of milk; no offers were received for about 2.2 million pounds of milk.

Beyond the problem of buying the quantities it is seeking to buy, USDA appears to be running into another problem with its fluid milk purchases: at least some food banks can’t handle all the milk they are receiving under this program.

Late last month, it was widely reported that food pantries in eastern Iowa and western Illinois were being flooded with milk donated by USDA.
Mike Miller, CEO of the River Bend Foodbank in Davenport, IA, told the Quad-City Times, also of Davenport, that the milk was “a huge help for hungry people in our community,” but that moving all that milk (about 80,000 half-gallons of milk will be distributed to food pantries across the Quad-City region through March) “has been challenging. Milk has a limited shelf life, so we have to move it quickly.”

Miller added that food banks lack adequate storage for the milk donations, and noted that some areas of the US have had to decline these milk donations “because it’s too much to handle and milk is not usually donated.”

Handling fluid milk should become easier for food banks as they become accustomed to receiving it. But it would seem that there are a couple of other solutions here.

First, USDA could switch from buying fluid milk to buying cheese for donation under TEFAP. The agency already buys a lot of cheese every year, primarily for use in the National School Lunch and School Breakfast programs. During fiscal year 2018, for example, USDA bought some 183 million pounds of Mozzarella, natural American and processed cheese.

So not only does industry have considerable experience in selling cheese to USDA, this cheese in turn has a longer shelf life, so food pantries won’t be fighting the calendar as much when they receive shipments.

The biggest problem with this solution is that milk is one of the most requested items among families and individuals served in Feeding America’s network.

Feeding America, if you’re not familiar with it, is the largest hunger-relief organization in the US. Through a network of 200 food banks and 60,000 food pantries and meal programs, the organization provides meals to more than 46 million people each year.

So what’s the solution to this dilemma of high demand for fluid milk but inadequate resources to handle fluid milk at the food-bank level? How about buying milk with extended shelf life?

This could take at least two different forms. First, USDA could buy fluid milk that requires refrigeration but has a shelf life of two or three months rather than two or so weeks. There are fluid milk companies around the US who produce ESL milk.

Second, USDA could buy UHT milk, which doesn’t require refrigeration and has a shelf life of several months. Actually, the agency already buys millions of pounds of UHT milk every year, so it’s already familiar with acquiring and distributing it.

These ideas might solve the problem of short shelf life for fluid milk, but they might present their own set of problems. For example, milk with an extended shelf life still has to be refrigerated, so it would still challenge food banks that have limited refrigerated space.

Also, milk with an extended shelf life might come with a higher price tag. But if food banks have more time to distribute these products, and consumers can store them for a longer period of time, there would probably be less milk being wasted, making the higher price worthwhile in the long run.

As far as UHT milk is concerned, it’s worth noting that USDA, in both its August and its October 2018 announcements, referred to a fresh fluid milk purchase program, so it would have to tweak its future announcements. And US consumers aren’t all that familiar with UHT milk, at least not yet.

USDA’s fluid milk purchase program is a good idea, and can be improved by offering milk with a longer shelf life.

 

A Busy Year Ahead For FDA, USDA, USTR

As we look ahead at some things the dairy industry can expect here in 2019, assuming Washington gets its act together one of these days and the government shutdown ends, it would appear that at least three federal agencies will be mighty busy over the next 12 months. Those agencies are the US Food and Drug Administration, US Department of Agriculture and the Office of the United States Trade Representative.

Let’s start with FDA. During his first two years as the agency’s head, FDA Commissioner Scott Gottlieb has established himself as what might be considered an “activist” commissioner. And this activism will undoubtedly be carried over into 2019.

Last March, Gottlieb unveiled FDA’s Nutrition Innovation Strategy, which includes several initiatives that will potentially impact the dairy industry this year and beyond. Among other things, FDA is seeking comments on the labeling of plant-based products with names that include the names of dairy products such as “milk” and “cheese.”

The deadline for submitting these comments is Jan. 28, 2019; the docket number is FDA-2018-N-3522. After that, well, it might take FDA the rest of 2019 to read through all the comments; as of Monday, Dec. 31, the agency had already received over 8,600 of them.

More broadly in the area of food standards, FDA is planning to reopen the comment period on a proposed rule, originally issued back in 2005, seeking to establish general principles to update the framework for federal standards of identity. This is certainly an important initiative for the dairy industry; after all, as the International Dairy Foods Association recently pointed out, 37 percent of all food standards of identity are for dairy products.

Also as part of its Nutrition Innovation Strategy, FDA is looking at modernizing its definition of “healthy.” More specifically, as Gottlieb explained recently, FDA is working on updating the definition of the “healthy” claim on food labels so it reflects current nutrition guidelines and to encourage its use.

We expect any updated definition of “healthy” to be unhealthy for most dairy products.

At least one more aspect of FDA’s Nutrition Innovation Strategy will bear watching this year: sodium reduction. When he announced the Nutrition Innovation Strategy last March, Gottlieb stated that there remains “no single more effective public health action related to nutrition than the reduction of sodium in the diet,” and said he was “committed to advancing” the agency’s short-term voluntary sodium targets. We’ll see how far this initiative gets in 2019, and beyond.

Meanwhile, USDA has a couple of significant undertakings this year, starting with implementation of the recently enacted 2018 farm bill. Here, the dairy industry can expect several actions from USDA in the coming months, at least if the 2014 farm bill is any guide.

For example, the 2014 farm bill, which was signed into law in February of that year, included two new programs: the Margin Protection Program for dairy farmers, and the Dairy Product Donation Program. A final rule implementing those two programs was issued in late August 2014.

The 2018 farm bill included some changes to the MPP, including a new name (the Dairy Margin Coverage program), so we expect USDA to publish a final rule implementing those changes sometime in the next few months. The new farm bill also extends the Dairy Forward Pricing Program (which expired on Sept. 30, 2018), and we expect USDA to publish a final rule extending that program in the near future (the 2014 final rule extending the Dairy Forward Pricing Program was released in March of that year).

The new farm bill also requires USDA to establish not less than three regionally located dairy product and business innovation initiatives, so it will be interesting to see how the agency approaches the implementation of this initiative in the coming year (or longer).

One other area that will keep USDA busy this year will be with its recently released GMO (bioengineered) food disclosure standard. The final rule has a compliance date of Jan. 1, 2020, for regulated entities other than small food manufacturers, and a voluntary compliance period that runs through the end of 2021. Suffice it to say USDA will have its hands full in 2019 answering questions about this rule.

Finally, the USTR looks like it will have a mighty busy 2019, for better or worse from a dairy industry perspective.

Needless to say, the USTR had a pretty noteworthy 2018, implementing tariffs on steel and aluminum imports from a number of countries, including several key US trading partners, while also concluding talks on a modernized North America Free Trade Agreement (renamed the United States-Mexico-Canada Agreement) and launching trade talks with Japan and the European Union, among others.

How all of this plays out in 2019 will be fascinating to watch. For example, Congress has to approve the new USMCA, and at this point it isn’t certain that the US-EU trade talks will even include agriculture. Meanwhile, tariffs and retaliatory tariffs imposed in 2018 remain in place as 2019 begins, so it will be interesting to see if those tariffs end up being terminated at some point, or survive through the entire year.

Just at FDA, USDA and USTR, 2019 should be a dairy interesting year.

2018: The Year Of The Trade Wars

Let’s face it: there are times when it’s pretty easy to come up with an overriding “theme” for a particular year in dairy. In 2014, for example, it would have been pretty difficult not to come up with a theme related to the record-high prices achieved that year — records that ranged from cheese and butter to Class III and mailbox prices.

This year also seems to be pretty easy to classify: 2018 has been the year of the trade wars. It’s just been awfully difficult to find a single overriding issue that’s had as much of an impact, or as much potential impact, as the ongoing trade wars being waged between the US and some of its closest trade partners, including Mexico and China, to name two countries that greatly impact US dairy exports.

At the start of 2018, it didn’t really seem that trade wars were going to be a dominant issue. Indeed, in our first issue of 2018, we noted that the US had “basically backpedaled” on trade agreements in 2017, withdrawing from the Trans-Pacific Partnership agreement and launching talks to modernize the North American Free Trade Agreement.

The trade wars didn’t actually amount to “front-page news” until our Mar. 9th issue, when we reported that President Trump was imposing tariffs on steel and aluminum imports from a variety of US trading partners, ranging from Canada and Mexico to China and Brazil.

That move was greeted with a fair amount of criticism from a variety of dairy, food and farm organizations, several of which predicted, correctly as it turned out, that the US tariffs would invite retaliatory tariffs from US trading partners.

By July, the economic impact of those retaliatory tariffs was becoming clearer to the US dairy industry. National Milk Producers Federation estimated that the tariffs would cost US dairy farmers $1.8 billion just through the remainder of 2018, based on the decline in milk futures prices since they were imposed. And keep in mind that the tariffs remain in effect as we head into 2019.

The good news in 2018 is that the US, Mexico and Canada did agree on a new NAFTA, dubbed the United States-Mexico-Canada Agreement, or USMCA. The bad news is that, thanks to ongoing tariffs being imposed on Mexico’s aluminum exports to the US, Mexico is continuing to impose tariffs on US cheese exports to that country, which happens to be the leading US market for such exports.

Or, as Michael Dykes, president and CEO of the International Dairy Foods Association, noted at a late-November Capitol Hill briefing on the USMCA and ongoing US tariffs on aluminum imports from Mexico, IDFA’s members “are very pleased that the USMCA negotiations are complete and Mexico remains a duty-free market but until the Section 232 tariffs are lifted, US dairy’s access to the Mexican market is at risk.”

Last week provided a nice illustration of the importance of the trade war issue to US agriculture. On Monday, Secretary of Agriculture Sonny Perdue announced a second round of trade mitigation payments to dairy and other farmers suffering from damage due to trade retaliation by foreign nations.

Three days later, President Trump signed the 2018 farm bill into law, a move that drew widespread praise from various ag and dairy organizations.

But while praising one or both of those announcements, there was a clear message from ag stakeholders: the ongoing trade wars must be ended.

For example, while he welcomed USDA’s announcement of a second round of trade mitigation payments to farmers, Jim Mulhern, NMPF’s president and CEO, noted that the tit-for-tat tariffs that prompted the payments “continue to inflict damage across the farm economy,” and urged the administration “to resolve tensions with key trading partners, including China and Mexico, as the best way to assist farmers going forward.”

And Jeff Lyon, general manager of FarmFirst Dairy Cooperative, asked that the administration “quickly resolve the trade conflict that exists between US trading partners, China and Mexico, and quickly lift the retaliatory tariffs currently in place as they continue to challenge dairy markets.”

Unfortunately, the trade wars will continue into the new year, and it might well be that the real impacts of the trade wars will be felt in 2019. Keep in mind that it wasn’t until almost the middle of 2018 when countries such as Mexico and China imposed their retaliatory tariffs on various US products, including cheese and whey.

It’s worth remembering that, for example, US dairy exports to China during the first half of 2018 were up 11 percent (on a value basis) compared to the first half of 2017, but by October, they were running 8 percent behind year-earlier levels (the first 10 months of each year).

How might US dairy exports to China fare if China’s retaliatory tariffs remain in place for all of 2019? Keep in mind that China is the number one export market for US dried whey and whey protein concentrate, among other products.

The year 2018 has been a monumental year for the dairy industry, partly because California joined the federal milk marketing order system — something that would have been unheard of a couple of decades ago. The year also saw completion of an on-time farm bill, something that, as noted in this space last week, doesn’t happen very often.

But when it comes to short- and long-term impacts, 2018 will likely long be remembered in the dairy industry as “the year of the trade wars.”

 

2017 Editorials


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