Dick Groves
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Impact Of 1996 NCE Study Still Being Felt

It’s now been 25 years (as noted in our “Archives” column last week) since the University of Wisconsin-Madison and the Wisconsin Department of Agriculture, Trade and Consumer Protection released a major study of the Green Bay-based National Cheese Exchange. It’s safe to say that the impact of that study is still being felt by the cheese and dairy industries today.

Regardless of the study’s conclusions, there can be no doubt that this was an extremely detailed study. As noted in the introduction, the study “sought to ascertain whether the NCE was an efficient market, that is, one that discovers prices for cheese that accurately reflect national supply and demand conditions. And if this were not the case, whether there exist possible unfair trade practices or methods of competition in the pricing of cheese.”

To achieve this objective, the study examined, among other things, the overall trading activity on the NCE from 1974 to 1993 and a detailed analysis of the trading of leading sellers and leading buyers during 1988-1993. Also, beginning in early 1992, the DATCP sent Demands for Sworn Statements and Production of Documents to the NCE and to over 20 cheese companies (manufacturers, marketers and traders) that had been active on the NCE in recent years.

As noted in last week’s “Archives” item, the study concluded that the NCE “appears to facilitate market manipulation,” and “was not an effectively competitive price discovery mechanism during 1988-1993.” However, the study’s authors “found no evidence of collusion among cheese companies.”

Almost exactly a year after that study of the NCE was released, the executive committee of the National Cheese Institute and the board of directors of the National Cheese Exchange announced that they had accepted a proposal from the Chicago Mercantile Exchange to create a new cheese cash market at the CME. NCI and NCE based their decision on the recommendation of a special cheese industry committee with broad industry representation, including producer cooperatives cheese manufacturers and marketers, and members of NCI and of the NCE board.

The last day of trading at the NCE took place on Friday, Apr. 25, 1997, in Green Bay, WI. For what it’s worth, the “market opinion” for 40-pound Cheddar blocks that day declined two cents, to $1.1800 per pound, while 500-pound barrels were unchanged, at $1.1700 per pound.

What was described in this newspaper a week later as a “new era in cheese pricing” actually got underway on Thursday afternoon, May 1, 1997, when the CME launched its new cash cheese market. So there were two major changes in the cheese industry’s cash market right there: trading moved from the NCE in Green Bay to the CME in Chicago; and trading shifted from Friday mornings to Thursday afternoons.

And again, for what it’s worth, in the first CME cash cheese trading session, both block and barrel prices declined to $1.1500 per pound.

The Thursday afternoon CME cash cheese market was short-lived; in September 1998, cash cheese trading at the CME switched to daily trading every weekday morning. And that, of course, is where it remains today.

The period in which these changes in the cheese industry’s cash markets took place might be referred to as the “golden era” of dairy industry pricing changes. For one thing, the 1996 farm bill required USDA to reform the federal milk marketing order program.

Work on that federal order reform process was well underway in 1997; for example, roughly two weeks before NCI and the NCE recommended moving the cheese industry’s cash market to Chicago USDA released three reports that addressed key issues relevant to federal order reform: the Class I price structure, classification of milk, and identical federal order provisions. And in April 1997, just a week before the NCE’s final trading session, USDA’s Basic Formula Price committee identified four BFP options for further discussion and debate.

Meanwhile, when it launched the cash cheese market, the CME was already offering cash butter trading, as well as butter and fluid milk futures and options contracts. And the New York-based Coffee, Sugar & Cocoa Exchange, which had also submitted a proposal to host the cheese industry’s cash market, was offering Cheddar cheese, nonfat dry milk and milk futures and options contracts.

Today, the CME hosts daily cash markets for block and barrel cheese, butter, nonfat dry milk and dry whey, and also offers futures and options contracts for cheese, butter, nonfat dry milk, dry whey, and Class III and Class IV milk.

Also as a result of that 1996 NCE study, USDA’s National Ag Statistics Service began conducting a voluntary weekly survey of Cheddar cheese transaction prices in 1997. That survey price replaced the NCE price in the BFP formula starting on June 5, 1997.

Today, USDA is still conducting a dairy product price survey, with at least three changes since 1997: the survey has been expanded to include butter, nonfat dry milk and dry whey (and all prices are used to calculate federal order prices); the survey is now mandatory rather than voluntary; and USDA’s Agricultural Marketing Service now administers the survey, rather than NASS.

Twenty-five years ago, the dairy industry was roiled by the NCE study. Today, much has changed in the dairy pricing arena, but two things haven’t: volatility remains and has worsened; and dairy pricing remains highly controversial.

US Needs An Independent Food Safety Agency

President Biden has been in office for a little over two months now, and in that time most of his cabinet nominees have been confirmed by the US Senate, including, among others, Tom Vilsack for secretary of agriculture, Katherine Tai as US trade representative and Xavier Becerra for secretary of health and human services.

Although not a cabinet post, there’s one key position for which Biden has not yet even named a nominee: commissioner of the US Food and Drug Administration. And that got us wondering if there would be more of a sense of urgency to name a new FDA chief if this position were actually something like administrator of the Food Safety Administration.

Such an agency doesn’t exist, of course, but that’s not because the creation of a Food Safety Administration hasn’t been recommended in the past. As John W. Harman of the US General Accounting Office (now the Government Accountability Office) testified at a House hearing back in 1993, the concept of consolidating federal food safety activities is “not a new concept”; the concept was debated in 1972 in connection with a proposed bill to transfer FDA’s responsibilities, including its food safety activities, to a new independent agency, called the Consumer Safety Agency.

More recently, in June of 2016, with the assistance of the National Academies of Sciences, Engineering, and Medicine, the GAO convened a meeting of food safety and government performance experts to discuss fragmentation in the US federal food safety oversight system and suggest actions to improve that system.

The list of participants in that meeting helps illustrate the fragmentation of federal food safety oversight. Among others, participants included Frank Yiannas, who at the time was vice president of food safety for Wal-Mart and who is now deputy FDA commissioner for food policy and response; and Sandra Eskin, who was then director of food safety for Pew Charitable Trusts and just last week was named deputy under secretary for food safety at USDA.

Recommendations for a single food safety agency haven’t gone unnoticed in Congress. In October of 2019, bills introduced in both the House and Senate would have, among other things, established a new Food Safety Administration as an independent agency to administer and enforce food safety laws.

Under those bills, the new FSA would have included, among others, several agencies currently housed within FDA, including the Center for Food Safety and Applied Nutrition (which deals with standards and labeling in addition to food safety) as well as the Center for Veterinary Medicine; and all or parts of several USDA agencies, including the Food Safety and Inspection Service. Also under that legislation, the FSA would have been headed by an administrator of food safety, who would be appointed by the president and confirmed by the Senate.

That brings us back to the current situation; that is, the lack of a commissioner at FDA. As it turns out, nominating an FDA commissioner isn’t exactly a high priority for new presidents; former President Donald J. Trump didn’t nominate Scott Gottlieb as commissioner until Mar. 10, 2017, or almost two months into his administration. And Gottlieb didn’t officially become FDA chief until May 11, 2017.

But therein lies one problem with taking so long to get a new commissioner in place at FDA: their tenure doesn’t always last all that long. Gottlieb, for example, left his post in April of 2019, after less than two years as FDA commissioner. And his successor, Stephen Hahn, ended up serving for just over a year, taking the position in December of 2019 and sticking around until Jan. 20, 2021.

Looking over a list of recent FDA commissioners, it’s worth noting that just one served in that post for more than three years since the turn of the century: Margaret Hamburg, who was appointed by former President Barack Obama and served from May of 2009 until April of 2015.

Earlier this month, six former FDA commissioners, including those who served under both Republican and Democratic presidents, urged Biden to prioritize securing FDA’s leadership team, including through seeking the formal nomination and confirmation of an FDA commissioner.

That letter from former FDA commissioners focused on issues such as the US response to the coronavirus pandemic, but also mentioned that FDA is implementing new food safety provisions. And that’s really just the beginning of what FDA is, or at least should be, working on from a food industry perspective.

For example, in a June 2019 letter to state agriculture commissioners, secretaries, and directors, Yiannas noted that FDA’s Center for Food Safety and Applied Nutrition is leading the Nutrition Innovation Strategy for FDA, and in doing so, “it continues its work on modernizing standards of identity and addressing naming issues for certain products.”

Among other things, the dairy industry continues to await a final rule regarding the use of ultrafiltered milk in standardized cheeses, in a proceeding that dates back to 1999; continues to await a final rule amending the standard of identity for yogurt, in a proceeding that dates back to 2000; and continues to await regulatory action on the use of dairy names on plant-based products marketed as dairy alternatives.

Maybe these efforts would be elevated at a new Food Safety Administration, and progress would already be underway with a new FSA administrator.



Some Dairy States Underrepresented On Ag Committees

Both the House and Senate Agriculture Committees have finalized their rosters for the 117th Congress, and the members of these important committees are certainly geographically representative of the entire country, ranging from Maine to California and from Florida to Washington.

But there’s something missing here. Wisconsin and Idaho, two of the largest dairy states in the US, don’t have a single member on either the House or Senate Ag Committee. Whether that makes any difference policy-wise remains to be seen, but at least symbolically, it would seem that these two key dairy states should have at least one member of Congress sitting on an ag committee.

Keep in mind how important Wisconsin and Idaho are in the US dairy industry: the former ranks first in cheese production and second in milk production, while the latter ranks third in both cheese production and milk production. In 2020, the two states accounted for 21 percent of total US milk production, and in 2019 (the most recent year for which statistics are available), they accounted for about one-third of total US cheese production.

To get an idea of how difficult, or not difficult, it might be to land a seat on one of the ag committees, it’s worth looking at the makeup of the panels.
The House Ag Committee has a total of 50 members (which technically means there should be one member from each state), including 27 Democrats and 23 Republicans.

The Senate Ag Committee has 22 members, evenly split, like the Senate as a whole, between Democrats and Republicans. So it would seem that, since each state has two US senators, three states couldn’t be represented on the Senate Ag Committee.

From a state perspective, Idaho’s odds of not having representation on an agriculture committee are better than are Wisconsin’s. That’s because Idaho has just two House members to go along with its two senators. Meanwhile, Wisconsin has eight House members along with its two senators.

Keeping in mind that there are 100 US senators and 435 House members, Wisconsin and Idaho members combined account for 4 percent of the US Senate and about 2.3 percent of the House.

Given the fact that there’s nobody from Wisconsin or Idaho on the agriculture committees, we thought it would be worth checking out how other major dairy states are represented on these panels. And the simple and obvious answer is: better than Wisconsin and Idaho.

Let’s start with California, which ranks first in milk production and second in cheese production. Neither of California’s two US senators sit on the ag committee, but the state is almost overrepresented (if that’s possible), with seven members on the 50-member panel, including six Democrats and one Republican. This includes US Rep. Jim Costa, who chairs the livestock and foreign agriculture subcommittee, which has jurisdiction over dairy policy.

It should be noted that, if any state should be overrepresented on an agriculture committee, it should be California, since the state in 2019 accounted for 12.7 percent of the gross receipts of all US farms. The number two state in gross receipts was Iowa, at 7.5 percent.

In other words, California agriculture is larger than any other state, by a considerable margin. And its share of seats on the House Ag Committee (14 percent) isn’t all that much greater than its share of gross farm receipts.

Meanwhile, the state of New York ranks fourth in milk production and fifth in cheese production, and has one senator and three House members on the agriculture committees. Texas ranks fifth in milk production, and has no senators but two House members on the House Ag Committee.

As far as the states that rank sixth through 10th in milk production are concerned: Michigan has one senator (Debbie Stabenow, the chair) and no House members on the ag committees; Pennsylvania has no senators but one House member (Glenn “GT” Thompson, the panel’s top Republican) on the ag committees; Minnesota has both of its senators and three House members on the ag committees; New Mexico has one senator but no House members on the ag committees; and Washington has no senators but one House member on the ag committees.

There are a few other points worth keeping in mind when looking at the makeup of the House and Senate ag committees. First, while Wisconsin and Idaho are both major dairy states, they are also major overall ag states, with Wisconsin ranking ninth and Idaho 18th in gross farm receipts in 2019. So it’s not just the dairy industry in these states that lacks a voice on the ag committees.

Second, the ag committees tackle more than just agriculture. Indeed, the formal name of the Senate ag committee is the Senate Committee on Agriculture, Nutrition and Forestry, and House Agriculture subcommittees oversee everything from nutrition and commodity exchanges to biotechnology (at least ag-related) and USDA operations.

Third, while Wisconsin has no representation on the ag committees, one of its senators, Tammy Baldwin, chairs the Senate Appropriations subcommittee on agriculture, rural development, Food and Drug Administration, and related agencies, which has considerable clout when it comes to USDA and FDA budgets.

Wisconsin and Idaho, and their dairy industries, would likely benefit from representation on the ag committees as work on the 2023 farm bill gets underway.

Tone Of US Trade Policy Seems Different

If first impressions matter — and there’s a fair amount of agreement that they do — the new Biden administration’s trade policy seems to be taking on a different tone than did trade policy in the early weeks of the Trump administration.

Time will tell how this plays out, and how much it matters for US dairy trade, but at least the initial impression is that the Biden administration’s trade policy won’t be as antagonistic as the previous administration’s trade policy was.

It may be recalled that President Trump, less than a week after he was inaugurated, made a major trade policy decision, withdrawing the US from the Trans-Pacific Partnership agreement. The TPP included the US along with Australia, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Brunei.

If it had been implemented with the US included, the TPP would have been the largest plurilateral free trade agreement by value of trade, encompassing roughly 40 percent of world GDP, and could have served further to integrate the US in the dynamic Asia-Pacific region, according to a 2016 Congressional Research Service report.

And the TPP looked like a positive deal for the US dairy industry. According to a 2016 report from the US International Trade Commission, the TPP agreement would have had “a positive effect on US dairy exports and a positive but more limited impact on US dairy imports.”

Both of those reports, as noted, came out in 2016, which was the last full year of the Obama administration. For what it’s worth, US involvement in TPP talks actually predated the Obama era; President George W. Bush notified Congress of his intention to negotiate with the existing P-4 members (New Zealand, Singapore, Chile and Brunei) in September 2008, along with Australia, Peru, and Vietnam in December 2008. President Obama recommitted to the TPP negotiations in November 2009.

After Trump withdrew the US from the TPP, the remaining countries went ahead and finalized the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which has been in effect for a little over two years now.

Meanwhile, the Trump administration continued to pursue what might be described as a confrontational trade policy. As John Murphy, senior vice president for international policy at the US Chamber of Commerce, put it:
“The administration of President Trump, a self-described ‘tariff man,’ championed tariffs and other limits on imports as a tonic for a wide range of economic ills.”

The US during the Trump administration wielded tariffs more readily than in any other period in the post-World War II era, Murphy pointed out. These included US Section 301 tariffs on goods from China, and Section 232 tariffs on steel and aluminum from Mexico, Canada and the European Union, which were imposed in 2018.

Finally, the US in 2019 received a favorable ruling from the World Trade Organization on civil aircraft subsidies being provided by the European Union, and imposed 25 percent tariffs on a variety of cheese and other dairy imports from the EU starting in October 2019. For its part, the EU received a favorable ruling in 2020 in a case involving Boeing, and started imposing its own tariffs on some imports from the US late last year.

Related to those aircraft-related tariffs, over the past week and less than two months into the new Biden administration, the US and the EU have agreed on the mutual suspension for four months of the tariffs related to the aircraft disputes. This suspension “will allow the EU and the US to ease the burden on their industries and workers and focus efforts towards resolving these long running disputes at the WTO,” the US and the EU said in a joint statement.

That announcement actually came one day after the US and the United Kingdom (which was a member of the EU when these aircraft disputes started, but isn’t a member of the EU today)announced a four-month tariff suspension in the aircraft dispute.

Also last week (as reported in a story on page 5 of last week’s issue), the Office of the US Trade Representative delivered Biden’s 2021 Trade Agenda and 2020 Annual Report to Congress. Opening markets and reducing trade barriers are “fundamental” to any trade agenda, and will be a priority for the Biden administration, the report stated.

But it doesn’t look like there will be any new trade agreements being hammered out between the US and other countries in the near future. Instead, it looks like US trade policy will pursue something resembling a return to “normal,” whatever that is.

For example, the report notes that America’s agricultural communities have been “burdened” in recent years by “erratic trade actions that were taken without a broader strategy,” and that these actions “triggered retaliation by our trading partners, leading to billions of dollars in lost exports and precipitating unprecedented mitigation payments.”

The Biden administration will pursue “smarter trade policies that are inclusive and work for all producers,” and its trade agenda “will seek to expand global market opportunities” for agriculture.

The report also stresses that Biden will “make it a priority to work with friends and allies” on trade enforcement, and “seek to repair partnerships and alliances and restore US leadership around the world,” among other things.

How US dairy trade fares under Biden’s trade policies remains to be seen, but at least initially, these policies are notably different from Trump’s, if nothing else.


FDA’s Traceability Proposal Needs To Be Rewritten

The deadline for submitting comments on the US Food and Drug Administration’s proposed rule to establish additional traceability recordkeeping requirements for numerous cheeses and other food products ended early last week, meaning that the next step in this regulatory process could be a final rule. Let’s hope FDA takes comments submitted on behalf of the cheese industry into consideration when it issues a final rule.

As reported on our front page last week, FDA received several comments, some of which were extremely detailed, from cheese and dairy organizations urging the agency to, among other things, rethink the list of cheeses included in its traceability proposal.

Reading over some of these comments, it certainly appears that FDA overreached when it proposed that all cheeses, other than hard cheeses, be included on its Food Traceability List. In its proposed rule, the description for these cheeses on the FTL includes all soft ripened or semi-soft cheeses, and fresh soft cheeses that are made with pasteurized or unpasteurized milk.

Back in mid-January, FDA made what it called “clarifying edits” to the FTL.
This clarification included some specific examples of the cheeses for which the proposed additional traceability recordkeeping requirements would apply.

And these specific examples help illustrate a major problem with FDA’s proposal. For example, Mozzarella is included on the list; in 2019 (the most recent year for which annual production figures are available), US Mozzarella production totaled 4.5 billion pounds, and accounted for over a third of total US cheese output.

Some of the other cheese varieties on FDA’s FTL, with 2019 production, include: Feta, 130 million pounds; Cream, 935 million pounds; Muenster, 196.9 million pounds; Blue (including Gorgonzola), 94.7 million pounds; Ricotta, 244.7 million pounds; other American (FDA lists Monterey Jack, but Colby would also be covered), 1.5 billion pounds; Hispanic (FDA lists four types of Hispanic cheese), 333 million pounds; and Brick, 2 million pounds.

Production of these cheeses in 2019 totaled almost 8 billion pounds, and accounted for over 60 percent of total US cheese production. So it’s safe to say FDA’s proposed rule would have a heck of a big impact on a large number of companies if finalized as is.

USDA’s National Ag Statistics Service doesn’t include Cottage cheese in its cheese production statistics (they are reported separately), but in 2019 output of creamed cottage cheese totaled about 358 million pounds and production of lowfat cottage cheese totaled about 328 million pounds.

Further, as the International Dairy Foods Association pointed out, FDA’s proposed rule would apply not only to cheeses on the FTL, but also to foods that contain a food on the FTL as an ingredient. Looking over the list of cheeses on the FTL — certainly starting with Mozzarella but also including everything from Blue to Ricotta —it’s obvious that an awful lot of cheese users will also be subject to FDA’s recordkeeping requirements.

Notably, and almost frighteningly, the section of FDA’s proposed rule devoted to the Food Traceability List covers all of about one page of the 55-page Federal Register document. Half a dozen pages of the proposed rule are devoted solely to definitions for everything from critical tracking events and key data elements to kill step and reference record number.

It’s probably safe to say that any proposal with that many definitions is probably a pretty complicated regulation that will come with some costs to industry. In its economic analysis of the proposed rule, FDA acknowledges that the proposal is an “economically significant regulatory action” and that it will have a “significant economic impact” on a substantial number of small entities. Annualized costs could reach over $3 billion per year.

FDA also provides an estimate of the burden for reading and understanding the proposed regulations (422,145 respondents requiring an average of 3.3 hours), as well as some firms incurring a one-time burden of establishing traceability program records (130,063 firms needing 0.03 hours to establish each of an average of 1,000, for an estimated one-time burden of 3,901,890 hours; and some companies will incur burden associated with training employees in procedures for properly documenting key data elements (96,644 firms will need to conduct an average of two hours of training).

Cumulatively, this results in a total of 5,874,833 one-time burden hours for respondents, FDA said.

Of course, there are also benefits to the proposed rule. It would allow FDA and industry to more rapidly and effectively trace food products that cause illnesses back through the food supply system to the source and forward to determine recipients of the contaminated product. This may result in public health benefits if foodborne illnesses directly related to those outbreaks are averted.

In its economic analysis, FDA notes that the rule would only apply to foods FDA has designated for inclusion on the Food Traceability List. But IDFA understands that FDA’s goal is that the proposed recordkeeping system will be “adopted broadly” by industry.

Not moving forward with this rule is not an option, since the rule is required under the Food Safety Modernization Act. What FDA really needs to do is get the final rule right.

And for starters, the agency needs to take a hard look at the cheeses on its FTL, and reduce the number of those cheeses to recognize where the real risks lie.

History Provides Context For US Dairy Trade Statistics

Year-end US dairy trade statistics were released earlier this month by USDA’s Foreign Agricultural Service, and as reported on our front page on both Feb. 5th and Feb. 12th, 2020 saw increases in the values of both US dairy exports and dairy imports, and at least a few records or near-records.

Those trade statistics also illustrate that history can be important for providing context to dairy export and import statistics. And not just very recent history, but also history dating back several years, and even decades.

In the dairy export arena, for example, US dairy exports in 2020 were valued at $6.5 billion, up 9 percent from 2019. The value of dairy exports was up almost $2 billion from just two years earlier.

But the value of US dairy exports last year still trailed two other years, 2014’s record $7.1 billion as well as 2013’s $6.7 billion.
Interestingly, last year was the first time ever that US dairy exports exceeded $500 million in value every month of the year; in both 2014 and 2013, they dipped below that level three times. But last year was also the sixth straight year in which dairy exports failed to reach $600 million in a single month; in both 2013 and 2014, dairy exports topped $600 million in multiple months.

What that illustrates, if nothing else, is that US dairy export values showed less volatility last year than in some previous years.

Among the leading US dairy export markets, US dairy exports to China last year were valued at $539.1 million, up an impressive 45 percent, or $167 million, from 2019. But exports to China remain well below their record level of $706.2 million, set in 2013, as well as their 2014 level of $695.2 million.

Thanks in part to that big increase in exports to China, US dairy exports topped $500 million in value to three countries last year: Mexico ($1.4 billion), Canada ($676 million), and China. In both 2018 and 2019, US dairy exports topped $500 million in value to only two countries, Mexico and Canada.

But exports did top $500 million in value to three countries in 2017, and also in 2013 and 2014. Mexico and Canada are the constants here, with exports to China fluctuating wildly, no doubt at least in part due to US trade policies.

US cheese exports declined slightly in 2020, dropping about 750,000 pounds from 2019. Still, last year marked the fourth straight year in which the US exported more than 700 million pounds of cheese, which is pretty impressive, considering that, prior to 2000, US cheese exports had never topped 100 million pounds, and prior to 2012, had never exceeded 500 million pounds in a single year.

But as impressive as US cheese exports have been in recent years, they haven’t broken the record high of 810 million pounds, set back in 2014.

Last year saw an impressive increase in dry whey exports, up 40 percent from 2019, to 472.2 million pounds. But dry whey exports were higher than that as recently as two years ago, at 487.4 million pounds, and topped half a billion pounds as recently as 2014, when they reached 504.5 million pounds.

And that 2014 level ranks only fifth as far as US dry whey exports are concerned, trailing 2013’s 521.5 million pounds, 2011’s 550.6 million pounds, 2010’s 557 million pounds and 2007’s record 582.8 million pounds.

On the import side, US cheese imports last year totaled 365.6 million pounds, down 7 percent from 2019 and their lowest level since 2014.

With cheese imports, the 21st century can be split into two categories: years in which imports topped 400 million pounds, which includes every year from 2000 through 2007, as well as 2015 through 2017; and years in which imports fell below 400 million pounds, which includes 10 of the last 13 years.

As far as cheese imports from individual countries are concerned, there are numerous noteworthy trends that require some historical context.

As far as import declines are concerned, US cheese imports from Italy last year were at their lowest level since 2014; imports from France were at their lowest level since 2010; and imports from Spain, Germany and the United Kingdom were at their lowest level since 2013.

But when it comes to cheese import declines, Denmark and Norway really stood out last year. Imports from Norway, at 10.6 million pounds, were at their lowest level since...well, since at least the 1980s. The online FAS import database only goes back to 1989, and since then, the lowest level of cheese imports from Norway was 13.6 million pounds, in 2002 and again in 2015.

Similarly, cheese imports from Denmark last year, at 12.1 million pounds, were also at their lowest level since at least the 1980s. In a way, this is more noteworthy than the decline in imports from Norway, since imports from Denmark topped 30 million pounds several times, including a high of 33 million pounds in 2003. Imports from Norway, by comparison, have never topped 20 million pounds (at least not since 1989).

Meanwhile, cheese imports from a few countries reached new highs last year, including Switzerland, Nicaragua, Canada and Greece.

Volatility is usually discussed in the context of prices, particularly in 2020 with cheese and milk prices fluctuating wildly. But US dairy trade trends are also quite volatile, both in value terms and also in volume terms.
As with price volatility, we expect this dairy trade volatility to continue here in 2021 and in the years ahead.


US Butter Production Finally Reaches 2 Billion Pounds

While cheese production records and milestones are pretty much guaranteed year in and year out (as noted in this space last week), butter production records and milestones are relative rarities. Until the last three years, that is.

Butter production in 2018 reached a record high of 1.97 billion pounds, then rose to a record 1.99 billion pounds in 2019 and broke the 2-billion-pound mark in 2020, reaching 2.1 billion pounds.

Yes, 2 billion pounds is quite a milestone for butter production. And after looking over historical butter production statistics, we’re reminded of a line from the Grateful Dead song “Truckin’”: “What a long, strange trip it’s been.”

That’s due in part to the fact that the butter production record broken in 2018 was actually established way back in 1941, when butter output reached a record 1.87 billion pounds. That figure was almost exactly double the level of production in 1919, the first year for which butter production figures are available from USDA’s National Ag Statistics Service. In 1919, the US produced 939.1 million pounds of butter.

Back in the 1920s and 1930s, as well as in 1940 and 1941, new butter production records were pretty common. In fact, there were more than a dozen new butter production records set between 1920 and 1941. US butter production first topped 1.8 billion pounds in 1940, then approached 1.9 billion pounds in 1941, when it hit the aforementioned record of 1.87 billion pounds.

And then butter production stopped setting new records. In fact, what butter production really did was hit some downward milestones. In 1944, for example, butter production fell below 1.5 billion pounds for the first time since 1925.

As a side note, butter production statistics in the 1942-1945 period should probably be accompanied by an asterisk, as World War II took place during that period and significantly altered dairy production.
Besides butter, cheese production fell in 1942 and didn’t top its 1941 level until 1945, and milk production fell by more than 1.5 billion pounds in 1943 alone.

But unlike cheese and milk production, butter output didn’t recover as World War II came to a close. Indeed, in 1946, butter production fell to 1.17 billion pounds, its lowest level since 1920.
Butter production did rebound somewhat after that, topping 1.4 billion pounds in 1953 and then topping 1.5 billion pounds in 1962. But it never approached the record set back in 1941.

Indeed, after reaching 1.5 billion pounds in 1962, butter production fell pretty steadily, bottoming out at 918.6 million pounds in 1973, below even the levels of 1919 (939.1 million pounds) and 1920 (937.2 million pounds). The 1970s were particularly dismal for butter production, which fell below 1 billion pounds a total of six times, including in 1973, 1974, 1975, 1976, 1977 and 1979.

Butter production hasn’t been below 1 billion pounds since 1979, but it has been pretty close. It totaled just over 1.1 billion pounds in both 1984 and 1987, and was still under 1.2 billion pounds as recently as 1998.

But butter production has grown here in the 21st century, albeit with a few bumps along the way. In 2007, it reached 1.5 billion pounds for the first time since 1962, and it hasn’t been below that mark since.

More recently, butter production in 2011 reached 1.8 billion pounds for the first time since 1941. However, unlike back then, 1.8 billion pounds appears to be a new “floor” for butter production, since it hasn’t been below that level since 2010.

And last year, the US finally reached 2 billion pounds of butter production, a milestone that’s obviously taken many years to achieve.

Another way to look at the evolution of butter production is to compare it to cheese production. The most obvious way to do this is to simply point out again that US cheese production seems to set new a new record every year, and hasn’t declined since 1991.

Butter production has grown impressively since reaching a 21st century low of 1.23 billion pounds in 2001, but it has also declined six times since then, including three straight years (2014-16) right after butter output in 2013, at 1.863 billion pounds, came within 10 million pounds of breaking the 1941 record.

What’s largely forgotten about butter versus cheese is that, for many years, the US actually produced far more butter than cheese. US cheese production first reached 1 billion pounds in 1942, while butter production first topped 1 billion pounds in 1921.

Indeed, while butter production was roaring back in the 1920s — setting a new record almost every year, and ending the decade at 1.64 billion pounds in 1929 — cheese output was floundering, topping 500 million pounds just once (at 501.1 million pounds in 1925) and ending the decade at 498.8 million pounds.

Both butter and cheese production grew in the 1930s, to 1.78 billion pounds and 710.2 million pounds, respectively. In 1940, butter production (1.84 billion pounds) was still more than double cheese output (785.5 million pounds).

A very different milestone was reached in 1958, when cheese production topped butter output for the first time. And the gap in production between cheese and butter has grown significantly since then, to understate things a bit.

Last year, 99 years after first topping 1 billion pounds, US butter production finally topped 2 billion pounds. Our guess is that it will take less than 99 more years to hit 3 billion pounds.


US Cheese Production Remains On An Impressive Roll

Well, it happened again: the US set yet another new cheese production record. While these records happen so regularly that they’re almost taken for granted these days, it’s still worth providing some perspective on this latest record.

As reported on our front page last week, US cheese production in 2020 reached a record high of 13.19 billion pounds, up 0.4 percent, or 53.3 million pounds, from 2019.

It’s now been almost three decades since US cheese production declined, and in fact cheese production has more than doubled since that last decline. And of course last year was the first cheese production increase that occurred amidst a global pandemic.

There are any number of ways to look at this latest cheese production record, but we’ll mention just a few. For one thing, it’s notable that the US now produces over a billion pounds of cheese every single month. Last year was actually the second straight year in which the US produced more than a billion pounds of cheese every month.

Speaking of billions, US cheese production first topped a billion pounds for an entire year back in 1942, fell below that level in 1943, then rose back above 1 billion pounds in 1944 and has been above that level ever since.

Interestingly, after first reaching 1 billion pounds in 1942, US cheese production didn’t reach 2 billion pounds until 1970. By comparison, during the same number of years most recently (1992-2020), US cheese production increased by about 6.7 billion pounds.

It’s also noteworthy that US cheese production has managed to increase even in years in which milk production declines. As noted in this space two weeks ago, milk production has declined twice this century, in 2001 and in 2009, but cheese production increased in both of those years (although the increase was less than 3 million pounds in 2001).

Also, milk production declined three times in the 1990s: in 1991, 1993 and 1996. Cheese production declined in just one of those years, 1991, and then only by less than 5 million pounds.

Also notable about 2020’s cheese production record is that it was achieved despite a drop in Mozzarella production. Specifically, while total cheese production increased by 53.3 million pounds compared to 2019, Mozzarella output fell by 76 million pounds.

So, how often does total cheese production increase when Mozzarella output declines? Not very often, as it turns out. There are a couple of ways to measure this.

First, going back 40 years, US cheese production in 1980 fell just shy of 4 billion pounds, meaning that cheese output has risen by a little over 9 billion pounds since then. Mozzarella production increased from 689 million pounds in 1980 to 4.42 billion pounds in 2020, or about 3.7 billion pounds.

In other words, the Mozzarella production increases over the past 40 years have accounted for somewhere around 40 percent of the total cheese production increase during that time.

By comparison, Cheddar production rose from 1.75 billion pounds in 1980 to 3.8 billion pounds in 2020, or just over 2 billion pounds, and thus accounted for less than a quarter of the total cheese production increase over that period.

Another way to look at how important Mozzarella production increases are to overall cheese production increases is to look at how frequently they occur at the same time. And the answer is: pretty frequently.

Specifically, going back to 1990, cheese production has declined just once, in 1991, while Mozzarella production has decreased four times: in 2020, 2008, 1997 and 1993. It increased in 1991, the last year in which overall cheese production declined.

By comparison, since 1990, US Cheddar production has declined a total of nine times.

Taking this back another decade, from 1980 through 1989, total US cheese production declined once, in 1984; Mozzarella production also declined once, in 1981; and Cheddar production declined four times, in 1984, 1986, 1988 and 1989.

With all of these statistics in mind, what might US cheese production look like here in 2021? At this point, there are at least a couple of factors supporting another year of record cheese output.

First, it looks like there’s going to be an awful lot of milk produced in the US this year. USDA is now projecting that US milk production this year will reach a record high of 227.4 billion pounds, up 4.3 billion pounds from 2020’s record output.

Keeping in mind that the last four times US milk production declined, cheese production still increased (in 2009, 2001, 1996 and 1993), it would seem logical to conclude that cheese production will have to grow to keep up with milk production growth.

Second, MWC, a $470 million cheese and whey plant in St. Johns, MI, began receiving milk last October from local dairy farmers, and when fully operational, the plant will produce more than 300 million pounds of cheese every year.

Notably, milk cow numbers in December 2020 in Michigan, Indiana and Ohio — the three states likely to supply most of the milk to that plant — were up a combined 33,000 head from a year earlier, pointing to higher milk production in the months ahead. It would seem that the new MWC plant will be absorbing a fair amount of the additional available milk.
There are few guarantees in the dairy industry these days, but it seems pretty likely that US cheese production will set yet another new record here in 2021.


EU Seems Pretty Adept At This Trade Deal Thing

Over the years, and decades for that matter, the European Union’s trade policies have generated plenty of controversy around the globe. This is especially true in the dairy sector, where the EU tends to run healthy dairy trade surpluses with many countries, most notably the US.

There are, from a dairy industry perspective, a couple of reasons why the EU’s dairy trade policies generate controversy around the globe: because they help boost EU dairy exports, and because they help limit EU dairy imports. These points were illustrated in a study released last week by the European Commission.

The study, as reported on our front page last week, considers free trade agreements recently concluded or implemented by the EU, including those with Canada, Japan, Mercosur, and Vietnam, the modernization of an agreement with Mexico, as well as trade agreements under negotiation with Australia, New Zealand, Malaysia, the Philippines and Thailand.

There were several aspects of the EU’s study that grabbed our attention. For example, there’s this observation: “The EU dairy sector is very competitive and enjoys a substantial tariff protection, which leads to limited imports.”

That’s an interesting observation for at least one major reason. That is, the EU is regularly criticized for its policies that limit dairy imports; these policies include tariffs but go far beyond that.

Maybe the best way to put this in perspective is to look over comments submitted to the Office of the US Trade Representative last October by the US Dairy Export Council and National Milk Producers Federation. The USTR was seeking input to assist in preparation of its annual National Trade Estimate report.

The comments submitted by USDEC and NMPF ran some 37 pages, covering countries ranging from Australia to Vietnam, as well as regions such as Central America and global organizations such as Codex.

Some of the comments submitted by USDEC and NMPF run all of one paragraph, while others run roughly one page. But the section on the EU runs an impressive nine pages, and delves into issues ranging from import licensing procedures and somatic cell counts to dairy certificate requirements and geographical indications.

What all these issues result in, according to USDEC and NMPF, is that the US ran a “remarkable” $1.5 billion dairy trade deficit with the EU in 2019, despite the fact that the US itself is a “major dairy exporter.”
Meanwhile, close to one-third of the comments submitted to the USTR by the International Dairy Foods Association dealt with non-tariff barriers that are limiting US dairy exports to the EU.

US dairy organizations aren’t the only ones noting some issues with the
EU’s policies that limit dairy imports. Last July, the World Trade Organization released a “Trade Policy Review” of the EU.

According to that WTO report, the EU agricultural sector “stands out in the tariff analysis, due to significantly higher rates, wide tariff range, use of non-ad valorem rates, and use of tariff quotas.” The highest tariff rates in agriculture are concentrated in the animal and animal products, dairy, and sugar and confectionary sectors. The dairy sector “continues to be one with the highest levels of protection, with high tariffs that are all non-ad valorem duties and no duty-free lines.”

With these points in mind, we had to chuckle at a couple of quotes included in the European Commission’s press release regarding the release of its study on trade agreements.

“The EU has always stood for open and fair trade, which has enormously benefitted our economy, including agricultural producers,” said Valdis Dombrovskis, the EU’s trade commissioner.

Well, it doesn’t really appear that the EU currently stands for “open and fair trade,” nor has that been the case “always.” For example, in 1973, a report from USDA’s Foreign Agricultural Service noted that the European Community’s Common Agricultural Policy “has affected the United States primarily because the surpluses generated have been exported with a disruptive effect on world markets including the American market.”
Dombrovskis continued: “This study shows that we have been able to strike the right balance between offering more export opportunities to EU farmers, while protecting them from potential harmful effects of increased imports.”

That quote reminded us of criticism levied on the EU last June by the Dairy Companies Association of New Zealand, which said a reported EU offer, comprised of miniscule quota volumes and high in-quota tariffs, could never credibly form part of a free trade agreement between the EU and New Zealand.

“This falls short of even paying lip-serve to free trade. It is unashamed protectionism from the world’s largest dairy exporter,” said Malcolm Bailey, DCANZ chairman.

The frustrating things here are that the EU study not only looks at trade agreements that have been recently concluded or implemented, but also trade agreements under negotiation; and that some of these agreements, such as deals with Canada, Japan and Vietnam, are being gradually phased in.

In other words, the EU dairy trade balance will continue to benefit from these trade agreements in the coming decade, even as complaints about EU trade policy continue and quite possibly even increase. Much to the frustration of its competitors, the EU appears to be pretty adept at negotiating favorable trade agreements

US Dairy Farmers Can Really Crank Out The Milk

US dairy farmers are, to understate things a bit, a mighty productive group. As it turns out, this is the case in both good times and bad. And their productivity seems to pretty much guarantee that the future will continue to include both good times and bad.

As reported on our front page this week, US milk production in 2020 reached a record high of 223.1 billion pounds, up 2 percent, or 4.7 billion pounds, from 2019’s record output.

US milk production has now increased every year since 2009, when output of 189.2 billion pounds was down 0.4 percent, or 776 million pounds, from 2008.

That point is noteworthy because it helps illustrate that declines in US milk production appear to be getting more and more rare. Prior to that decline in 2009, the previous drop in US milk production occurred in 2001, when output of 165.3 billion pounds was down about 2.1 billion pounds from 2000.

And that’s been it for milk production declines here in the 21st century. To put this in some historical context, in the last decade of the 1990s, US milk production actually declined three times: in 1991, in 1993 and in 1996.

There were also multiple years in the 1980s when milk production declined, but at least two of those declines come with an asterisk because of government policies. Specifically, Congress passed legislation in 1983 that created the Milk Diversion Program, which was aimed at encouraging dairy farmers to reduce production from a historical base. The program ran for all of 1984 and the first part of 1985, and apparently achieved its goal, as 1984 milk production dropped 4.2 billion pounds from 1983.

Then, the 1985 farm bill included the Dairy Termination Program, better known as the whole herd buyout program, which bought entire dairy herds from farmers. That program ran for parts of 1986 and 1987, and as a result milk production in 1987 was down 415 million pounds from 1986.

From this brief history, we can conclude that declines in milk production are occurring less frequently early in the 21st century than they did in the late 20th century.

One other interesting note about US milk production: it first topped 120 billion pounds back in 1953, at 120.2 billion pounds, and 25 years later, in 1978, it had actually increased by just 1.3 billion pounds, to 121.5 billion pounds. Milk production over the past 25 years increased from 155.3 billion pounds in 1995 to 223.1 billion pounds in 2020, an increase of 67.8 billion pounds.

It’s safe to conclude that the US dairy industry has been in growth mode for the past quarter-century or so.

Getting back to 2020, there are a couple of points worth noting about the milk production increase. First, at 4.7 billion pounds, that increase was the largest, on a volume basis, since 2014’s 4.8-billion-pound rise. In fact, on a volume basis, it was the second-largest over the past decade, topped only by that 2014 increase.

Second, that impressive increase in milk production occurred during a pandemic. And it’s safe to say nobody in the dairy industry had any previous experience in managing milk production during a pandemic.

The pandemic’s impact on milk production was at least twofold. First, once lockdowns were initiated starting last March, a number of milk buyers started instituting programs to incentivize their producers to reduce milk production. And second, milk prices crashed during the second quarter of 2020, with the Class III price dropping from $17.00 per hundredweight in February to $12.14 per hundred in May and the average mailbox milk price in federal order areas dropping from $18.87 per hundred in January to $12.90 per hundred in May.

These two factors had quite an impact on US milk production. After rising by 3.1 percent in the first quarter of 2020 (which included an extra day due to leap year), US milk production increased by just 0.5 percent in the second quarter. That included a 0.5-percent drop in May milk production.

Also, milk cow numbers for the entire US fell by 10,000 head in April, 15,000 head in May and 10,000 head in June.

But pretty much everything rebounded after that. For starters, the Class III milk price rebounded from $12.14 per hundred in May to $24.54 per hundred in July — just six cents shy of the record high, set back in September 2014.

As milk prices bounced back, so too did milk cow numbers, rising by an eye-opening 93,000 head during the second half of 2020. More than half of that increase came during the fourth quarter.

And milk production increased impressively during the second half of 2020, especially during the fourth quarter, which saw milk production for the entire US increase 2.4 percent in October, 3.4 percent in November and 3.1 percent in December.

Those last two increases were the largest percentage increases of the entire year (February’s 5.4-percent was actually 2 percent when adjusted for the extra day).

US dairy producers proved to be remarkably resilient and productive in 2020. Milk production has considerable momentum here in the first month of 2021, meaning that there could be a fair amount of milk looking for a home in the next few months.

And that likely means relatively low milk prices for the next several months. That in turn could put some downward pressure on production, but 2021 will still in all likelihood see a new record.


Even In A Pandemic, Dairy Products Are A Great Bargain

In 2020, the Consumer Price Index for dairy and related products increased by 4.4 percent, its largest percentage increase since 2011. And December’s dairy CPI was a record-high 231.74 (1982-84=100).

So do these figures mean that dairy products are no longer a bargain for consumers?

Hardly. Indeed, it’s safe to say that, here in early 2021, dairy products remain a great bargain for consumers. Some dairy CPI history and some current CPI data will help put this in perspective.

For starters, while the dairy CPI in 2020 posted its largest percentage increase in almost a decade, it’s worth noting that the dairy CPI has actually been relatively flat in recent years.

Indeed, following a 6.8-percent rise in the dairy CPI back in 2011, the dairy CPI actually declined three times (in 2015, 2016 and 2018) and increased by just 0.1 percent in two other years (2013 and 2017). Only in 2012 (2.1 percent) and in 2014 (3.6 percent) did the dairy CPI rise by more than 1 percent.

Yes, the dairy CPI did reach a record high in December 2020, and actually set three new records last year, initially reaching 230.2 in May, then hitting 231.2 in August and finally reaching 231.74 in December. But before hitting 230.2 in May 2020, the record high for the dairy CPI, 229.9, was actually set back in December 2014.

That means, obviously, that the dairy CPI failed, for more than five years, to break the record high set at the end of 2014. In fact, from February 2016 to September 2019, the dairy CPI never even got above 220, meaning that not only did the dairy CPI not set any new record highs during that period, it didn’t even come close.

At 231.74 in December, the dairy CPI remained well below numerous food-related price indices. December’s CPI for food stood at 270.0, while the CPI for food at home was 251.3, the CPI for cereals and bakery products was 283.7, and the CPI for fruits and vegetables was 306.5.

The federal government includes meats, poultry, fish and eggs in a “protein foods” group, along with beans, peas, and lentils; and nuts, seeds, and soy products. The CPI for meats, poultry, fish, and eggs stood at 264.5 in December, meaning that dairy products would seem to be a better protein value than some other animal-derived foods.

Another way to look at what a great bargain dairy products are for consumers is to look at average price data which, along with the CPI, is also collected and reported by the US Bureau of Labor Statistics. In December, the average retail price for a pound of Cheddar cheese was $5.54, the eighth straight month in which the average retail Cheddar price topped $5.50 a pound.

That $5.54 average was also the highest retail Cheddar price for the month of December since 2012, when it was $5.87 a pound.

Yes, retail Cheddar prices were relatively high in 2020, but comparisons can be deceiving because retail Cheddar prices were relatively low for several years before 2020. For example, back in 2014, the average retail Cheddar price was above $5.50 a pound for nine straight months, including a high of $5.73 in April.

But, after October 2014, when they averaged $5.57 a pound, average retail Cheddar prices didn’t make it back to the $5.50 per pound mark again until May of 2020. In fact, they actually were below $5.00 a pound for the final two months of 2016 and all but three months in 2017.

So from the perspective of the past decade, retail Cheddar prices in 2020 were still a bargain.

Meanwhile, the average price for a gallon of whole milk in December was $3.54, up almost 35 cents from a year earlier and the highest average retail whole milk price for the month of December since 2014, when retail whole milk prices averaged $3.82 per gallon.

As was also the case with Cheddar cheese, 2020 retail whole milk prices look high in comparison to recent years, but fall well short of where they were if you go back to 2015 or earlier. While January 2015 was the last time retail whole milk prices averaged above $3.50 a gallon until December 2020, prior to January 2015, whole milk prices were above that level quite often.

Specifically, retail whole milk prices averaged above $3.50 per gallon every month in 2014, including a record high of $3.86 a gallon in November 2014, and were above $3.50 a gallon for at least two months in 2011, 2012 and 2013. Indeed, in both 2011 and 2012, the average retail price for a gallon of whole milk peaked at a level higher than it did in 2020 ($3.72 and $3.58 a gallon, respectively).

Finally, it’s worth remembering that, whatever the price, dairy products offer consumers an impressive “bang for the buck” from a nutritional standpoint. Many if not most dairy products are nutrient-dense foods, meaning they deliver not only great flavor but also protein, fat and a variety of vitamins and minerals.

Here’s how the National Dairy Council put it, in comments submitted last August on the Dietary Guidelines Advisory Committee’s report: “Dairy foods are the lowest cost sources of dietary calcium and vitamin D in the US diet and are among the lowest cost sources of potassium, magnesium, vitamin A, riboflavin (B2) and vitamin B12 as well.”

Consumers abandoning dairy in favor of plant-based alternatives might want to consider how much nutrition they’re getting for the price before making the switch.

Inflation returned to the dairy case last year, but dairy products remain a nutritional and flavor bargain for consumers.

10 Years With The Food Safety Modernization Act

It’s now been 10 years since President Obama signed the Food Safety Modernization Act into law, and if there’s one thing we’ve learned since then, it’s that the FSMA is one of the more consequential laws the food industry has had to deal with in the past 75-plus years. And FDA still isn’t finished rolling out all the industry regulations required under the law.

By way of very brief background, Congress spent several years working on major food safety legislation before finally passing the FSMA in December 2010. For example, in April of 2008, a discussion draft of something called the Food and Drug Administration Globalization Act of 2008 was released by the House Energy and Commerce Committee; that discussion draft contained language that would have, among other things, required domestic and foreign food facilities to have safety plans in place to identify and mitigate hazards.

One Congress (that discussion draft was released during the second year of the 110th Congress; the FSMA was introduced in the early weeks of the 111th Congress and passed in the final weeks of that Congress) and numerous drafts and rewrites later, the FSMA was signed into law.

What Congress passed and President Obama signed was a bill that ran 242 pages total and included four titles; those titles dealt with improving the capacity to prevent food safety problems; improving capacity to detect and respond to food safety problems; improving the safety of imported food; and miscellaneous provisions.

While it took several years for Congress to finalize the FSMA, the length of time it will take the US Food and Drug Administration to implement that law is yet to be determined.

Certainly, FDA has accomplished quite a bit since the FSMA became law. A glance at the sections just in the law’s first title reminds us of all the proposed rules, final rules, guidance documents and implementation dates that have been issued for, among other things, hazard analysis and risk-based preventive controls, inspections of records, and the sanitary transportation of food.

And these accomplishments have been spread out over the past decade. Indeed, it was on May 5, 2011, when FDA issued an interim final rule on the administrative detention of food (part of the FSMA’s second title); that IFR became effective on July 3, 2011. A final rule on administrative detention became effective on Feb. 5, 2013.

Since then, FDA has issued proposed rules and then final rules for a number of other sections of the FSMA, but there are at least two reasons why FDA’s work in implementing the FSMA is far from finished.

The first of those reasons, and the most obvious, is that there are still three proposed FSMA rules that have yet to be finalized. The comment period on two of those, including the proposed rule on laboratory accreditation, have closed, while FDA recently extended the comment period on the third, which deals with food traceability.

Suffice it to say that it will be a year or two before a final rule is issued on the traceability proposal, and probably at least another year or two before that final rule becomes effective. So the “finish line” for FSMA rulemaking is still several years away.

Second, past experience with major food-related undertakings indicate that FDA is never really “finished” with implementation. It may be recalled that Congress passed the Nutrition Labeling and Education Act in 1990 and issued final rules in early 1993. By 1995, most foods included the NLEA-mandated Nutrition Facts label.

But that was hardly the end of the NLEA rulemaking. Before the end of 1995, FDA amended its regulations to update the Daily Values, and in 2003 the agency updated its regulations to address the declaration of trans fats. And, from 2003 through 2007, FDA also issued three advance notices of proposed rulemaking seeking public comment on issues relevant to updating the Nutrition Facts label.

Also, between 1993 and 2013, FDA received 12 citizen petitions asking for various changes to the Nutrition Facts and Supplement Facts labels. And then, in 2014, FDA proposed a significant overhaul of the Nutrition Facts label. A final rule updating the label was released in 2016.

The point here is that, even if FDA decides to stand pat after releasing its final FSMA regulation, chances are there will be ongoing efforts to prod the agency to do more to ensure food safety, by tweaking FSMA rules or by implementing new rules.

All of this leads to one final question: Ten years after President Obama signed the FSMA into law, is the US food supply safer?

Not necessarily. The US Centers for Disease Control and Prevention reported last spring that the incidence of enteric infections caused by eight pathogens (including Campylobacter, Listeria, Salmonella, Shiga toxin-producing E. coli, Shigella, vibrio, Yersinia and Cyclospora) reported by FoodNet sites in 2019 “continued to increase or remained unchanged, indicating progress in controlling major foodborne pathogens in the United States has stalled.”

Even after all the FSMA regulations are finalized, the law is not about to fade away: FDA’s “New Era of Smarter Food Safety Blueprint,” which was announced last summer, builds on work that FDA has done to implement the FSMA.

That Blueprint also contains, as its fourth Core Element, the real key to improving food safety: promoting food safety culture throughout the food system. Simply put, the food safety culture matters more than regulations..

New Dietary Guidelines As Anti-Milkfat As Ever

The federal government released the latest edition of the Dietary Guidelines for Americans last week, and when it comes to dairy-specific recommendations, the government is sticking with the same outdated advice it’s been touting for 40 years: consume mostly fat-free or lowfat dairy products.

Unfortunately, that advice ignores a growing body of evidence that concludes just the opposite: that the milkfat in dairy products actually offers, potentially, a variety of health benefits.

Back in 1980, the Dietary Guidelines advised consumers to avoid too much fat, saturated fat and cholesterol by, among other things, limiting their intake of butter, cream and “foods made from such products.”

In 2020, for the food category dairy and fortified soy alternatives (part of the guideline to meet food group needs with nutrient-dense foods and beverages from five food groups), most choices “should be fat-free or low-fat,” the Dietary Guidelines advise.

Just in case consumers didn’t get that message, the fourth and final guideline is to limit foods and beverages higher in saturated fat, sodium and added sugars. Intake of saturated fat should be limited to less than 10 percent of calories per day by replacing them with unsaturated fats, particularly polyunsaturated fats.

Top sources of saturated fat include higher fat milk and yogurt, 6 percent; cheese, 4 percent; pizza, 5 percent; spreads, 3 percent; desserts and sweet snacks (including ice cream and frozen dairy desserts), 11 percent; and sandwiches, 19 percent.

Interestingly, while being highly critical of milkfat specifically and saturated fats more generally, the Dietary Guidelines actually has some nice things to say about oils, which “are important to consider as part of a healthy dietary pattern as they provide essential fatty acids.” Commonly consumed oils include canola, corn, olive, peanut, safflower, soybean, and sunflower oils. Also, the government used to advise consumers to limit their intake of “hydrogenated margarines”, but as of June 2018, partially hydrogenated oils are no longer generally recognized as safe (GRAS).

So obviously the government’s view of dietary fat has changed over the past four decades, from avoiding too much fat and saturated fat to just avoiding saturated fat specifically.

But this dietary fat advice is still misguided, as a number of studies help illustrate. Just to cite one example: back in 2016, an editorial in The BMJ noted that a new study published in that journal “adds to the doubts around the health benefits of replacing saturated fat with polyunsaturated fats,” and notes that the benefits of choosing polyunsaturated fat over saturated fat “seem a little less certain than we thought.”

More recently, a group of US and international nutrition scientists, including three former members of different Dietary Guidelines Advisory Committees (which examines the evidence on specific nutrition and public health topics and provides independent, science-based advice to the federal government as it develops the Dietary Guidelines) last August asked key congressional leaders to encourage the US Departments of Agriculture and Health and Human Services to give “serious and immediate consideration” to lifting the limits placed on saturated fat intake for the next edition of the Dietary Guidelines.

These nutrition scientists noted that a “critically important consideration” is the growing recognition that the effect of saturated fats on health “cannot be considered in isolation but instead must be analyzed as part of the larger food matrix” in which these fats exist.

And they concluded that “there is no strong scientific evidence that the current population-wide upper limits on commonly consumed saturated fats in the US will prevent cardiovascular disease or reduce mortality. A continued limit on these fats is therefore not justified.”

Unfortunately, USDA and HHS stuck with tradition, and recommended primarily lowfat and fat-free dairy products as well as limits on saturated fat intake.

Another frustrating point about the continuing emphasis on lowfat and fat-free dairy products is that these products are touted as being more nutrient-dense than their full-fat counterparts. The Dietary Guidelines document provides examples of calories in food choices that are not nutrient dense and calories in nutrient-dense forms of these foods.

In the case of fluid milk, one cup of fat-free milk has 83 calories, while the milkfat in whole milk adds 63 calories, so a cup of whole milk has 146 total calories.

But skim milk isn’t really as nutrient-dense as whole milk, since it contains about 3 percent more water and no fat compared to about 3.25 percent fat. Dietary fat is in fact essential; therefore, replacing fat with water would seem to make a food less nutrient-dense, not more.

When it comes to saturated fat and lowfat and fat-free dairy products, the dairy industry seems to be stuck in a five-year cycle. For five years, we read and hear about new, promising health benefits from milkfat, and then we anxiously and optimistically await the next edition of the Dietary Guidelines.

And every five years, we’re disappointed because the federal government continues to peddle the same advice: consume mostly lowfat and fat-free dairy products, and limit your saturated fat intake to 10 percent or less of total calories.

And now it looks like it will be 2025 at the earliest before the Dietary Guidelines reflect the truth about full-fat dairy.

A Few Things Dairy Can Expect In 2021

If there’s one thing the dairy industry, and pretty much every other industry, learned in 2020, it’s this: expect the unexpected.

A year ago, as everybody pondered what to expect in 2020, few folks knew what a coronavirus was, let alone what COVID-19 was. In fact, it was on Dec. 31, 2019, when the World Health Organization’s Country Office in the People’s Republic of China picked up a media statement by the Wuhan Municipal Health Commission from their website on cases of “viral pneumonia” in Wuhan, China.

And the rest, as they say, is history. While the rise and spread of the coronavirus was the main story in 2020, thanks to vaccines now being rolled out across the US and around the world, 2021 will hopefully see the decline of COVID-19 cases and government responses to those outbreaks, and something resembling a return to normal.

What might that mean for the dairy industry? For starters, maybe the industry will see somewhat less price volatility in 2021.

That seems like a pretty safe prediction for the simple reason that it’s hard to imagine price volatility getting any more severe in 2021 than it was in 2020. After all, 2020 saw the CME cash market price for 40-pound Cheddar blocks drop to $1.00 a pound in April and reach a record high of $3.00 a pound in July, and the federal order Class III price range from a high of $24.54 per hundredweight in July (six cents shy of the all-time record, set in September 2014) to a low of $12.14 per hundred in May.

Although less spectacular, butter prices also rode the roller-coaster in 2020, with almost a $1.00 per pound difference between the high for the year ($2.0150 on June 4) and the low ($1.1000 per pound on Apr. 23).

And Class IV prices were also quite volatile in 2020, with a low of $10.67 per hundred in May and a high of $16.65 per hundred in January. To put that in some recent historical perspective, in 2019 the Class IV price ranged from a low of $15.48 per hundred in January to a high of $16.90 per hundred in July.

All of the 2020 price volatility has resulted in very large volumes of milk being depooled from federal orders, which will in all likelihood result in heightened discussions of federal order reforms in 2021. The last round of federal order reforms took place in the 1990s, and it’s safe to say 2020 exposed some problems with the way federal orders currently function.

Of course, the last round of federal order reforms was launched after being mandated by Congress in the 1996 farm bill, and took roughly three years to complete (from passage of the 1996 farm bill, which was signed into law by President Clinton on Apr. 4, 1996, to release of the final order, which was issued on Mar. 12, 1999).

With this timeline in mind, it’s unlikely that the dairy industry will see any significant changes in federal order policies in 2021, but there will undoubtedly be plenty of discussion of such changes.

Among the many difficult things to predict is the future level of government involvement in the dairy industry. In recent years, we’ve seen USDA purchase dairy products under various authorities, including Section 32, trade mitigation and the Families to Farmers Food Box Program. The latter undoubtedly contributed to the rapid recovery in cheese and milk prices after they bottomed out last spring.

So what will 2021 bring in this area? There is at one key point to keep in mind: Congress passed and President Trump in late December signed into law a pandemic relief bill that includes a considerable amount of money that could be used to purchase dairy products.

That pandemic relief bill includes, among many other things, at least $1.5 billion to purchase food and agricultural products; $400 million to pay for milk and other dairy products under a dairy donation program; $400 million for the Emergency Food Assistance Program; and $13 million for the Commodity Supplemental Food Program. At least some of this money has to be spent by Sept. 30, 2021.

According to the National Restaurant Association, the pandemic relief bill also includes several items that will benefit restaurants, which leads us to wonder what food service sales will look like in 2021, especially during the latter half of the year as more and more people get vaccinated, COVID-19 infection rates hopefully decline and state and local restrictions begin to be eased.

Our guess is that food service sales will start to boom in the latter half of 2021, as consumers who have been hunkering down since last spring start to patronize restaurants once again (at least those restaurants that managed to survive the pandemic). One thing to watch will be the National Restaurant Association’s Restaurant Performance Index, which has been in negative territory since the pandemic began but could improve significantly as lockdowns wind down and consumers once again start to dine out regularly.

Finally, 2021 will see President Trump leave office and Joe Biden become president, meaning that, among many other things, US trade policy will likely see some significant changes. Under Trump, the US withdrew from the Trans-Pacific Partnership agreement, got involved in trade wars with various countries and regions, and spent billions of dollars compensating dairy and other industries for the trade damage these trade wars wrought, among other things.

Biden’s trade policy remains to be seen; suffice it to say it will be different than Trump’s.

All in all, 2021 will be as difficult to predict as any other year, but probably won’t be as unpredictable as 2020 proved to be.


An Unprecedented Year For The Dairy Industry

Dictionary.com, which bills itself as “the world’s leading digital dictionary,” recently announced that its 2020 Word of the Year is Pandemic, because the word “kept running through the profound and manifold ways our lives have been upended—and our language so rapidly transformed—in this unprecedented year.”

To put this in a little perspective, the word “pandemic” has appeared at least once in every edition of this newspaper dating back to early May, and several issues in February, March and April as well. There is no mention of the word “pandemic” in any of our January issues, which we fondly recall as “the good old days.”

For what it’s worth, there were no mentions whatsoever of the word “pandemic” in any of the issues of this newspaper in 2019, 2018, 2017, 2016 and 2015. And probably plenty of years prior to that as well, if we had taken the time to check.

Dictionary.com also tallied the thousands of responses it received for its People’s Choice 2020 Word of the Year, and the top submission was the word unprecedented. And that word helps sum up what the dairy industry (and the entire food industry) experienced this year.

Arguably the biggest area where use of the word “unprecedented” was common was in the area of dairy prices. And that was just during the first half of the year; the second half was also unprecedented, in some ways.

During the first half of 2020, the CME cash market price for 40-pound Cheddar blocks plunged from $2.0025 per pound on Jan. 23 to $1.00 per pound less than three months later (on Apr. 15, to be exact). That price drop was unprecedented. As noted in this space back on June 12th, the block price first rose above $2.00 per pound back in 2004 (rising above that level would essentially be necessary, at least during the dairy product price support program era, for a $1.00 drop in price), and also topped $2.00 per pound in 2007, 2008, 2011, 2012, 2013, 2014 and 2019 (prior to 2020).

The range between the low and high block price exceeded $1.00 in only one of those years: in 2008, when the block price reached a then-record $2.2850 per pound in late May and bottomed out at $1.1325 a pound at the end of the year. So while that price drop was greater than what was experienced earlier this year, it was spread out over a much longer period of time.

As it turned out, that was just the beginning of unprecedented cheese price records being shattered this year. Less than two months after blocks bottomed out at $1.00 a pound, they skyrocketed to a new record high of $2.5850 a pound.

Obviously, the block price had never experienced an increase of such magnitude in such a short period of time, although it’s worth remembering that the CME’s cash cheese market has only been trading daily since September of 1998. Prior to that, the cheese industry’s cash market traded only once a week, and in all the years the National Cheese Exchange and its predecessor, the Wisconsin Cheese Exchange, were in business, the block market never topped $1.70 per pound (it reached $1.6950 a pound in September 1996).

But even that unprecedented block price movement wasn’t the end of the story in this unprecedented year. After falling to $2.50 a pound in mid-June, the block price started to rise again, reaching a record high of $3.00 per pound on July 13th.

That brought about various other examples of “unprecedented” prices and price movements (although blocks weren’t the first dairy commodity to reach $3.00 a pound; that distinction belongs to butter, which reached $3.06 a pound in September of 2014 and then reached $3.1350 a pound a year later).

Among other things, after reaching $3.00 a pound on July 13, blocks dropped to $1.65 a pound on August 21st, wiping out the record set by that “unprecedented” price drop that occurred earlier this year. That decline was later topped when, over the course of less than half a year (July 13th to Dec. 2nd), the block price dropped by some $1.4225 a pound.

And of course blocks became the first dairy commodity to experience a $2.00 per pound price increase — not just in a single year, but in a period of less than three months.

Related to the unprecedented cheese price volatility, federal order statistics will also see unprecedented volatility this year. More specifically, among other things, depooling will result in what will likely be an unprecedented drop in Class III use.

In 2019, despite significant volumes of milk being depooled from Class III during the last four months of the year, Class III volume totaled 64.2 billion pounds and Class III utilization was 41 percent. Through November of this year, Class III volume was under 32 billion pounds (meaning it will probably end up under 34 billion pounds) and Class III utilization is under 25 percent.

This year also has seen an unprecedented number of industry events either cancelled outright or switched to virtual formats. Meeting virtually certainly has its merits, but a major downside is that, in an industry where lots of business is still done on a handshake, well, it’s safe to say this year saw an unprecedented decline in handshakes.

Last but not least, this year also saw something resembling an unprecedented increase in new terms and phrases, from PPE (personal protective equipment) and social distancing to pivoting (from food service to retail).

Another year like 2020 would certainly be unprecedented.


Potential, And Potential Limits, To Southeast Asia Dairy Imports

Last week, USDA’s Economic Research Service released a report that examined the potential for US dairy exports to increase to Southeast Asia (SEA). The report concluded (as reported in a story on page 9 of last week’s issue) that the US does indeed have the potential to expand exports of several different dairy products to at least some of these countries.

Coincidentally, that ERS study was released about a week after Eat Just, Inc., announced that its cultured chicken has been approved for sale in Singapore as an ingredient in chicken bites.

So what does cultured chicken have to do with exporting dairy products? Potentially, quite a bit, as we will try to explain.

First, a bit of background. Eat Just, Inc., describes itself as a company that applies cutting-edge science and technology to create healthier, more sustainable foods.

The company stated that, over the course of many months, its team of scientists, product developers and regulatory experts have prepared “extensive documentation” on the characterization of its cultured chicken and the process to produce it. Eat Just included details on the purity, identity and stability of chicken cells during the manufacturing process, as well as a detailed description of the manufacturing process.

“Safety and quality validations demonstrated that harvested cultured chicken met the standards of poultry meat, with extremely low and significantly cleaner microbiological content than conventional chicken,” Eat Just stated in a news release. “The analysis also demonstrated that cultured chicken contains a high protein content, diversified amino acid composition, high relative content in healthy monounsaturated fats and is a rich source of minerals.”

Also, Eat Just referred to this as a “first-in-the-world regulatory allowance of real, high-quality meat created directly from animal cells for safe human consumption.” The regulatory achievement involved a safety review by the Singapore Food Agency, and the company said its cultured chicken was confirmed to be safe and nutritious for human consumption by an outside panel of international scientific authorities in Singapore and the US, with expertise in medicine, toxicology, allergenicity, cell biology and food safety.

Finally, the ERS report points out that most Southeast Asian countries produce only small milk quantities. Singapore specifically is described by the US government as an island city-state, about 3.5 times the size of Washington, DC. Only about 1 percent of Singapore’s land is devoted to agriculture, so it’s safe to say that Singapore is a net food importer in general and net dairy importer specifically.

Even though local farmers produce less than 10 percent of the Singapore’s nutritional needs at the moment, the Singapore Food Agency is aiming to increase this to 30 percent by 2030. But the country is obviously limited by its size, as well as its climate (tropical, which isn’t exactly conducive to milk production).

All of that background brings us back to Eat Just, Inc., and its cultured chicken. We can’t help but think that one reason Singapore became the first country in the world (at least according to Eat Just) to approve meat created directly from animal cells is because, if its food can’t be produced in traditional ways (on farms, with animals), it can be produced in new, non-traditional ways (in labs, without animals or land).

As it turns out, Eat Just isn’t just working on cultured chicken. A couple of months ago, the company announced a partnership with a consortium led by Proterra Investment Partners Asia Pte. Ltd., an investment management firm focused on the food and agribusiness sectors, to build and operate a plant protein production facility in Singapore to meet demand for Eat Just’s plant-based JUST Egg products across Asia. That is, not just in Singapore, with a population of 6.2 million, but across Asia, where close to 60 percent of the entire world population lives.

That brings us to TurtleTree Labs, which describes itself as a food technology venture “addressing a multi-billion dollar global dairy market opportunity with the capability to create enormous financial and social value by providing accessible nourishment while staving off the threats of food, economic, and socio-political insecurities.”

TurtleTree Labs is a Singapore-based startup “addressing the value gap created by an insufficient and unsustainable animal-based dairy industry.”
The company said its acellular technology works by culturing mammary cells in-vitro and inducing their natural ability to produce all components of milk. The first step involves obtaining stem cells from sources such as milk. They are then transferred into an environment where they convert into mammary gland cells. The mammary gland cells interact with a special formula which causes the cells to lactate. The end product, milk, is obtained through a filtration process.

TurtleTree Labs said it is “advantaged by committed support from the various Singapore government agencies, in alignment with Singapore’s goals to produce 30% of its own nutritional needs by 2030.”

The bottom line here is that, in addition to competing with the likes of the European Union, New Zealand and Australia in Southeast Asia, the US dairy industry (as well as its traditional animal-based dairy competitors) will have to compete with the likes of TurtleTree Labs for a share of Southeast Asia’s growing dairy market. Yes, there’s some nice potential there, but also some emerging competition from companies and technologies that didn’t exist 10 years ago.



Cheese Export Subsidy Updates Seem Unnecessary, Irrelevant

Back on Nov. 5, the US Department of Commerce’s International Trade Administration published in the Federal Register its quarterly update to the annual listing of foreign government subsidies on articles of cheese subject to an in-quota rate of duty covering the period Apr. 1 through June 30, 2020.

This quarterly update included exactly one “subsidy” program: Canada provides export assistance of 47 cents per pound on certain types of cheese.

And this leads us to wonder why the federal government continues to require this quarterly update, which is published pursuant to section 702(h) of the Trade Agreements Act of 1979 (as amended).

More specifically, that 1979 law requires the “administering authority” to determine whether any foreign government is providing a subsidy with respect to any article of quota cheese, and publish a list of the type and the amount of each such subsidy which is determined to exist.

And some subsidies definitely existed back then. For example, in 1980 (the first year in which the subsidy list was published), among many others, Italy was providing EC (European Community) restitution payments of 72.6 cents per pound, while Finland was providing an export subsidy of 62.6 cents per pound plus an indirect subsidy of 21.7 cents per pound, or more than 84 cents per pound total.

So obviously things in the cheese subsidy arena have changed significantly over the past four decades, which leads us to conclude that this update of cheese subsidy programs isn’t necessary anymore, for several reasons.

First, as noted above, these days there is exactly one subsidy program identified in the notice, namely Canada’s export assistance of 47 cents per pound on certain types of cheese, compared to 40 years ago, when export subsidies ranged from about 24 cents per pound provided by Norway to Finland’s 84.3 cents per pound.

To put this in some additional, and more recent, historical perspective, we went back to 2002 and found the notice of subsidy programs on cheese subject to an in-quota rate of duty during the Apr. 1-June 30, 2002 period. And in fact there were still quite a few of those cheese subsidies during that period.

For example, 13 countries were providing European Union restitution payments (there were 15 EU member countries at the time) ranging from two cents per pound for Belgium to 12 cents per pound for Finland. Greece wasn’t providing any subsidies, and Sweden isn’t listed in the notice.

Also listed in that 2002 notice were the following subsidies: Canada, 22 cents per pound in export assistance on certain types of cheese; Switzerland, five cents per pound in deficiency payments; and Norway, 29 cents per pound in indirect (milk) subsidy plus 13 cents per pound in consumer subsidy, for a total of 42 cents per pound.

It may be recalled that the EU suspended its export subsidies more than a decade ago, then revived them starting in 2009, during the Great Recession. But in 2010, the quarterly updates weren’t listing any EU restitution payments. And so to this day, the EU restitution payments are still listed as zero.

Related to this point, the reason we went back to 2002 to check on these cheese subsidy programs is because that’s the year US cheese imports set a record that still stands today, 474.6 million pounds. The US has imported less than 400 million pounds of cheese in each of the last two years, and it’s likely that cheese imports in 2020 will also fall well short of 400 million pounds.

Meanwhile, US cheese production has increased from about 8.5 billion pounds in 2002 to 13.1 billion pounds in 2019, meaning that imports are filling a declining portion of the US cheese market.

By contrast, back in 1979, when the Trade Agreements Act was passed by Congress and signed into law by President Jimmy Carter, US cheese production totaled 3.7 billion pounds and cheese imports totaled about 248 million pounds. Back then, cheese imports had a much larger, and more important, share of the US cheese market in 1979 than they do in 2020.

Further, as noted, the only current subsidy listed by the ITA is Canada’s export assistance on certain types of cheese. For what it’s worth, Canada’s exports of cheese to the US in recent years have ranged from about 10.3 million pounds in 2019 to 12.4 million pounds in 2018. In other words, the only country currently providing any sort of export assistance, according to the ITA’s quarterly update, accounts for less than 3 percent of total US cheese imports.

Third, and perhaps most important, if there’s one thing we’ve learned about dairy trade over the years, it’s that countries have a lot more “weapons” in their ag and trade policy portfolios than just subsidies.
These might not technically be government export “subsidies,” but they certainly help illustrate how dairy trade is not now, never has been and probably never will be truly free or fair.

For example, the EU budgeted about $200 million for the promotion of EU agri-food products at home and abroad for 2020. More than half of that is allocated to promotion programs outside the EU, including in the US.

Meanwhile, the US Department of Agriculture last year awarded $300 million to various organizations under the Agricultural Trade Promotion Program, including about $7.8 million to the US Dairy Export Council.
Export subsidies still exist, they just don’t exist in forms that show up in the ITA’s report, rendering that report largely irrelevant.

Economics, Agriculture, Trade And A Pandemic

On Monday, President-elect Joe Biden announced key members of his economic team, including Janet Yellen, treasury secretary; Neera Tanden, director of the Office of Management and Budget; Wally Adeyemo, deputy treasury secretary; Cecilia Rouse, chair of the Council of Economic Advisers; and Jared Bernstein and Heather Boushey, members of the Council of Economic Advisers.

This announcement led us to wonder why the secretary of agriculture and the US Trade Representative aren’t also considered key members of the incoming Biden administration’s economic team. After all, agriculture and trade are pretty important to the overall health of the economy, to understate the situation a bit.

To put this “economic team” and other key administration posts in perspective, we went back and checked on when previous presidents-elect announced their nominees for agriculture secretary and USTR. And it seems that these aren’t necessarily “top-of-mind” when it comes to new administrations building their teams (economic or otherwise).

Four years ago, for example, President-elect Donald Trump waited until the day before he took office (he was sworn in on Jan. 20, 2017) to nominate Sonny Perdue to be his secretary of agriculture. Perdue wasn’t sworn in as the country’s 31st agriculture secretary until Apr. 25, 2017, one day after he was confirmed by the US Senate.

Earlier in January 2017, or about two months after he won the 2016 election, Trump had announced his intention to nominate Robert Lighthizer to be the US Trade Representative.

More than eight years earlier, on Dec. 17, 2008, President-elect Barack Obama nominated former Iowa Gov. Tom Vilsack to be his secretary of agriculture. That was about six weeks after Obama was elected president.

The same week that Vilsack was announced as Obama’s choice to head up USDA, Ron Kirk was nominated as the new US Trade Representative.
Going back eight more years, nominees for agriculture secretary and US Trade Representative aren’t really comparable, since President-elect George W. Bush wasn’t announced as the winner of the election until Dec. 12, 2000, or about five weeks after the election.

Despite that late start, however, President-elect Bush nominated Ann Veneman to be his secretary of agriculture on Dec. 20, 2000, or a little more than one week after he was declared the election winner. That appears to be some sort of modern-day record for nominating a secretary of agriculture after winning an election.

By comparison, it wasn’t until Jan. 11, 2001, or less than two weeks before inauguration day, that Bush nominated Robert Zoellick to be his US Trade Representative.

Going back a few more presidents (or, more accurately, presidents-elect), and focusing just on agriculture secretaries, Bill Clinton nominated Mike Espy to be secretary of agriculture on Dec. 24, 1992. Four years earlier, President-elect George H. W. Bush nominated Clayton Yeutter to be his secretary of agriculture on Dec. 14, 1988.

Eight years before that, President-elect Ronald Reagan nominated John Block to be his agriculture secretary on roughly Dec. 23, 1980. And four years before that, President-elect Jimmy Carter nominated Bob Bergland to be his secretary of agriculture on roughly Dec. 21, 1976.

From this brief history, we can reach several conclusions. First, President-elect Donald Trump four years ago set some sort of modern-day record by waiting until Jan. 19, 2017, to announce Sonny Perdue as his nominee for secretary of agriculture.

No other president-elect in recent decades has even waited until the new year (which is less than three weeks before inauguration day) to announce an ag secretary nominee, including George W. Bush, who wasn’t even declared the winner of the 2000 election until Dec. 12, 2000, but still managed to nominate Ann Veneman before Christmas.

Second, it doesn’t appear that nominating someone for secretary of agriculture is exactly a top priority for presidents-elect. Indeed, just to cite one example, Espy was the final cabinet pick announced by Clinton back in late 1992. This is despite the fact that the food and agriculture business is one of the largest, and most important, in the US.

Finally, while it would appear that agriculture and trade are being somewhat taken for granted as Biden announces his economic team and other cabinet officials, it’s probably safe to say that every cabinet position is important when it comes to the economy.

But this year, thanks to the coronavirus pandemic, there’s one federal agency that arguably stands out as the most important when it comes to economic recovery. That agency is the US Department of Health and Human Services.

That’s because, housed within HHS are the two key agencies in the ongoing battle against the coronavirus, namely the Food and Drug Administration, which as soon as next week could approve the first coronavirus vaccine; and the Centers for Disease Control and Prevention, which, among many other things, will decide who gets the vaccine when.

In this context, naming an ag secretary and US Trade Representative can maybe wait a bit longer. And even if Biden doesn’t announce those officials for a couple more weeks, he’ll still be roughly in line with the timelines followed by most of his recent predecessors.


Pfizer’s Vaccine Breakthrough, And Its Dairy History

Earlier this month, Pfizer and BioNTech announced that their vaccine candidate against COVID-19 has an efficacy rate above 90 percent at seven days after the second dose.

Last Friday, the companies submitted a request to the US Food and Drug Administration for Emergency Use Authorization of that vaccine candidate, which they said would potentially enable use of the vaccine in high-risk populations before the end of 2020.

That is certainly great news for the entire world, as it looks like FDA’s approval of the Pfizer-BioNTech and other vaccines will bring about some sort of normalcy, or maybe a “new normal,” to the world in general and the food and agriculture industry specifically maybe by the middle of 2021.

The Pfizer-BioNTech announcements also brought back some memories of Pfizer’s long involvement in the dairy business, and its breakthrough on chymosin more than 30 years ago. What follows is a brief look at Pfizer’s dairy and food industry history.

What was originally known as Charles Pfizer & Company was founded way back in 1849 in Brooklyn, NY. From the timeline provided on the company’s website, we can’t tell exactly when Pfizer got involved in the food industry, although, in 1919, the company pioneered the mass production of citric acid from sugar through mold fermentation.

Also from that company timeline, it’s unclear when Pfizer became involved in the dairy business. We do recall that it was back in the early 1960s when Pfizer acquired the old Paul-Lewis Laboratories, which was based in Milwaukee, WI.

One part of Pfizer’s cheese industry legacy also dates back to the 1960s. It was in 1963 that Chas. Pfizer & Co., Inc., published the first of its “Cheese Monograph” series. That first book, Italian Cheese Varieties, was written by Dr. George W. Reinbold of Iowa State University.

Subsequent books in the Pfizer Monograph series dealt with American cheese varieties, Swiss cheese varieties, Blue-veined cheeses, ripened semi-soft cheeses, cottage cheese and other cultured milk products, and lactic starter culture technology.

Arguably Pfizer’s biggest contribution (biggest because it’s still contributing today) to the cheese industry occurred in the 1980s and early 1990s. Back in late 1987, Pfizer announced that the first food additive petition involving a fermentation process using a genetically engineered microorganism had been accepted by FDA.

The petition submitted by Pfizer covered chymosin, the active component of calf rennet. The new fermentation process would provide the chymosin enzyme economically in a consistent, stable and highly pure form, Pfizer reported at the time.

Then, in March of 1990, FDA affirmed that the use of chymosin derived by fermentation is generally recognized as safe (GRAS). CHY-MAX was Pfizer’s trademark for chymosin produced by this new process, and the product was to be marketed worldwide by Pfizer Specialty Chemicals Group through its dairy products unit headquartered in Milwaukee.

About two and a half years later, Pfizer cut the ribbon officially opening its renovated dairy ingredients division headquarters in Milwaukee and said further major capital investments were going to be made to strengthen its role as a leading supplier to the cheese and dairy industries. The additional funds were used to expand production of CHY-MAX.

Less than four years later, in early 1996, Pfizer’s involvement in the food industry largely ended, when it sold its Food Science Group to Finnish company Cultor Ltd. However, Pfizer’s CHY-MAX business was not part of that divestiture; that business was retained by Pfizer.

Later in 1996, two other related announcements were made. First, Chr. Hansen acquired Pfizer’s CHY-MAX business, which brought an end to Pfizer’s long-time involvement in the dairy industry. Chr. Hansen, meanwhile, continues to produce and market a variety of CHY-MAX products.

A short time after that, the Cultor dairy ingredients business was acquired by Gist-brocades of the Netherlands. Gist-brocades was then acquired, about 20 years ago, by DSM.

From this brief, and admittedly incomplete, history, we can reach at least a couple of conclusions. First, the dairy ingredient business has undergone a heck of a lot of change over the years, so much change that some of the names of the companies involved, such as Paul-Lewis Laboratories and Cultor, have been pretty much lost except in company (and the Cheese Reporter’s) archives.

Second, while Pfizer ended its involvement in the dairy industry more than 24 years ago, its work on a COVID-19 vaccine promises to have a pretty significant impact on the dairy industry in the next year or two. This is particularly good news right now, as COVID-19 cases worldwide continue to rise, and partial shutdowns also continue to spread from coast to coast and around the world, impacting supply chains for dairy and other food products.

On its website, Pfizer describes its “Focus Areas” as internal medicine, inflammation and immunology, oncology, rare disease, vaccines, and anti-infectives. There’s no mention of the food or dairy industries.

But it’s safe to say that Pfizer’s ongoing vaccine efforts, along with the efforts of numerous other companies, will be felt by the dairy and food industries in the months ahead as things slowly but surely return to normal.